Commission Proposal on new Financial Regulation

The reduction of administrative burden for beneficiaries, contractors and implementing partners will be a benchmark used to assess the new Financial Regulation.

Among the detailed measures, here are a few issues of importance:

Due to the fact that over the years these provisions have become so complex , the Commission proposal will establish a distinction between: – situations where the budget is implemented directly (by the Commission or Executive Agencies – Article 53(1) point (1)); and – situations where the budget is implemented indirectly in shared management with Member States or through other entities or persons (Articles 53 (1) point (2)).

The proposal seeks to shift the FR towards a performance-based system, based on the definition of agreed indicators and objectives (outputs and outcomes). It also seeks to proceed to a robust simplification of lump sums. The maximum threshold should be deleted and left to the College to decide when adopting a specific lump sum framework.

The Commission proposal also aims to encourage a wider use of Private Public Partnerships, specifically in the field of research. The proposal calls for flexibility in order to accommodate a vast range of PPPs, depending on their structure and needs of the funded activity.

The real-cost regime will undergo a review. The various types of costs - costs actually incurred, in kind contributions, and profits - will be further clarified and defined. The possible profit of an action should be recovered on a pro-rata basis (where the EU funds 50% of costs, only 50% of the profit should be recovered).

The proposal recommends reviewing the principal of the gradual decrease of Operating Grants (Article 113(2) FR) over four years rather than completely abandoning it.

A dual regime for assigned revenue is proposed (Article 18 FR) with the distinction between: 1.the re-use, for the same purpose, of funds initially assigned by the budget authority 2. revenue collected from and assigned by various donors to a specific programme or action.

The externalisation of budgetary tasks to third parties will be reformed to ensure that expenditure is executed with the same level of control and transparency as expected from Commission services as set out in the Financial Regulation.

The full proposal is available here.

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