This Commission report is the first in a series of annual reports to the EU institutions on the implementation of the European Structural and Investment Funds (ESI Funds). It provides an overview of the 2016 annual implementation reports on the 533 programmes submitted by Member States and regions for the 2014-2015 period and summarises the available evaluations of these programmes.

The late adoption of the multiannual financial framework for the period 2014-2020 has had an impact on the adoption of legislation governing the ESI Funds. By the end of 2014, 220 programmes had been adopted. However, the majority (313) of programmes were finalised in 2015 181 of which were completed only in the second half of the year.

Progress in implementation: on the basis of the 2016 annual implementation reports covering 2014 and 2015, it appears that the total volume of projects selected for support from the Funds amounted to EUR 58.8 billion , or 9.2% of the total volume of investment planned for the 2014-2020 period. The EU’s contribution to the selected projects is estimated at EUR 41.8 billion. The progress made is as follows :

according to the most recent financial data submitted up to the autumn of 2016, implementation has accelerated significantly in terms of the volume of project selection. The total financial volume of selected projects more than doubled in nine months, from EUR 58.8 billion at the end of 2015 to EUR 128.8 billion (20.2% of planned investments); by the end of 2015, the Member States and regions had selected 989 000 projects ranging from investments in heavy infrastructure to individual support to farms. The selected projects will support 89 000 micro-businesses and SMEs under the European Social Fund (ESF); the implementation of programme structures and procedures to ensure the robustness and quality of investments throughout the programme life cycle has been important for the successful launch of the programmes ; lastly, more than two-thirds of the country-specific recommendations adopted in 2014 in the context of the European Semester concerned investments under the ESI Funds (in particular the ERDF and the ESF) and were therefore integrated into the priorities of the Member States’ programmes.

Implementation by theme: the report provides an overview of the financial volume and the selection rate of projects for the ESI Funds by thematic objective at the end of 2015. The main findings are as follows:

projects representing more than EUR 11.5 billion (more than 12% of the planned amount) were selected in the field of employment, social inclusion and education : ESF and the Youth Employment Initiative (YEI) actions involved 2.7 million participants, including 1.6 million unemployed and 700 000 inactive. 235 000 were in employment following an ESF or YEI operation, 181 000 had gained a qualification. Social inclusion is the area where the most noticeable progress is being made in respect of the ESF: out of the 631 000 ESF participants (e.g. jobless households, migrants), 55 000 participants have already found a job ; an amount of approximately EUR 6 billion has been programmed to support institutional capacity building and efficiency of public administration, mainly under the ESF, with an ERDF contribution also planned. By the end of 2015, more than 11% of the total budget had been allocated to projects.

The Commission now considers it vital that the implementation of the new programmes is accelerated throughout the European Union.

Recent data show a more uniform state of advancement in most Member States and themes. The evolution of these trends will be further evaluated in the 2017 reporting cycle, which will provide a more comprehensive picture of implementation and allow for better reporting on a qualitative level.

PURPOSE: to define the missions of the European Social Fund (ESF) for the period 2014-2020.

LEGISLATIVE ACT: Regulation (EU) No 1304/2013 of the European Parliament and of the Council on the European Social Fund and repealing Council Regulation (EC) No 1081/2006.

CONTENT: the Regulation is part of a package of measures relating to the cohesion policy comprising the following Regulations:

· Regulation (EU) No 1303/2013 .of the European Parliament and of the Council sets out the provisions common to five European structural funds, the ERDF, the European Social Fund (ESF), the Cohesion Fund (CF), the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF).

· The Regulations specific to the five funds for the ERDF , the ESF , the Cohesion Fund , the European Territorial Cooperation and the European grouping of territorial cooperation ( EGTC ).

This Regulation establishes the missions of the European Social Fund (ESF) , including the Youth Employment Initiative (YEI), the scope of its support, specific provisions and the types of expenditure eligible for assistance.

Missions of the ESF : the Funds:

· promote high levels of employment and job quality, improve access to the labour market,

· support the geographical and occupational mobility of workers and facilitate their adaptation to industrial change and to changes in production systems needed for sustainable developments,

· encourage a high level of education and training for all and support the transition between education and employment for young people,

· combat poverty, enhance social inclusion, and promote gender equality, non-discrimination and equal opportunities.

