EU CAP Network Workshop on the Use of Simplified Cost Options in the CAP

Kaley Kart (EU CAP Network) opened the workshop by welcoming participants and outlining the key points of the agenda and the objectives for the day ahead, which would build on the activities of the European Network for Rural Development in the previous programming period.

The scene setting began with a presentation from DG AGRI and DG REGIO.

Federico Guzzo (DG AGRI, Unit C1) outlined the general principles of SCOs in the Common Agricultural Policy (CAP), saying that SCOs are an alternative method to calculate eligible costs, whilst reducing the administrative burden for applicants. He also acknowledged the increased use of SCOs by MSs, where it is up to them to define the methodologies being applied.

Raluca Chetraru (DG Regio, Unit F1) highlighted best practices in the use of SCOs under the Cohesion funds. She reinforced the points made by Federico, suggesting that there was increased use of SCOs by MSs, particularly those with a focus on outputs and results. Raluca also acknowledged the importance of networking on SCOs to raise awareness of the benefits of using SCOs, through the Transnational Network (TN) on simplification and ongoing TN simplification actions such as workshops, peer-to-peer bilateral meetings, and multi-country workshops, involving MAs, PAs and audit authorities, where all MSs are present.

Sandra Sergio (DG AGRI, Unit H2) outlined the audit aspects associated with the use of SCOs. She emphasised the role of relevant programme authorities to get assurance that the calculation is sound and correct methods are used in the preparation of SCOs. She acknowledged that establishing SCOs needs time and resources, particularly for ensuring the quality and reliability of data for the SCO. Sandra underlined the potential for SCOs to reduce administrative burden for beneficiaries, allowing them to focus more on policy objectives and ensure better access to funds. The role of audit remains critical to ensure funds are used effectively.

Mike Mackenzie (DG AGRI, Unit B1) outlined the adoption of SCOs in the CAP, under cooperation (including LEADER) and investments. In the current period, for cooperation interventions, 88% of funding committed has a mix of SCO and reimbursement of actual costs in place, especially for LEADER and European Innovation Partnership (EIP). Mike recognised that LEADER has a long experience and knowledge in the use of SCOs, particularly for the preparation of Local Development Strategies, running costs of LAGs, and start-ups. He also acknowledged that whilst SCOs were used for investments (around a third for physical assets in the last programming period), there is significant scope to increase their use across all types of investment support. Mike concluded by highlighting the Commission’s post-2027 proposals, which may significantly expand the mandatory use of SCOs. Overall, the proposals reflect a broader and more systematic use of SCOs across policies.

The following comments were offered in response to points made by the audience.

Ann Verspecht (Belgium-Flanders, MA) highlighted the use of SCOs for investment support with very detailed unit costs (codes) developed for about 700 investment components. Investment projects are split up into sub-investments with different support rates, using historical data to determine the unit costs and ensuring a level playing field for all. Beneficiaries know what they will be paid without the same administrative burden, whilst the MA is reassured that the regime is audit-proof. Disadvantages include the time and effort needed to design and maintain the SCO, risks of over- or under-subsidisation, and guaranteeing sufficient quality of investment projects.

Eleftheria Bakali (Greece, MA) outlined the use of SCOs in Greece for EIP Operational Groups (OGs). Various SCO types are used to ensure that they can cover as many of the activities as possible. Their design was informed by an objective database and robust statistical data (including from costs incurred by OGs in 2014-20) to ensure the SCOs are reasonable and fair, with the appropriate safeguards in place (e.g. from the certification body). Eleftheria also highlighted the need for clear guidance on implementation and control.

Gianluca Giorgi (Italian National Network) outlined the role of the National Network (NN) in providing advice and recommendations on SCOs to MAs in a regionalised context. The NN team has been working on SCOs for ten years, supporting regional authorities and producing various outputs and recommendations. Gianluca highlighted the need for proper data analysis. The Italian CAP Strategic Plan (CSP) includes a specific measure devoted to supporting the use of SCOs, including those related to sectoral interventions under the European Agricultural Guarantee Fund (EAGF). Despite lower error rates with SCOs, compared to the ‘conventional’ forms of payments, there is still a need for PAs to change their mindset about the use of SCOs.

Leena Salonpää (Finnish Food Authority) talked about the implementation of simplified cost models in Finland. In this programming period, their use has been extended, with various types now used. The payment process works well, is faster thanks to the introduction of SCOs, and is appreciated by beneficiaries. Leena indicated that SCO establishment is time-consuming and reliant on relevant expertise to establish the amounts. She also suggested that beneficiaries need to understand that projects have to be implemented according to the approved plan, especially for lump sums and flat rates.

Participants broke into four groups to share relevant experiences on the use of SCOs, focusing on challenges in design and implementation across the different types of SCOs (lump sums, standard scales of unit costs, flat rates) as well as the horizontal considerations/approaches enabling the use of SCOs. Feedback from across the interactive sessions was provided during the panel discussion.

