This chapter focuses on the third dimension of the OECD Cross-border Governance Framework: Funding and financing of cross-border governance bodies and action. It first explores how cross-border governance bodies fund their staff and operational costs, building on international examples. Specifically, it discusses different models for determining membership contributions and how these can be adjusted to meet changing cross-border priorities and circumstances. Then, the chapter discusses the need for many cross-border governance bodies to mobilise project funding to meet their objectives. It explains the reliance of many governance bodies on Interreg funding, and discusses alternative funding and financing sources. Finally, the chapter presents considerations for regional, national and international policy makers on how to build the capacity of governance bodies to ensure sustainable and adaptable funding and financing for cross-border co-operation.
Building More Resilient Cross‑border Regions
Abstract
Sustainable and adaptable funding for day-to-day operations and the implementation of concrete actions is a must if cross-border governance bodies are to effectively achieve their objectives. However, their funding is often precarious, with membership contributions sometimes only covering operational costs, limiting their ability to implement ambitious projects. Additionally, membership contributions can be inflexible, which can make it difficult for cross-border governance bodies to adapt to changing contexts or address emerging challenges and opportunities. A further challenge is the frequent lack of multi-year financial planning in many of these bodies, which can create uncertainty among members regarding financial expectations and the potential need for additional external resources to meet operational costs and investment needs.
To ensure the long-term effectiveness of cross-border governance bodies, policy makers must take concrete action to diversify revenue streams. While many cross-border bodies currently rely on Interreg funding, other funding and financing options, such as private sector contributions, are also available and could be more actively pursued. A lack of time and skills for proposal writing and a limited awareness of non-Interreg funding mechanisms are common obstacles that can prevent diversification.
To enhance the financial sustainability of cross-border governance bodies and actions, several measures are necessary. First, ensuring flexibility around membership contribution formulas. This can pave the way for periodic adjustments that may be needed to meet changing needs, priorities, and circumstances. Second, adopting multi-annual financial plans can provide greater predictability for members by establishing clear, long-term financial expectations. Third, strengthening in-house capacity to identify funding opportunities and draft good-quality proposals can further support the mobilisation of project funding. Fourth, reinforcing the skills required to absorb available funding and invest it effectively can help cross-border governance bodies avoid unspent funds and project delays. Fifth and finally, reviewing the eligibility criteria of EU funding mechanisms that are infrequently used by cross-border governance bodies could improve their use and expand their impact. Addressing these areas can significantly enhance the financial sustainability of cross-border bodies, improve their ability to adapt to emerging challenges, and help them to deliver on their strategic goals.
This chapter focuses on the third dimension of the OECD Cross-Border Governance Framework: Funding and Financing cross-border governance bodies and action. It consists of two parts. The first part explores how cross-border governance bodies are funded. It discusses membership contributions, and details different mechanisms used for dividing and adjusting contributions among members. The second part focuses on the efforts of cross-border governance bodies to mobilise project funding. It explores different funding and financing mechanisms available and provides examples of how different cross-border governance bodies have been able to diversify their revenue streams. The chapter finishes with a series of considerations for policy makers to build the capacity of cross-border governance mechanisms to mobilise, absorb and invest funding effectively.
Cross-border governance bodies need the operational capacity to carry out their mandate. As such, they should consider:
Establishing annual membership contributions that cover basic staffing and operational costs so that the governance bodies are able to address cross-border issues, even when funding for cross-border projects fluctuates.
Periodically reviewing the volume of membership contributions to allow for adjustments that may be needed to meet changing needs, priorities, and circumstances (e.g. members' fiscal capacities, inflation).
Establishing clear criteria (e.g. population, financial capacity, parity) for dividing membership contributions among formal members, to promote fairness and shared responsibility for cross-border initiatives.
Regularly reviewing the division of membership fees, to ensure it remains fair amidst changing circumstances (e.g. changes in member composition, financial capacities).
To enable strategic financial planning, and help cross-border governance bodies and their members anticipate future financial needs and allocate resources effectively, they should consider:
Adopting multi-annual financial plans that include staff, operational, logistical, project, and other costs, with exact figures for the first year and estimates for subsequent years.
To ensure cross-border governance bodies are able to mobilise the necessary funding and financing to implement concrete initiatives and build financial resilience, they should consider:
Assessing existing skills and expertise related to mobilising funding and financing (e.g. proposal writing, engagement with donors), as well as future needs to identify potential gaps.
