220.127.116.11. What is co-financing?
An external action project may be fully or partly financed by the EU Budget/EDF. This means that other donors may co-finance an action together with the European Commission.
Under the EDF, in addition to the co-financing mechanism, it is also possible to make voluntary contributions73. However, voluntary contributions made to the EDF by Member States do not constitute co-financing, but a simple additional contribution to that Fund. Once the contributions have been made they become an integral part of the EDF.
Two types of co-financing should be distinguished: parallel and joint co-financing.
- Parallel co-financing: the action is broken down into clearly identifiable sub-projects, each funded by the different co-financing partners (funds are earmarked). Normally each sub-action will be subject to the rules and procedures imposed by each donor.
- Joint co-financing: the total action cost is divided between the co-financing partners and all the funds are pooled, with the result that the source of funding for a specific activity within the project cannot be identified (funds are not earmarked). As it is virtually impossible to apply each donor's rules and procedures, the donors agree on the common rules to be applied. Under joint co-financing, the contribution of the EU/EDF is finite by nature, so it is neither possible nor consistent with the purpose of joint co-financing to require the traceability of this contribution once it has been transferred to a co-financed fund and mingled with other donors' funds.
In order to implement joint co-financing measures, the European Commission may receive and manage financial contributions from:
- EU Member States and their regional and local authorities, in particular their public and semi-official agencies;
- other donor countries, and in particular their public and semi-official agencies
- international organisations, including regional organisations, and in particular international and regional financial institutions;
- private entities;
- beneficiary countries.
Such funds are to be treated as assigned revenue and integrated as such in the annual action programmes.
When the European Commission receives such funds it will conclude transfer agreements with the donors to lay down procedures for the transfer and management of funds.
With a view to harmonising the terminology used in the legal framework, the term 'joint co-financing' will cover such terms as pool funds, basket funds, multi-donor funds/actions, active or passive co-financing with Member States and multi-donor trust funds, all of which are forms of co-financing.
See section 3.2..