The panel session was moderated by Alistair Prior (EU CAP Network) and involved Julian Gschnell (MA, Austria), Łukasz Czech (farmer, Poland), Carla Maria Álvarez de Vera (MA, Canaries Government), Marco Mazzei (EU CAP Network, Evaluation Helpdesk) and Angelos Sanapoulos (FAMENET). The panellists reflected on the challenges associated with the design and implementation of SCOs identified in the earlier interactive sessions, before discussing opportunities for increasing their use.

A key challenge for decision makers is that SCOs are difficult to design and implement, given the lack of CAP-specific guidance, leading to uncertainty about what costs are eligible or will be paid at the end of the process. There is a clear need and demand for improved inter-institutional dialogue and exchange of information, with national auditors taking responsibility for assessing methodologies (ex-ante) where appropriate.

The panel highlighted challenges associated with the capacity and expertise of decision makers across both SCO design and implementation. Panellists agreed that capacity building within MA, PA and audit bodies is essential. They also highlighted the value of having a small team within the PA/MA focused on working on SCOs, so they understand the ways to design the methods and can track changes in rules. Capacity building was also deemed essential for those in MAs checking outputs, which are less straightforward than checking invoices.

Panellists also highlighted issues with organisational cultures where different mindsets can lead to tensions between MA, PA, and audit. Some of this may be down to a perceived lack of clarity about what is expected from audit, or questions surrounding the clarity, fairness or equitability of SCO methodologies.

Several questions arose around the many financial rules to be checked by the PA, e.g. conflict of interest, double funding, establishing suitable audit trails, and how this can be possible without invoices. Other questions related to the extent to which SCOs could be flexible, for example, if the SCO turned out to be unpopular, or a project had to be amended through the implementation period, or a mistake was found in the SCO design. Finally, there were questions about whether different types of SCOs could be combined for different parts of the project (a mix of SCOs).

Advice from those using SCOs under other funds was to start with small steps and develop SCOs incrementally, beginning with using off-the-shelf methods, then unit costs, and ultimately draft budgets. There is scope to learn from SCO methodologies with a proven track record in the CAP, e.g. LEADER. Also, there may be good data sources within regulations to support SCOs, such as tax or employment regulations for travel costs or employment costs. Additionally, there may be SCOs already in use under other Funds, which could be adapted for use within CSPs. Other potential solutions include the use of digital and IT tools to aid the calculation of SCOs based on the calculations of existing methodologies by other institutions (e.g. travel costs/staff costs for universities). Panellists felt there was much to learn from SCO work through FAMENET and the work of the Cohesion SCO Network.

More discussion and better communication about SCOs under the CAP are needed, with all actors aligned for the same goal - simplification - particularly for beneficiaries, who, for the most part, will be microenterprises. For decision makers, there should be certainty that the process will not be contested at a later stage. Suggested solutions for breaking the chain of mistrust included improved inter-institutional relations with auditors and involving the national audit authorities in the ex-ante assessment of SCO methodologies.

Panellists concluded by reflecting on how they would change the dynamics around the uptake of SCOs.

Participants then broke into four groups to identify ways of enhancing the use of SCOs, based on the key challenges identified in the earlier interactive session.

Challenges and potential solutions included:

Making SCO methodologies audit-proof

There followed a plenary discussion on networking for SCOs, moderated by Kaley Hart (EU CAP Network). Kaley reflected on what came out of earlier discussions, suggesting that the next steps going forward could include the sharing of different methodologies, perhaps through a shared library. Networking could also involve capacity building, e.g. through an SCO network like the one organised by DG REGIO. Support could also involve a helpdesk facility for CAP SCOs.

Participants suggested that networking should enable them to pose questions and consult others, particularly for any specific problems or issues. Networking would also enable decision-makers to share good examples and practical case studies. There was strong demand for further face-to-face and online exchanges on more specific elements of SCO design and implementation.

Establishing or building on existing communities of practice was suggested as being of benefit, drawing together relevant expertise from across MS. Horizon projects ‘Attractiss’ and ‘ModernAKIS’ were cited as platforms that were already addressing SCOs under the CAP. Some highlighted the benefits of previous networking. For example, work on SCOs in Italy started ten years ago, thanks to an in-person event on SCOs; Germany and Belgium collaborated on draft budget work for LEADER; in the Netherlands, a national symposium on SCOs with MA, PA, beneficiaries, and speakers from Belgium aided the organisation of a national community of practice.

It was suggested that the EU CAP Network could support a Member State-led EU-level thematic cluster on SCOs if there were an appetite to do so.

Susan Grieve (EU CAP Network) outlined next steps, indicating that there was no doubt that peer-to-peer learning across the entire SCO ecosystem is needed if we are to enhance the use of SCOs. Susan encouraged participants to continue the conversations after the event. The EU CAP Network recognises the need to support SCO exchanges and will work with stakeholders on the best route for doing this.

Mike Mackenzie (DG AGRI, Unit B1) concluded, remarking that the workshop provided rich insights and discussions on the substance of SCOs. He acknowledged the many challenges existing at all levels and the need for workable future solutions.