Reinforcing in-house capacity to identify funding opportunities and draft good-quality proposals, particularly for those international, national or subnational funding mechanisms that align with the governance body’s co-operation objectives. This could be done by:
Organising targeted training by external experts or leveraging experienced staff to train colleagues;
Inviting experts from formal members to organise ad hoc training, provide on-the-job coaching or assist in drafting different parts of project proposals.
To ensure cross-border governance bodies can effectively absorb and invest project funding and financing, and avoid project delays, they should:
Build in-house skills and expertise in the following fields:
Strategic planning, to ensure project proposals are in line with available resources and/or based on a realistic estimation of what human resources can be mobilised to support project implementation;
Procurement of goods and services, to ensure timely and cost-effective resource allocation;
Human resource management, to quickly scale operational capacity when project funding becomes available.
To ensure an increased uptake of a wider range of EU-sponsored funding and financing programmes by cross-border governance bodies, the European Commission could consider:
Reviewing the eligibility criteria of underused EU funding mechanisms to assess whether bodies such as EGTCs can participate in calls or if adjustments may be needed to facilitate their access.
Developing and disseminating written materials (e.g. an online brochure or toolkit) that offer practical guidance on: i) alternative funding and financing options available to cross-border governance bodies; and ii) how to apply for them.
Source: Author’s elaboration.
Ensuring sustainable and adaptable funding for cross-border governance bodies helps them achieve cross-border development objectives and address the needs of border communities effectively. Sufficient and steady funding makes it easier to hire and retain skilled staff that specialise in cross-border co-operation, as well as cover operational expenditures (e.g. office space, communication infrastructure, necessary travel). As such, reliable funding for cross-border governance bodies can help them remain focused on addressing cross-border issues over time, even when funding for cross-border projects fluctuates. Moreover, ensuring that funding mechanisms are adaptable to changing needs and circumstances provides cross-border governance bodies with the necessary flexibility to tackle new and emerging cross-border challenges.
In practice, however, funding for cross-border governance bodies is often precarious, as evidenced by the cross-border governance bodies studied. Membership contributions are usually their primary source of funding, which may cover only basic operational costs. This means that cross-border governance bodies often need to mobilise external resources in order to carry out concrete projects. Moreover, membership contribution structures often lack flexibility, making it difficult for cross-border governance bodies to cover costs arising from changing contexts (e.g. inflation) and effectively address emerging or unexpected challenges and opportunities. Additionally, many cross-border governance bodies do not use multi-year financial plans, which can create uncertainty among members regarding financial expectations, especially regarding membership contributions, operational costs, and potential investment needs.
Membership contributions
Differences in the revenue levels of cross-border governance bodies reflect differences in their mandates, membership composition, and the financial capacity and commitment of members to support cross-border co-operation. For example, in order to provide quality healthcare, the European Grouping of Territorial Co-operation (EGTC) Cerdanya Hospital has managed a budget exceeding EUR 20 million annually since opening in 2014 (EGTC Cerdanya Hospital, 2024[1]). Cross-border governance bodies that are not tasked with providing a specific public service tend to have much smaller budgets (Annex Figure 4.A.1). The Eurometropole Lille-Kortrijk-Tournai, for instance, maintained a budget of between EUR 1.2 million and 1.4 million from 2008 to 2023 (Eurometropole Lille-Kortrijk-Tournai, 2024[2]).
Some cross-border bodies rely more on membership contributions than others
Cross-border governance bodies typically rely on membership contributions to cover their staff and operational costs. The method for dividing these contributions among members, however, varies across governance bodies to account for factors such as population size. Tailoring the way membership contributions are divided among members can help ensure that contributions are considered fair and aligned with the member capabilities.
The degree to which cross-border governance bodies rely on these fees also varies (Figure 4.1). This can have important implications on the need to mobilise external funding. For instance, cross-border governance bodies that depend heavily on membership fees often need to secure additional funding from alternative sources to support their operations. Moreover, maintaining strong political and institutional support from members is particularly critical when a significant portion of funding comes from member contributions, as any reduction in commitment can jeopardise the organisation's financial stability. Furthermore, a reliance on membership fees may restrict an organisation's flexibility to adapt to new challenges or opportunities.
Some cross-border governance bodies, such as the Cerdanya Hospital and the Eurometropole Lille-Kortrijk-Tournai, are almost entirely funded through membership contributions (EGTC Cerdanya Hospital, 2024[1]; Eurometropole Lille-Kortrijk-Tournai, 2024[2]). Where reliance on such contributions is high, ensuring sustained political support and commitment from member institutions is vital, in order to ensure a predictable and steady stream of funding for cross-border action. In the case of the Eurometropole Lille-Kortrijk-Tournai, for example, which is almost entirely dependent on membership contributions, a stable funding base from members permits the EGTC to maintain ongoing operations and cover essential staff costs.