Scope of support : the ESF supports the following investment priorities :

· Promoting sustainable and quality employment and supporting labour mobility : for example, the access to employment for the long-term unemployed, and for young people, in particular those not in employment, education or training, including those from marginalised communities; self-employment and the creation of micro, small and medium sized enterprises; equality between men and women; active and healthy ageing; modernisation of public and private employment services.

· Promoting social inclusion, combating poverty and any discrimination : for example, active inclusion, integration of marginalised communities such as the Roma, combating all forms of discrimination, enhancing access to affordable, sustainable and high-quality services, including health care and social services of general interest, promoting social entrepreneurship.

· Investing in education, training and vocational training for skills and life-long learning : for example, reducing and preventing early school-leaving, improving the quality and efficiency of, and access to, tertiary education, facilitating the transition from education to work.

· Enhancing institutional capacity of public authorities : for example, investment in institutional capacity and in the efficiency of public administrations and public services at the national, regional and local levels with a view to reforms, better regulation and good governance.

Thematic concentration : in each Member State, at least 20% of the total ESF resources shall be allocated to the thematic objective "promoting social inclusion, combating poverty and any discrimination".

In the developed regions, at least 80% of the ESF allocation to each operational programme should be concentrated on up to five of the investment priorities. In transition regions, it will be 70% , and, in less developed regions, 60%.

Youth Employment Initiative (YEI) : the YEI shall support the fight against youth unemployment in eligible regions of the Union. It targets all young persons under the age of 25 not in employment, education or training , residing in eligible regions, who are inactive or unemployed (including the long-term unemployed), and whether or not registered as seeking work.

By " eligible regions ", it is understood that "eligible regions" are those NUTS level 2 regions that have youth unemployment rates for young persons aged 15 to 24 of more than 25% in 2012 and, for Member States where the youth unemployment rate has increased by more than 30% in 2012, NUTS level 2 regions that have youth unemployment rates of more than 20% in 2012.

The resources for the YEI may be revised upwards for the years 2016 to 2020 in the framework of the budgetary procedure.

Results-oriented approach : in order to ensure closer monitoring and improved assessment of the results achieved at the Union level by actions supported by the ESF, a common set of output and result indicators is established in this Regulation.

Participation of partners : effective implementation of actions supported by the ESF must take account of the actors at regional and local levels, in particular the umbrella associations representing local and regional authorities, organised civil society, economic and, in particular, social partners and non-governmental organisations.

Social innovation will be encouraged, especially at the local and regional level, to respond to social needs, in partnership with appropriate actors, in particular, with social partners.

Financial support : with a view to simplifying the use of the ESF and with regard to the specificities of the operations supported by the ESF, specific provisions are provided as regards eligibility of expenditure. The use of standard scales of unit costs , lump sums and flat-rate financing should lead to simplification for the beneficiary and should lower the administrative burden for all ESF project partners.

ENTRY INTO FORCE: 21.12.2013.

DELEGATED ACTS: the Commission may adopt delegated acts for establishing the definition of standard scales of unit costs and lump sums and their maximum amounts according to different types of operations. The power to adopt delegated acts shall be conferred on the Commission from 21 December 2013 to 31 December 2020 . The European Parliament or the Council may object to a delegated act within a period of two months from the date of notification (this period can be extended for two months). If the European Parliament or the Council make objections, the delegated act will not enter into force.

The European Parliament adopted by 579 votes to 33 with 12 abstentions, a legislative resolution on the proposal for a regulation of the European Parliament and of the Council on the European Social Fund and repealing Regulation (EC) No 1081/2006.

Parliament adopted its position in first reading following the ordinary legislative procedure. The amendments adopted in plenary were the result of a compromise between Parliament and Council. They amend the Commission proposal as follows:

ESF Missions: the amended Regulation established the mission of the European Social Fund (ESF), including the Youth Employment Initiative (YEI), the scope of its support, specific provisions and the types of expenditure eligible for assistance.

