Hungarian government aims for transparency: The big EU Funds overhaul!

The Hungarian government is poised to introduce substantial reforms to the rules governing the implementation of Hungary’s Recovery and Resilience Plan, aiming to enhance the transparency of financial and administrative processes while improving access to EU funds. 

According to Portfolio, the proposed measures span a broad range of areas, including project financing structures and oversight mechanisms. These reforms are expected to have far-reaching implications for both the Recovery EU Funds and the Cohesion Framework.

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One of the most important changes is that the Restoration Fund now also covers investments based on projects financed from the central budget. This innovation means that the measures covered by the Restoration Fund will also be subject to the strict rules, even if they are not directly financed by EU funds.

The proposal redefines the concept of financial instruments to bring them into line with the current EU legal framework. The new rules will allow the combined use of grants, which will increase flexibility in the use of EU funds. The funds concerned are the European Regional Development Fund, the Cohesion Fund and the European Social Fund Plus.

Control and transparency

The Internal Audit and Integrity Directorate will also have a broader range of tasks, with a greater role in identifying conflicts of interest and conducting risk-based audits. To support this process, the ARACHNE risk assessment tool will be introduced to help identify potential irregularities in a data-driven manner.

This is partly in response to the European Commission’s expectations to prevent financial fraud and detect irregularities quickly. The rules for setting market prices are also being revised to further increase transparency. For instance, if there are not enough bids in a public procurement procedure, the shortfall can be made through online bidding.

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The role of EU Funds

The Regulation allows certain projects to be financed by the Cohesion Fund in the context of operational programmes for the period 2021-2027. This measure could be particularly important if there are obstacles to the absorption of RRF funds, as the deadline for the absorption of such funds is strictly limited to the summer of 2026.

The transfer of projects is subject to strict conditions to ensure that the original objectives and indicators are not compromised. This mechanism can provide a safety net to avoid loss of resources.

The proposal also clarifies a number of technical details. For example, the accuracy of data in the public accounts would be ensured through continuous information to the tax authorities, while the preparation of aid payments would be subject to stricter controls. Control procedures for advance payments would also be fine-tuned to reduce risks.

According to the rules, the new regulation will have a retroactive effect and will enter into force five days after it has been published. This means that the changes will also apply to pending cases.

The next steps

The draft regulation has been published for public consultation until the 17th of December. This will give stakeholders the opportunity to comment on the proposed changes. The government’s aim is to contribute to a faster and more efficient use of EU funds by clarifying the rules and increasing the flexibility of the legal framework while meeting the strict requirements of the EU.

The new rules will not only support more efficient implementation of current projects but will also help Hungary to be better prepared for future EU challenges and opportunities. The measures promise transparency, flexibility and optimal use of resources and EU funds.

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