Note: This figure represents the share of membership contributions as a portion of total annual revenue, including any unspent funds carried over from previous years.
Source: Author’s elaboration, based on EGTC Rio Minho: (EGTC Rio Minho, 2024[3]); EGTC Cerdanya Hospital: (EGTC Cerdanya Hospital, 2024[1]); Eurometropole Lille-Kortrijk-Tournai: (Eurometropole Lille-Kortrijk-Tournai, 2024[2]); EGTC Alzette Belval: (EGTC Alzette Belval, 2024[4]).
Other cross-border governance bodies, however, show that it is possible to reduce the reliance on membership contributions over time. For instance, while the EGTCs Rio Minho and Alzette Belval initially relied heavily on membership contributions, they gradually secured external funding, for instance from EU programmes (EGTC Alzette Belval, 2024[4]; EGTC Rio Minho, 2024[3]). This development highlights the potential for cross-border governance bodies to expand their financial base beyond membership contributions, thus enhancing their capacity to pursue diverse projects and adapt to emerging opportunities.
Overall, the evidence suggests that cross-border governance bodies should aim to secure stable contributions from members while also encouraging diversified funding streams. This dual approach can help minimise financial vulnerability and enable cross-border governance bodies to expand their capacity to support cross-border action.
Diverse approaches to dividing up membership fees can be adopted to cater to unique border contexts
Beyond ensuring a stable funding base, cross-border governance bodies must also consider how to divide the level of membership contributions fairly among formal members, and the factors on which to base these. The way in which membership contribution levels are calculated (e.g. in terms of benefits of cross-border action or the fiscal capacity of members) can nurture perceptions of equity and shared responsibility. How contributions are divided up may also affect agenda-setting and decision-making influence, as funding shares may correlate with voting power.
The mechanisms that cross-border governance bodies use to divide membership contributions among national delegations often reflects the unique structure and needs of the organisation, and generally fall into two main categories: equal division and differentiated contributions. Some cross-border governance bodies use a straightforward 50-50 split among national delegations. This is the case for the Eurometropole Lille-Kortrijk-Tournai, where French and Belgium delegations each provide half of the annual membership contribution (Eurometropole Lille-Kortrijk-Tournai, 2021[5]). The 50-50 division can simplify financial arrangements and emphasise the idea of equal investment in and benefits from cross-border co-operation, fostering a sense of balanced partnership.
In contrast, some bodies use a differentiated model that allocates membership fees based on specific factors, such as population distribution. For instance, the EGTC Cerdanya Hospital determines fees based on a 60-40 split, with Catalonia (Spain) covering 60% and France 40% (EGTC Cerdanya Hospital, 2024[6]). This reflects the population imbalance between the Catalan and French regions of Cerdanya at the time the EGTC was established (OECD, 2023[7]). Such a differentiated approach can help align contributions with factors such as population size or economic capacity, promoting fairness in funding. Another relevant example comes from the EGTC Alzette Belval. Between 2013 and 2021, the contributions were evenly split among members from France and Luxembourg. Following the accession of the city of Rumelange, Luxembourg, to the EGTC in 2022, Luxembourg’s share of the EGTC membership fees increased from 50% to 60%, while that of France dropped to 40% (EGTC Alzette Belval, 2024[4]; OECD, 2023[7]).
Cross-border governance bodies can also employ various mechanisms to divide membership fees within national delegations. This differentiation can be based on multiple factors, such as population size of individual members or the number of members per delegation. For example, the EGTC Alzette Belval’s French members (national government, Grand Est region, two departments and one inter-municipal grouping) each provide 20% of the French share of total membership contributions. Conversely, 50% of Luxembourg’s contribution comes from the national government. The remaining 50% is provided by the five municipalities who are members of the EGTC (OECD, 2023[7]). This means that, in 2023, French and Luxembourgian municipalities contributed 28% of total membership fees, reflecting a relatively strong financial commitment of regional and national government levels to support the EGTC’s operations and objectives.
These examples illustrate how cross-border policy makers can use membership contributions to promote fairness and shared responsibility for cross-border initiatives. Furthermore, they also highlight the importance of regular review processes to ensure that membership fees rules continue to be fair despite changing circumstances (e.g. changes in member composition, financial capacities, population).
