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Document 52016PC0605

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the financial rules applicable to the general budget of the Union and amending Regulation (EC) No 2012/2002, Regulations (EU) No 1296/2013, (EU) 1301/2013, (EU) No 1303/2013, EU No 1304/2013, (EU) No 1305/2013, (EU) No 1306/2013, (EU) No 1307/2013, (EU) No 1308/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014,(EU) No 283/2014, (EU) No 652/2014 of the European Parliament and of the Council and Decision No 541/2014/EU of the European Parliament and of the Council

COM/2016/0605 final - 2016/0282 (COD)

Brussels, 14.9.2016

COM(2016) 605 final

2016/0282(COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the financial rules applicable to the general budget of the Union and amending Regulation (EC) No 2012/2002, Regulations (EU) No 1296/2013, (EU) 1301/2013, (EU) No 1303/2013, EU No 1304/2013, (EU) No 1305/2013, (EU) No 1306/2013, (EU) No 1307/2013, (EU) No 1308/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014,(EU) No 283/2014, (EU) No 652/2014 of the European Parliament and of the Council and Decision No 541/2014/EU of the European Parliament and of the Council


EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

Reasons for and objectives of the proposal

The Financial Regulation 1 sets out the principles and procedures governing the establishment and implementation of the EU budget and the control of the EU funds. Over the last 30 years, the number of general financial rules contained in the Financial Regulation has increased sharply 2 . In addition, a number of sectoral financial rules have emerged: the rules for participation to the Framework Programme for Research and Innovation 3 , the Common Provisions to the European Structural and Investment Funds 4 and the Common Implementing Rules for the External Action 5 .

Users of EU funds have repeatedly complained about the proliferation of rules both at general and at sectoral level, their heterogeneity and their complexity due to the fact that they follow the architecture of the programme and multiple layers of controls. In addition, the complexity of the financial set of rules has slowed down implementation of the EU funds, making it costly and prone to errors.

A first step towards more coherent and simpler financial rules was achieved in 2012: the Commission tabled proposals for the programmes covered by the MFF 2014-2020 which reduced the number of programmes and instruments, grouped them under a single framework with common rules, simplified procedures for application and declaration of costs by final beneficiaries, facilitated the deployment of innovative financial instruments, enabled EU Trust-Funds and improved the cost-efficiency of controls. Recent revisions have aligned the Financial Regulation on the results of the negotiation to the MFF 2014-2020 (2013 revision) as well as to the new Procurement Directive (2015 revision).

However, there is room for further simplification. This is confirmed by the experience gained since 2014 and by the work of the High Level Group of Independent Experts on Monitoring Simplification for Beneficiaries of the European Structural and Investment Funds 6 . The public consultation on the revision of the Financial Regulation 7 also shows stakeholders’ clear expectations in the area.

Efforts must therefore continue in order to remove bottlenecks, ensure synergies and complementarities between ESI Funds and the other EU funds and improve efficiency of delivery and control requirements. Simpler and more flexible financial rules will contribute to optimising spending and impact of the MFF 2014-2020 and constitute as such one of the key elements of the Commission's initiative for a Budget Focused on Results (BFOR) which aims at making sure that resources are allocated to priorities and that every action delivers maximum performance and added value 8 . In addition, this will reduce the costs related to implementation of EU rules as well the number of errors.

Simpler and more flexible EU financial rules are key in enhancing EU budget’s ability to adapt to changing circumstances and to respond to unexpected developments.

The present legislative proposal forms an integral part of the mid-term review/revision of the multiannual financial framework (MFF) 2014-2020 9 . It contributes to two of its main objectives: simplification and flexibility.

The Commission therefore proposes in a single act an ambitious revision of the general financial rules accompanied by corresponding changes to the sectorial financial rules set out in 15 legislative acts concerning multiannual programmes. The inclusion of sectoral changes in the same legislative proposal aims at ensuring a coherent negotiation process as well as at facilitating a speedy adoption by the legislator. The focus is put on the following key areas:

1.    Simplification for recipients of EU funds: many measures aim at simplifying life for recipients of EU funds. They relate to grants (removal of the non-cumulative award check for low-value grants and of the non-profit principle; simpler rules for "contribution in kind" valuation; recognition of volunteer work; grant awards without calls for proposal under specific conditions) and simplified forms of grants (Title VIII).