The ESF shall improve access to the labour market, enhance social inclusion, combat poverty, promote education, skills acquisition and lifelong learning, and mobilising a range of policies targeting the most disadvantaged people. Its main missions were the following:

promote employment, improve access to the labour market, paying particular attention to those who are the furthest from the labour market and support voluntary labour mobility ; facilitate the adaptation of workers to industrial change and changes to production system needed for sustainable developments ; support the transition between education and employment for young people; promote gender equality, non-discrimination and equal opportunities;

support active and healthy ageing , including through innovative forms of work organisation,

The ESF should also contribute to cultural and creative skills.

The ESF shall benefit people, including disadvantaged people such as the long-term unemployed, people with disabilities, migrants, ethnic minorities, marginalised communities and people of all ages facing poverty and social exclusion.

Consistency and thematic concentration: the strategy and actions set out in the Operational Programmes must be consistent and respond to the challenges identified in the National Reform Programmes, as well as, where relevant, in their other national strategies that aim to fight unemployment, poverty and social exclusion.

Member States shall concentrate the ESF allocation to each operational programme on up to five of the investment priorities.

At least 20 % of the total ESF resources in each Member State shall be allocated to the thematic objective "promoting social inclusion, combating poverty and any discrimination".

Involvement of partners : efficient and effective implementation of actions supported by the ESF should take into account those who act at the regional and local levels, in particular the umbrella associations representing local and regional authorities, organised civil society, economic and in particular the social partners and non-governmental organisations.

Social innovation : this should be encouraged particularly at local or regional level, to address social needs, in partnership with the relevant partners and, in particular social partners.

Youth Employment Initiative : this will target all young persons in eligible regions under the age of 25 not in employment, education or training, residing in the eligible regions, who are inactive or unemployed (including long-term unemployed), and registered or not as seeking work.

"Eligible regions " are those NUTS 2 level regions that have youth unemployment rates for young persons aged 15-24 of more than 25% in 2012 or, for Member States where the youth unemployment rate has increased by more than 30% in 2012, NUTS 2 level regions that have a youth unemployment rate of more than 20% in 2012.

The resources for the YEI may be revised upwards for the years 2016 to 2020 in the framework of the budgetary procedure in accordance with Council Regulation laying down the multiannual financial framework for the years 2014-2020.

Sound financial management : Member States should refrain from adding rules which complicate the use of funds for the beneficiary.

The ESF should complement other Union programmes and close synergies shall be developed between the ESF and other Union financial instruments.

The Council reached agreement on a partial general approach concerning the EU cohesion policy for the 2014-2020 period.

The Council's partial general approach is aimed at strengthening results orientation and improving the quality of cohesion spending. It also seeks to contribute to the integration of cohesion policy in the economic governance of the EU.

The partial general approach does not prejudge the outcome of negotiations on other elements of cohesion policy or on the EU's multiannual financial framework (MFF) for 2014-2020 or the Financial Regulation.

(1) The Council's compromise text : this covers some of the more technical features of the future cohesion policy. Work on the more political elements will continue. Some of these are dealt with in the negotiations on the MFF.

More concretely, the partial general approach includes the following elements:

Programming : common programming rules are envisaged for the five funds covered by a common strategic framework, namely: (i) the European Regional Development Fund (ERDF) ; (ii) the European Social Fund (ESF) ; (iii) the Cohesion Fund (CF) ; (iv) the European Agricultural Fund for Rural Development (EAFRD) ; (v) the European Maritime and Fisheries Fund (EMFF).

Each programme has to specify how it contributes to the EU's 2020 strategy for jobs and growth. The question as to whether the link between the EU strategy for jobs and growth on one hand and cohesion policy on the other should be assured through country-specific recommendations or national reform programmes has been left open. The Council will come back to it in June.

Ex ante conditionality : certain conditions must be met before funding may start. It is aimed at improving cohesion policy performance.

Management and control : the partial general approach provides for specific rules for the management and control of funds disbursed.

Monitoring and evaluation : this part of the partial general approach makes sure that the implementation of the cohesion policy programmes is duly monitored and evaluated.

Eligibility: the financing of already completed projects, which is possible under the current rules, would be excluded under the partial general approach.

Major projects : the Council's compromise text would facilitate the deployment of "upstream" quality reviews by independent experts of major projects. This is considered to be more effective than the existing approvals "downstream" by the Commission.