Flexibility in membership contributions helps cross-border bodies meet evolving needs
Flexibility in the total volume of membership contributions can minimise funding problems that may arise suddenly or in the future. Member needs and priorities can shift over time, requiring adjustments in funding to support new projects or strategic goals. Additionally, changes in the membership base, such as existing members leaving or new ones joining, may necessitate rebalancing contributions. The fiscal capacity of individual members may also fluctuate due to macroeconomic shifts, such as inflation, or crises that affect funding availability. Allowing membership contributions to be adjusted over time enables cross-border governance bodies to remain resilient, responsive, and financially sustainable.
Two distinct approaches to determining the volume of membership contributions for cross-border governance bodies were observed in this project: fixed contributions and periodic adjustments. The Eurometropole Lille-Kortrijk-Tournai, for example, has adopted the former approach, having capped membership fees at EUR 1.26 million in 2011 (OECD, 2023[7]). While this provided the organisation with financial certainty, the lack of periodic adjustments to membership contributions resulted in a loss of about 28% (in real terms) of its funding power due to inflation between 2008 and 2023. This effectively reduced its ability to maintain a stable level of operational capacity (World Bank, 2024[8]; Eurometropole Lille-Kortrijk-Tournai, 2024[2]). While fixed contribution models can be popular with members, and provide short-term stability for the cross-border governance body, in the long term they can undermine financial sustainability as costs increase, making it challenging for organisations to carry out their mandate.
Other cross-border bodies allow for periodic adjustments to membership fees, enabling more flexible financial planning. The EGTC Cerdanya Hospital, for instance, combined an initial period of stable contributions with gradual increases to meet growing costs. From 2015 to 2020, membership fees were capped at EUR 20 million per year. From 2021, however, they were periodically raised, reaching more than EUR 25 million by 2023 (EGTC Cerdanya Hospital, 2024[1]). These adjustments helped the hospital avoid deficits that had arisen in prior years and enabled it to keep pace with rising operational demands. The Cerdanya Hospital also created a special commission to explore how to streamline the process of determining membership contributions to meet changing needs (Box 4.2). For its part, the EGTC Rio Minho has demonstrated remarkable flexibility in adjusting membership contributions, including substantial increases and decreases (e.g. +199% from 2019 to 2020 and -55% from 2020 to 2021) (EGTC Rio Minho, 2024[3]). This approach demonstrates the EGTC’s ability to adapt its funding mechanism to meet the demands of specific projects while responding to shifting financial conditions. For example, the decrease in membership contributions took place during the height of the COVID-19 pandemic, which strained the fiscal capacity of the EGTC’s members (OECD, 2023[7]).
The EGTC Cerdanya has recently established a mixed commission for its funding and financing, on which sit its founding members (the French ministry of Health, the regional health agency of Occitanie, the Catalonia Health Department, and the management team of the EGTC). The Commission is mandated to explore the development of a new funding and financing model that simplifies the current annual tripartite budget negotiations (between the French and Catalan governments and the EGTC). In particular, it is looking at the possibility of automatic changes to membership contributions based on: i) funding increases in the hospital sector in both French and Spain; and ii) expected costs of the EGTC, to be included in multi-annual investment plans.
Source: Author’s elaboration, based on (OECD, 2023[7]).
There are different ways in which cross-border governance bodies can adjust the volume of membership contributions. The simplest approach is to use annual budget proposals to determine changes in the volume of membership contributions. By voting on draft budgets, members maintain control over adjustments to their contributions, ensuring that decisions are aligned with current financial realities and organisational needs.
Another option is to formalise provisions to adjust membership fees, for example, by including them in founding statutes. Specifying that contributions can be revised at designated intervals (i.e. every second year) can provide greater stability and predictability for both the cross-border governance body and its members, helping to avoid drastic fluctuations from year to year.
Financial planning practices
As a financial planning tool, multi-annual financial plans offer institutions a structured framework to help anticipate future financial needs, prioritise initiatives and allocate resources effectively. For cross-border governance bodies, multi-annual financial planning is particularly critical due to the complexity and sustained financial commitment often required to address cross-border challenges. By establishing predictable funding and clarifying financial expectations among members, multi-annual financial plans can enhance financial stability, support strategic alignment, and enable the pursuit of larger, transformative initiatives that can make a lasting impact in a cross-border territory.
The absence of multi-annual financial plans can hinder proactive resource mobilisation
Many, but not all cross-border governance bodies rely on annual instead of multi-annual financial plans (OECD, 2023[7]). Of the five cross-border governance bodies studied, only one (the EGTC Rio Minho) uses financial plans that span multiple years. There are several reasons that could explain the reliance on annual financial plans. First, through their very nature, cross-border governance bodies bring together public stakeholders from different countries, each of which may have unique budgeting cycles, financial priorities, and economic conditions. Developing multi-annual financial plans may not align with budget practices or the flexibility each member might require. Additionally, without the legal capacity to secure or guarantee multi-year funding from their members cross-border governance bodies may default to annual financial plans.
