Financing not linked to costs (FNLC) is a simplified reimbursement tool where reimbursements are based on meeting specific conditions or achieving pre-defined results.
Why is it useful?
Financing not linked to costs has several advantages for ESF+ authorities and stakeholders, some of which are common to simplified cost options (SCOs):
- Less bureaucracy: Underlying costs linked to implementation are not subject to audits or verifications, reducing administrative burden and costs.
- Enhanced focus on policy objectives and results. Setting up a FNLC scheme requires stakeholders to clearly define what will be financed, for what objectives, and under which specific conditions.
- More effective policy development and implementation. Final beneficiaries can fully focus on fulfilling the conditions and achieving the results relevant to achieving policy objectives instead of on assembling all underlying accounting documents.
- Fewer errors: FNLC typically results in lower error rates compared to traditional cost-based funding.
Main benefits compared to simplified cost options
- No need for complex calculations
Unlike Simplified cost options, financing not linked to costs does not require developing detailed calculation methods to estimate real costs of implementing an operation. The only requirement is that funding amounts linked to conditions and results must align with the principles of sound financial management.
- Increased flexibility in determining the amounts to be reimbursed
Amounts for reimbursement can be established based on savings in public expenditure through achieving the results envisaged by the scheme instead of on the actual costing estimate for implementing an operation. As it is not linked to costs, FNLC can be a valuable tool for financing innovative policy schemes for which no historical data are available to calculate SCOs.
- Enhanced possibilities to achieve challenging results.
Unlike SCOs, where amounts cannot exceed the actual costs incurred by beneficiaries, FNLC allows to set specific top-up amounts for achieving more challenging results, e.g. when dealing with a more difficult target group or for ensuring durability.
- A new approach
FNLC allows the ESF+ to function as a true policy instrument, moving beyond merely financing projects to driving policy change.
How does it work?
For the 2021-2027 programming period, FNLC rules are outlined in Articles 51-56 and 95 of the Common Provisions Regulation (CPR).
Funding amounts, conditions and results must be determined before implementing an FNLC scheme, in one of two ways:
- By Member States: Submitting FNLC proposals to the European Commission, together with the ESF+ programme or with a request for a programme amendment (Article 95(1) CPR).
- By the European Commission: Adopting a delegated act under Article 95(4) CPR, which sets the amounts for Union-level financing by operation type (EU-level FNLC).
For further details, refer to the Recommendation Paper on Financing not linked to costs.
