New Financial Management Tools under EU Cohesion Policy : Have they Delivered on Simplification?

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Gal, Fabian and van der Valk, Odilia (2025) New Financial Management Tools under EU Cohesion Policy : Have they Delivered on Simplification? European Policies Research Centre, Delft.

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Abstract

The financial management of EU Cohesion Policy programmes has long faced criticism for excessive administrative complexity. In response, the 2021–2027 programming period introduced measures aimed at simplification, notably through Simplified Cost Options (SCOs) and Financing Not Linked to Costs (FNLC). These tools seek to reduce documentation, streamline procedures, and shift focus toward performance and outcomes. SCOs have been widely adopted across IQ-Net programme authorities, with many reporting improved financial predictability, reduced verification demands, and better alignment with outputs. Nonetheless, challenges remain: setting up SCOs involves considerable upfront effort, they are not universally applicable, and audit practices often remain misaligned with the simplification logic. FNLC represents a more radical shift, linking payments to outputs or milestones rather than actual costs. While promising in theory and already fully applied under the Recovery and Resilience Facility (RRF), FNLC’s uptake under Cohesion Policy is still limited. Early adopters acknowledge benefits like enhanced efficiency and flexibility but also face challenges with indicator design, legal clarity, and audit uncertainty. Successful implementation depends on strong administrative capacity and clear regulatory guidance. Despite these simplification tools, administrative burden remains a significant issue. Most MAs perceive limited reduction in effort compared to the previous period, with some even reporting increased difficulty. Beneficiaries experience mixed outcomes—some see tangible benefits through digitalisation and flat-rate systems, while others still face confusion and administrative overload, especially with mandatory SCO use in complex projects. The overall findings suggest that while simplification measures like SCOs and FNLC hold potential, their benefits are often undermined by broader systemic complexities. New procedures, fragmented rules, overlapping funding mechanisms, and risk-averse verification systems have added layers of difficulty. Even beneficiaries, though generally well supported, sometimes face burdens that negate expected simplifications. Looking forward, IQ-Net programme authorities emphasise the need for more systemic and proportionate reforms post-2027. Priorities include expanding results-based approaches like FNLC where appropriate, aligning audit practices with simplification goals, improving digital systems, and ensuring rule clarity and stability. There is a shared recognition that simplification must go beyond technical fixes and address structural governance issues.

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