The absence of multi-annual financial plans, however, can hamper cross-border governance bodies in several ways:
Without clear, long-term financial expectations, members may be unsure about future contributions that may be needed, including to meet operational costs and investment needs. This uncertainty can hinder the ability to plan and commit resources.
Cross-border governance bodies may be forced to focus on short-term decisions, which can be inefficient. Addressing cross-border challenges often requires sustained funding commitments, and a lack of long-term planning can restrict the ability to design and implement ambitious, impactful projects.
Identifying the need to change membership contributions becomes challenging without multi-annual financial planning, which can cause funding gaps and strain the ability to meet strategic objectives.
One approach to ensuring more predictable and strategic financial perspectives is for cross-border governance bodies to create multi-year financial plans that include staff, operational, logistical, project, and other costs, with exact figures for the first year and projections for subsequent years. Such an approach can provide governance bodies and their members with relative clarity about mid-term financial commitments and how the financial capacity of the organisation to carry out cross-border action could develop. At the same time, it leaves sufficient flexibility for adjustments, given the uncertainty surrounding the capacity of cross-border governance bodies to mobilise external funding.
To further align financial planning with strategic objectives, cross-border governance bodies can consider including an annex in their multi-annual plans that list potential projects along with estimated costs. This addition can help them clarify: i) the types of initiatives they consider essential to fulfil their mandate; and ii) the resources required to achieve them. In turn, this can support early-stage funding mobilisation efforts, enabling the organisations to proactively seek funding sources, such as competitive grants or additional member contributions.
While membership contributions generally sustain the operations of cross-border governance bodies, they are often insufficient for them to fully deliver on their mandate. To ensure their long-term effectiveness, cross-border governance bodies should rely on a mix of funding and financing mechanisms for practical initiatives and investments. This may, however, be easier said than done, and can require creativity and capacity-building on the part of the governance body.
Most cross-border governance bodies in the EU rely on competitive EU funds for investment, yet many other funding sources remain under-utilised. These include EU programmes, national and subnational grants, and non-governmental contributions. Reliance on competitive EU funding sources can lead to financial vulnerabilities if priorities shift, or budgets decrease, or the cross-border governance body fails to identify calls or develop projects that are selected for funding. To build financial resilience, cross-border governance bodies should enhance their technical capacity to prepare strong proposals and manage funds effectively. Moreover, EU policy makers may need to reassess eligibility criteria for un- or underused funding and financing mechanisms, in order to ensure available resources can effectively support cross-border co-operation.
Mobilising cross-border project funding
To mobilise external funding and financing for cross-border action, governance bodies can draw on a range of mechanisms (Annex Table 4.A.1). For cross-border governance bodies in the EU, Interreg is an important source of funding. Between 2014 and 2020, approximately half of EGTCs relied on Interreg funding, usually as project partners or co-ordinators, with only a few serving as sole beneficiaries (European Committee of the Regions, 2018[9]). However, many other EU funding and financing mechanisms can be tapped into, several of which are tailored to different sectors, such as education (Erasmus+), research and innovation (Horizon Europe), digitalisation (Digital Europe) and environmental development (LIFE).
Beyond EU funding, several other sources of financial support are available for cross-border projects. International development banks, for example, can provide financial support, particularly for initiatives outside the EU. Additionally, grants from national and regional governments may be accessible, either through open calls or through specific funding agreements tailored to meet cross-border needs.
Finally, funding from non-governmental sources offers additional opportunities for financial support. This includes forming partnerships with private companies that may co-finance projects such as the construction and management of shared public infrastructure (e.g. public transport). Crowdfunding methods can also be used to gather financial support directly from the public.
Together, these diverse funding sources provide cross-border bodies with a range of possible resources that they need to deliver impactful cross-border projects. It is important, however, to develop the mechanisms and capacities to mobilise and manage funding effectively.
Different factors determine cross-border governance bodies’ ability to mobilise project funding
The ability of cross-border governance bodies to diversify their funding sources varies widely and is influenced by several factors. First, some governance bodies are formally barred from receiving certain types of cross-border funding and financing mechanisms. For instance, the statutes of the EGTC Nemunas-Niemen specify that it will not generate revenue by delivering economic activities or services to members or other partners (EGTC Nemunas-Niemen, 2023[10]). This means that it cannot generate revenue by providing paid services, such as delivering training sessions (e.g. on mobilising funding from EU programmes).