Further discussions will be held at Council level in the coming months. The new cohesion policy rules are closely linked to the MFF negotiations. They are only expected to be adopted by the European Parliament and the Council once an agreement on the MFF has been reached.

(2) Multiannual financial framework 2014-2020 : the Council discussed, in public session, for the first time on the basis of the negotiating box, certain areas of the multiannual financial framework (MFF) including cohesion policy and the provisions relating to the five funds belonging to these policy fields.

During the debate, a number of delegations voiced concerns about the proposed overall level of expenditure in times of fiscal consolidation and asked for cuts to be made in all headings.

Cohesion policy : some Member States considered the proposed amount for cohesion policy as a minimum, whereas others viewed the amount proposed for the common agricultural policy as a minimum.

Several Member States expressed concerns relating either to the new category of transition regions or to its scope. A number of delegations opposed the proposed level of capping, limiting the level of transfer to each Member State to a certain percentage of its gross domestic product. Some Member States objected to the so-called reversed safety net, which would limit the scope of support to a certain percentage as compared to its level during the 2007-2013 period. Some Member States argued for co-financing rates of 85% for less developed regions, whereas others pleaded for reducing the rates.

The rules governing the five funds under the common strategic framework : some Member States stressed the importance of macro-economic conditionality. Others were sceptical about it, unless it was extended to other types of expenditure.

The General Affairs Council of 29 May will hold a first discussion on a comprehensive version of the negotiating box covering all elements of the MFF negotiating package.

Ministers for European Affairs will continue their work on the MFF at an informal meeting in Horsens (Denmark) on 10 and 11 June.

The European Council will discuss the MFF for the first time on 28 and 29 June.

PURPOSE: to define the next framework for cohesion policy for the period 2014-2020 (ESF Regluation).

PROPOSED ACT: Regulation of the European Parliament and of the Council.

BACKGROUND: u nemployment and persistently high rates of poverty call for action at EU and national level. Almost 23 million people are today unemployed and over 113 million are estimated to be living at risk of poverty or exclusion.

Social and employment issues are a primary concern of European citizens, and an area where more is expected from the Union. Additional challenges that the Union faces relate to: shortfalls in skill levels, under-performance in active labour market policy and education systems, social exclusion of marginalised groups, and low labour mobility. There is a need both for policy initiatives and for concrete supporting actions.

The European Social Fund (ESF) supports policies and priorities aiming to achieve progress towards full employment, enhance quality and productivity at work, increase the geographical and occupational mobility of workers within the Union, improve education and training systems, and promote social inclusion, thereby contributing to economic, social and territorial cohesion.

As the ESF should be fully aligned with the Europe 2020 Strategy and its headline targets, it should support the policies pursued by the Member States under the Integrated Guidelines adopted in accordance with the Treaty and the Recommendations on the National Reform Programmes.

This proposal is part of a package of legislative measures relating to the Cohesion policy 2014-2020 . This package includes:

an overarching regulation setting out common rules governing the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF). This will allow for the better combination of funds for a stronger impact of EU action; three specific regulations for the ERDF , the ESF and the Cohesion Fund ; two regulations dealing with the European territorial cooperation goal and the European grouping of territorial cooperation ( EGTC ); two regulations on the European Globalisation Fund ( EGF ) and the Programme for Social Change and Innovation ; a communication on the European Union Solidarity Fund ( EUSF ).

IMPACT ASSESSMENT: the impact assessment for the ESF Regulation mainly addressed the scope of the instrument and one specific aspect of simplification. It also discussed the articulation between and complementarity with the financial instruments available to the Commission’s Directorate-General for Employment, Social Affairs and Inclusion, notably the ESF, the European Globalisation Adjustment Fund, the PROGRESS programme, EURES and the PROGRESS Microfinance Facility.

The ESF is seen as providing considerable European added value and has received very broad support. Concentration on the main challenges and Council Recommendations is widely seen as an important precondition for the effectiveness of support. Reducing the complexity of support and the related audit burden , notably for smaller beneficiaries, is also seen as an important area that needs to be addressed.

LEGAL BASIS: Article 164 of the Treaty on the Functioning of the European Union (TFEU).

