Lump Sums in LEADER: Insights from Estonia
Estonia is one of the countries that has adopted lump-sum payments for LEADER in the 2023-2027 programming period and has already gathered valuable experiences from its implementation.
Lump-sum payments, part of the Simplified Cost Options (SCOs) package, were formally introduced in the 2014-2020 programming period as part of efforts to simplify the management of European Structural and Investment Funds and reduce administrative burdens for beneficiaries.
While this approach promises a more efficient process for both beneficiaries and LAG technical teams, its application has presented new challenges. Estonia, one of the countries that has adopted lump-sum payments for the 2023-2027 programming period, has already gathered valuable experiences from its implementation.
Why lump sums?
According to the Estonian Managing Authority, the primary motivation for introducing lump-sum payments in LEADER projects was to streamline administrative procedures and accelerate the disbursement of funds. Previously, verifying expenditure documents and processing payments could take several months. With lump sums, the aim is to release grants within two weeks of beneficiaries submitting the necessary proof of results- though technical difficulties in the IT system have slightly delayed this goal. In Estonia, lump sums are used to fund projects only; advance payments/flat rates are used for LAG running costs.
How it works in practice
The shift was also intended to allow Local Action Groups (LAGs) to focus on their core mission, namely managing, monitoring and evaluating strategies, and facilitating exchanges between stakeholders, rather than being bogged down by excessive paperwork. The Estonian approach seeks to make the financing of these activities as automated and straightforward as possible.
Lump sums have been particularly beneficial for small-scale projects with clearly defined outcomes. As Alo Tomson, CEO of LAG Pärnu Bay Partnership, shared:
"For mini-projects of EUR 1 000 to 8 000, lump sums have been a game-changer. They allow small local initiatives to access funding without needing to go through exhaustive financial reporting. This is particularly important for first-time applicants who might struggle with traditional administrative requirements."
Similarly, Riina Trumm, Manager of LAG South Järvamaa Partnership, highlighted:
"The process is significantly easier for projects with a single activity, such as purchasing equipment. The simplification helps both applicants and LAGs manage funds more effectively."
However, the model is not without its complexities. Unlike conventional funding schemes, lump-sum payments require projects to meet pre-defined outcomes precisely. For example, if a training programme is designed for 15 participants, delivering training to only 14 could result in a complete loss of funding. This makes the careful drafting of project objectives and budgets crucial, particularly for long-term projects facing fluctuating costs. In the current context, accounting for fluctuating costs when planning a study visit that will take place two years after the start of the project, or estimating material and labour costs in infrastructure projects, can be difficult.
Additionally, the most challenging and time-consuming aspect of the lump-sum process is agreeing on the ‘reasonable price’ of the grant with the Paying Agency. While in the past, delays in payments stemmed from verifying expenditure documents, under the new system, the complexity shifts to the early-stage budget negotiations. As a result, while the processing of applications has become longer, the delay in processing and granting payments has already decreased from 90 to 50 days on average and is expected to reach only two weeks.
Implementation hurdles and improvements
Estonia faced a bumpy start in rolling out the lump-sum model. In the first six months, 36 out of 150 applications were rejected, leading to legal disputes and regulatory adjustments. In response, the Managing Authority, Paying Agency and LAGs established a bi-monthly joint meeting to resolve issues collaboratively.
The Managing Authority emphasised that while IT challenges slowed the implementation, once these issues were addressed, entrepreneurs found the final process to be significantly simpler. Kai Kalmann-Jotautas, Head of the Rural Economy and Competition Policy section, Ministry of Regional Affairs and Agriculture for the Republic of Estonia (Managing Authority), also stressed the importance of continuous communication:
"Even if you prepare long written guidelines, they are not always read or applied uniformly. The key is ongoing dialogue and a one-stop shop for clarifications and lessons learned."
But, most importantly, the additional workload has not transferred to the beneficiaries. On the contrary, lump sums ensure that many small projects receive funding quickly, allowing entrepreneurs and local initiatives to launch without waiting years for payments- a challenge that previously caused financial hardship for small-scale applicants.
Learning from others
Since there were no official EU guidelines for implementing lump sums under the European Agricultural Fund for Rural Development (EAFRD) at the time, Estonia sought inspiration from Poland, Finland and Malta. A key lesson from Finland was giving beneficiaries the option to choose whether or not to use lump sums, depending on the nature of their project- an approach Estonia may consider in the future.
While the launch has had its hurdles, this is only the beginning of the process. All stakeholders involved are committed to making lump sums work, and ongoing dialogue ensures that the system is constantly improving. The key to success is not perfection from the outset, but continuous adaptation, open communication and mutual trust between the Managing Authority, the Paying Agency and LAGs.
Estonian MA’s key takeaways for other Managing Authorities
Kai Kalman from the Estonian Managing Authority shares the key lessons learned so far:
- Co-create and design the process with important key partners - this creates a sense of ownership and everyone contributes,
- Research the best practices of other countries, and if you don't know and still don't understand, then ask the EU in writing, because the system must be legally correct and audit-proof.
- If difficulties arise during implementation, then quickly introduce changes through co-creation.
- Have the implementation of the simplified cost model audited by the certifying audit unit. This ensures that the entire system is fair and equitable and that verifiable calculation methods are used based on objective information.
- Think outside the box and use as many IT and digital solutions as possible, e.g. a photo with geocoordinates to prove the result. For example, we found a solution to support construction work through interim payments within the lump sum system.
- Don't over-regulate
- Let go of the old way of thinking: for example, you no longer need to look at cost documents - and that's ok.
- SCOs may not always be suitable for all projects, for example, for collaborative projects. Here, it is worth considering a mixed option, combining the use of simplified cost options and actually-incurred costs.
- Talk, talk, talk! Communication is very important. All parties need to understand the system in the same way.
- Unexpected events may come from IT systems
- Systems never change overnight, so it's worth repeating simple messages over and over again.
If you would like more information, you can contact the Managing Authority in Estonia.