Second, the potential to mobilise co-financing plays a critical role, as some funding sources (e.g. most EU funding programmes) require a financial contribution that not all members of cross-border governance bodies, or the bodies themselves, can afford. This may affect, in particular, those cross-border governance bodies whose members mainly include small local governments with limited fiscal capacity (OECD, 2023[7]). Third and relatedly, the interest and financial capacity of individual members to provide funding can significantly affect the diversity of funding sources that a cross-border body can access. For instance, in the case of the Eurometropole Lille-Kortrijk-Tournai, individual members have been reluctant to provide funding beyond their annual membership contributions (OECD, 2023[7]).
Fourth, the human resource capacity within cross-border governance bodies affects their ability to mobilise project funding. Ensuring staff have sufficient available time and expertise in fundraising is necessary for successfully identifying funding opportunities, drafting competitive proposals, and lobbying potential donors. As highlighted in Chapter 3, many cross-border governance bodies only have a few staff members, constraining their capacity to mobilise additional resources (OECD, 2023[7]). Furthermore, it takes time to build expertise in proposal writing and to demonstrate the capacity to manage project funding effectively. Ultimately, the ability to show a proven track record in handling project funding can enhance a body’s attractiveness to potential donors.
Some cross-border governance bodies have been successful in mobilising project funding from a wide range of sources. This success can be attributed to different factors, including the ability of some bodies to offer paid services to members and other stakeholders (e.g. for training and advice). Additionally, the willingness of members to provide co-financing for investment projects has enabled some bodies to secure financing from EU programmes. Finally, in the case of the EGTC Alzette Belval, strategic adjustments to its development strategy encouraged individual members to provide project contributions.
In its early years of operation (2013-2017), the EGTC Alzette Belval derived almost all of its revenue from membership contributions. Since 2018, however, the organisation has been able to mobilise increasing amounts of project funding: initially only through Interreg, but later also from its members.
The Interreg-funded projects focused on: i) improving citizen awareness of the public goods and services on offer in the region; and ii) decreasing residents’ reliance on cars by enhancing the region's "soft" mobility network, creating a safe network of cycle and pedestrian paths. Project funding from EGTC members enabled the development of a study for coherent spatial and architectural planning of the cross-border area. Additionally, funding from non-members (e.g. Luxembourg Ministry of Mobility) supported the development of a feasibility study for a cross-border bus corridor to enhance public transport links in the region.
The mobilisation of project funding from the EGTC’s members was facilitated by changes to the organisation’s development strategy. The EGTC's first two strategies encouraged the implementation of projects targeting all municipalities in the cross-border region. In contrast, the current strategy also proposes projects to be implemented on only one side of the border, with the potential to create positive spillover effects for the entire cross-border agglomeration. This has encouraged individual members to fund projects.
Source: Author’s elaboration, based on (OECD, 2023[7]; EGTC Alzette Belval, 2024[4]; EGTC Alzette Belval, 2021[11]; EGTC Alzette Belval, 2017[12]; Alzette Belval EPA, n.d.[13]).
Reliance on Interreg funding can create financial vulnerabilities for cross-border governance bodies
Despite the relative success of the EGTC Rio Minho and EGTC Alzette Belval in mobilising project funding from a range of sources, the majority of their project funding has come from Interreg. By 2023, 31% of the total revenue of the EGTC Rio Minho and 33% of that of the EGTC Alzette Belval had come from this source (EGTC Rio Minho, 2024[3]; EGTC Alzette Belval, 2024[4]).
The reliance of many EU cross-border governance bodies on Interreg is understandable for several reasons. First, Interreg is a funding stream that is expressly aimed at supporting cross-border initiatives, making it a logical starting point for cross-border governance bodies seeking to mobilise EU funding. This marks it out from other EU funding programmes (Annex Table 4.A.1), which are not specifically or uniquely targeted to cross-border co-operation.
Second, many cross-border governance bodies have limited human resource capacity to pursue funding opportunities from alternative EU or national mechanisms, making Interreg the favoured option by default. Interviews with these bodies revealed that many lack the necessary time and skills to identify funding opportunities beyond Interreg and develop robust proposals for them (OECD, 2024[14]; OECD, 2023[7]). This may explain why cross-border governance bodies often have limited awareness of alternative EU funding options (Annex Table 4.A.1). For instance, there are no examples of EGTCs securing funds from programmes such as LIFE, Europe Creative, or Digital Europe. These programmes could, in principle, support valuable projects aimed at protecting cross-border green spaces and biodiversity, promoting cultural heritage in cross-border regions, and enhancing digital technology for SMEs and citizens, respectively. Another explanation for the limited engagement with alternative EU funding sources may be that cross-border governance bodies are uncertain about their eligibility for these programmes.