CONTENT: the present proposal defines the ESF’s mission and scope for 2014-2020, together with the associated investment priorities addressing the thematic objectives, and lays down specific provisions concerning operational programmes co-financed by the ESF and concerning eligible expenditure.

Scope : the draft ESF Regulation for 2014-2020 proposes to target the ESF on four ‘thematic objectives’ throughout the European Union:

(i) promoting employment and labour mobility;

(ii) investing in education, skills and lifelong learning;

(iii) promoting social inclusion and combating poverty;

(iv) enhancing institutional capacity and an efficient public administration.

Each thematic objective is translated into intervention categories or ‘investment priorities’ . In addition, the ESF should contribute also to other thematic objectives such as supporting the shift towards low-carbon, climate resilient and resource efficient economy, enhancing the use of information and communication technologies, strengthening research, technological development and innovation and enhancing the competitiveness of small and medium-sized enterprises.

Concentration of funding : in order to ensure this concentration, it is proposed that:

support for administrative capacity should be limited to Member States with less developed regions or eligible to the Cohesion Fund; at least 20 % of the ESF allocation should be dedicated to ‘promoting social inclusion and combating poverty’; operational programmes should concentrate funding on a limited number of ‘investment priorities’.

Gender equality : the draft Regulation clarifies and strengthens the ESF contribution to the Union's commitment to eliminate inequalities between women and men and prevent discrimination. Member States should combine a robust mainstreaming approach and specific actions to promote gender equality and non-discrimination.

Social innovation and cooperation : the proposal aims to reinforce social innovation and transnational cooperation under the ESF, through an incentive in the form of a higher co-funding rate for priority axes dedicated to them, specific programming and monitoring arrangements, and a stronger role for the Commission in the exchange and dissemination of good practices, joint actions and results across the Union.

Monitoring and evaluation systems : the draft Regulation proposes minimum quality standards and a set of compulsory common indicators. This should ensure that monitoring produces robust and reliable data that can easily be aggregated at EU level and that evaluation focuses on assessing the effectiveness and impact of ESF support.

Social partners : for the less-developed regions and countries, the draft Regulation calls for an appropriate amount of ESF resources to be allocated to capacity building actions for social partners and non-governmental organisations. Joint activities undertaken by the social partners will also be supported, considering their vital role in the field of employment, education and social inclusion.

Small beneficiaries : the draft Regulation proposes a limited number of specific eligibility rules to facilitate access to ESF funding for smaller beneficiaries and operations and to take account of the different nature of ESF operations and the different type of ESF beneficiaries as compared to other Funds. In order to ensure that simplification reaches the beneficiaries, the draft Regulation proposes to extend the use of simplified cost options, including by making their use obligatory for smaller operations. These provisions will reduce the administrative burden on beneficiaries and managing authorities, strengthen the results orientation of the ESF and will contribute to reducing error rates.

Financial instruments : lastly, specific provisions are introduced for financial instruments to encourage Member States and regions to leverage the ESF and thus increase its capacity to finance actions supporting employment, education and social inclusion.

BUDGETARY IMPLICATION: the Commission’s proposal for a Multiannual Financial Framework includes EUR 376 billion for cohesion policy for the period 2014-2020. The proposed budget (in billion euros) is broken down as follows:

Less developed regions EUR 162.6 Transition regions: EUR 38.9 More developed regions: EUR 53.1 Territorial cooperation: EUR 11.7 Cohesion fund: EUR 68.7 Extra allocation for outermost and sparsely populated regions: EUR 0.926. Facility for transport, energy and ICT: EUR 40 billion (with an additional EUR 10 billion ring-fenced inside the Cohesion Fund).

The present proposal establishes minimum shares for the ESF for each category of regions defined in the proposal for a General Regulation. This results in a minimum overall share for the ESF of 25 % of the budget allocated to cohesion policy (excluding the allocation to the Connecting Europe Facility), i.e. EUR 84 billion.

The indicated minimum ESF allocation includes the budget (EUR 2.5 billion) for a forthcoming Commission proposal regarding food support for the most deprived persons.

DELEGATED ACTS: this proposal contains provisions empowering the Commission to adopt delegated acts in accordance with Article 290 of the Treaty on the Functioning of the European Union (TFEU).