Third, while some national and regional governments in co-operating countries have established specific funding mechanisms for cross-border development, others have not. For instance, as of 2011, the Hungarian government has provided financial support from the national budget specifically for the operation of EGTCs that involve Hungarian government entities, such as local governments (see Chapter 1) (Central European Service for Cross-Border Initiatives - Budapest, 2022[15]). However, interviews with cross-border governance bodies indicated that they are often unaware of targeted funding opportunities for cross-border co-operation that are provided by national or regional governments in co-operating countries (OECD, 2023[7]).
Finally, there is limited evidence of cross-border governance bodies mobilising funding from the private sector to implement cross-border initiatives. The absence of private sector funding may suggest limited engagement with the private sector in general, or a lack of understanding of how investment by private actors could support cross-border initiatives while providing significant upside to investors. Additionally, it may reflect the fact that the initiatives pursued by cross-border governance bodies do not align well with private sector interests or priorities.
Dependence on competitive EU funding sources such as Interreg, however, can expose cross-border governance bodies to financial vulnerabilities if EU priorities shift, budgets decrease, or governance bodies fail to prepare competitive proposals. To address this risk, it may be beneficial for cross-border bodies to diversify their project funding sources—not necessarily to reduce funding from Interreg but to build resilience against potential funding shifts.
Leveraging member expertise can help cross-border governance bodies mobilise project funding
Strengthening their capabilities to navigate EU or other competitive funding mechanisms, along with national and subnational grants and private sector investments, can enable cross-border governance bodies to secure additional financial resources and more effectively meet their strategic objectives. To achieve this, cross-border governance bodies could consider several measures.
To start with, cross-border governance bodies can consider mapping their existing skills, expertise, and experience, as well as future needs related to mobilising funding and financing for cross-border projects. This assessment can help to pinpoint current skills in areas such as identifying funding opportunities, proposal writing and project management. It can also help them assess their experience with various funding mechanisms, including from international institutions (e.g. EU, international development banks), and national or subnational grants, to highlight areas of proficiency. Additionally, the assessment can help determine the skills needed to better access funding mechanisms that will contribute to achieving each organisation’s cross-border co-operation objectives. Together, these elements can reveal which skills and expertise need to be developed or strengthened to mobilise the necessary funding to achieve cross-border objectives.
Building or reinforcing skills and expertise can be achieved through different means. These include organising targeted training by external experts or leveraging experienced staff to train colleagues. However, given frequent human resource and financial constraints, cross-border governance bodies could prioritise building resource-mobilisation skills by drawing on the expertise of their members. Some members, such as local or regional governments, may have valuable experience in preparing project proposals for relevant grants from national governments or international institutions, which could be shared through ad hoc training, on-the-job coaching, or by assisting in drafting different parts of the proposals. Strengthening their capabilities to navigate international funding mechanisms, national and subnational grants, and private sector investments, can help cross-border governance bodies secure additional financial resources, and better deliver on their strategic objectives.
Limited human and financial management skills can lead to unspent funds and project delays
While reinforcing the ability to mobilise project funding may be essential for many cross-border governance bodies, it is equally important to develop the skills and processes necessary to absorb available funding and invest it effectively. For governance bodies that rely heavily on external resources, fluctuations in revenue can make it challenging to consistently absorb funding, as changes in project funding levels often require quick adjustments in planning and operations. Furthermore, core teams within these bodies, often funded through membership contributions, may lack the time or specific expertise required to manage new funds optimally, which can hinder the effective execution of cross-border initiatives. This lack of capacity can lead to several challenges, including an inability to fully invest available funds and delays in project implementation.
The EGTC Rio Minho provides a particularly salient example in this regard. In recent years, revenue growth has outpaced expenditures, leaving a considerable portion of its revenue unspent in 2020, 2021, and 2022 (EGTC Rio Minho, 2024[3]). If not addressed effectively, this underutilisation of funds could pose several risks. Without strengthening its capacity to absorb and deploy existing project funding, mobilising additional funds could exacerbate the underutilisation of resources, making it challenging for the organisation to manage and implement future projects effectively. This difficulty in handling new projects could ultimately undermine the ability of the organisation to meet its strategic goals. It can also weaken its credibility when seeking additional resources in the future. If this challenge is not resolved, it may also lead members to reconsider approving annual increases in membership contributions, potentially jeopardising the organisation’s financial sustainability and its ability to pursue ambitious cross-border initiatives.
In order to ensure effective funding absorption and investment, cross-border governance bodies should develop the necessary skills and processes, including in the following areas:
Strategic planning, to ensure project proposals are in line with available resources or based on a realistic estimate of what human resources can be mobilised to support project implementation;
Procurement of goods and services to ensure transparent, timely, and cost-effective resource allocation;
Human resource management, enabling governance bodies to quickly scale operational capacity, for example by hiring additional staff when project funding becomes available.
By supporting the development of these competencies, policy makers can enable cross-border governance bodies to secure diverse funding sources and channel them into impactful projects.
Strategies for EU policy makers to support resource mobilisation efforts by cross-border governance bodies
The limited mobilisation of funding mechanisms beyond those offered by Interreg highlighted in Annex Table 4.A.1 suggests that cross-border bodies in the EU may not be fully capitalising on available options. There are several actions that EU policy makers could take to address this issue.
For instance, policy makers can explore why certain EU programmes, such as LIFE and Creative Europe, are not used by cross-border governance bodies. This can include, for example, reviewing eligibility criteria to assess whether bodies such as EGTCs can, in fact, participate in calls or if adjustments may be needed to facilitate their access.
In the same vein, EU policy makers can also consider surveying cross-border governance bodies, such as EGTCs, to assess their awareness of available funding and financing mechanisms, their experience in applying to funding calls, and any obstacles they may have encountered in the process. Based on these findings, policy makers can implement targeted support measures, including organising online information sessions or developing guidance materials (e.g. an online brochure or toolkit). This would be a positive step in clarifying which funding mechanisms are accessible to cross-border governance bodies and whether any special conditions apply, such as specific eligibility criteria.
In addition, EU policy makers can work to increase the visibility of cross-border governance bodies that have successfully mobilised funding from non-Interreg sources, such as the European Structural and Investment Funds (ESIF), Horizon 2020, and Erasmus+ programmes that are underused by cross-border governance bodies. Highlighted examples could include:
The EGTC Gorizia-Nova Gorica, which unites subnational governments from Italy and Slovenia, successfully managed an Integrated Territorial Investment (ITI) initiative to implement two major projects: "Building a Cross-Border Healthcare Network" and the "Isonzo-Soča Cross-Border Nature Park." The ITI had a total budget of EUR 10 million, 85% of which was provided by the European Regional Development Fund (ERDF), with the remaining 15% funded by national government institutions (European Commission, 2021[16]).
The EGTC Efxini-Poli, comprising regional and local authorities from Greece, Cyprus, and Bulgaria, participated in a Horizon 2020-funded project (the predecessor to Horizon Europe). The project aimed to support urban innovation by enhancing co-operation among researchers and policy makers (EGTC Exfini Poli, 2019[17]).
These examples could be promoted through the above-mentioned online brochure or tool. Sharing these examples could help raise awareness of the alternative funding options that are available to cross-border governance bodies. Practical guidance could be offered on how to access and manage these resources effectively.
Sustainable and adaptable funding is essential for cross-border co-operation bodies to achieve their objectives. However, as discussed, funding for these bodies can be precarious and unstable, with membership contributions at times covering only operational costs. Moreover, in some cross-border governance bodies, membership contributions do not change over time, hindering their ability to respond to evolving needs.
To ensure long-term effectiveness, cross-border governance bodies must, therefore, diversify revenue streams. To do so, they can tap into a wide range of mechanisms, including specific EU funding programmes and national and subnational grants. However, the ability of such bodies to mobilise project funding and financing depends on a range of factors, including technical skills and expertise, such as proposal writing. It also depends on the ability and willingness of governance body members to provide funding beyond their annual membership contributions.
The sustainability of cross-border governance bodies and actions will rely, at least in part, on membership contribution formulas that allow for periodic adjustments to meet changing needs and circumstances. Investing in building or reinforcing the fund-raising skills and the expertise of staff in a cross-border governance body is equally important. Moreover, governance bodies should ensure that the skills and processes required to absorb available funding and invest it effectively are available so that funds do not go unspent and project delays are minimised. Finally, national and international policy makers could provide cross-border governance bodies with enhanced guidance and practical examples on how to access underused funding mechanisms.
References
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Source: Author’s elaboration, based on EGTC Rio Minho: (EGTC Rio Minho, 2024[3]); Eurometropole Lille-Kortrijk-Tournai: (Eurometropole Lille-Kortrijk-Tournai, 2024[2]); EGTC Alzette Belval: (EGTC Alzette Belval, 2024[4]).