2.    From multiple layers of controls to cross reliance on audit, assessment or authorisation, and harmonisation of reporting requirements: the aim of these measures is to encourage reliance as far as possible on one single audit, assessment or authorisation (conformity to State aids for instance), when the audit, assessment or authorisation meets the necessary conditions to be taken into account in the EU system. More generally, rules for implementing partners (international organisations, EIB/EIF, national promotional banks, national agencies, NGOs) will be simplified by relying increasingly on their procedures and policies once assessed positively. Financial framework partnership agreements concluded with long term partners will allow progressing in the harmonisation of audit, reporting and other administrative requirements among donors (Title V Articles 122, 123 and 126).

3.    Allowing the application of only one set of rules to hybrid actions or in the case of combination of measures or instruments: the proposal aims at achieving further simplification for the partners of the EU by a number of measures to avoid the parallel application of different rules and procedures, notably through facilitating the combination of European Structural and Investment Funds (ESIF) funding with financial instruments and the European Fund for Strategic Investments (Title V).

4.    More effective use of financial instruments: optimise use of reflows, ensuring a level playing field among key EU implementing partners, reducing burdensome requirements related to publication of individual data of final recipients or to the exclusion criteria (Title X).

5.    More flexible budget management: the proposal sets out several ways for more budgetary flexibility, in order to allow the Union to respond to unforeseen challenges and new tasks more effectively and to achieve swifter crisis management - among which the creation of a "flexibility cushion" for unforeseen needs and new crises in the external actions geographic instruments budget, a more efficient activation of the solidarity and globalization adjustment funds, and the extension of Trust-Funds to internal policies (Articles 14 and 227), the creation of a EU crisis reserve with the reuse of decommitted appropriations, and for the next Multiannual Financial Framework, the possibility that financial operations other than financial instruments generate a contingent liability for the Union exceeding the financial assets provided to cover the financial liability of the Union (Article 203) and the creation of a common provisioning fund holding the resources provisioned for financial operations (Article 205). Recent initiatives (such as the European Fund for Strategic Investments (EFSI) or the European Fund for Sustainable Development (EFSD)), have indeed shown the need to fully use the leverage of the EU budget by creating non-provisioned contingent liabilities. Title X sets the framework to authorise, manage and control these financial risks.

6.    Focus on results and streamlining of reporting: a stronger focus on results through lump sums, prizes, payment based on output and results rather than on reimbursement of costs, payment against conditions to be fulfilled (Article 121, Title XIII). This should contribute to further reducing the costs of implementing EU funds as well as the number of errors. On the reporting side, reports are regrouped around the draft budget and the integrated financial reporting package, in order to increase efficiency and transparency both towards the general public and the budgetary authority (Articles 39 and 239-245).

7.    Simpler and leaner EU administration: facilitating agreements or delegations between Institutions or bodies in order to pool the implementation of administrative appropriations in European Offices or within Executive Agencies (Articles 57, 58, 64, 65 and 68); merging consultative panels competent for financial irregularities (Article 73 (6)) with the EDES panel (Article 139) and moving from annual to multiannual financing decisions (Article 108).

8.    Providing possibility for citizen engagement: the proposal provides a possibility for citizens to be consulted on the implementation of the Union budget by the Commission, Member States and any other entity implementing the Union budget rticle 54).

In simplifying and making EU financial rules more flexible, the present proposal paves the way for the preparation of the next generation of spending programmes (post-2020).

Consistency with existing provisions on the policy area

In designing simpler and more flexible EU financial rules the Commission has made sure that it does not weaken sound financial management which remains a key objective. Quite to the contrary, the present proposal also strengthens rules on tax avoidance to be respected by EU implementing partners and clarifies that the duty to avoid conflicts of interest fully applies to all modes of implementation of EU funds (including at the level of Member States). It also consolidates the systems in place to protect EU budget against fraud and financial irregularities (extending the authorising officer's competence to take action with regard to the Early Detection and Exclusion System in indirect implementation).The simplification of EU financial rules will also contribute to reduce the costs and time needed to implement EU funds as well as the number of errors. It should also increase the impact of the policies and their results on the ground.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

Legal basis

The proposal is based on Article 322 of the Treaty on the Functioning of the European Union (TFEU) for the part relating to the revision the Financial Regulation and on the sectoral legal basis for the legislative acts modified by the second part.

Subsidiarity (for non-exclusive competence) 

The adoption of EU general financial rules and of the modifications proposed to the sectoral legislative acts falls under the exclusive competence of the EU.

Proportionality

This proposal focused on simplification and does not contain rules which would not be necessary to achieve the objectives of the Treaty. In particular, the modifications to the sectorial legislative acts proposed in its omnibus part are limited to those necessary to allow the simplifications proposed in the Financial Regulation to deploy their full effect on the ground.

3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

Stakeholder consultations

A public consultation on the revision of the Financial Regulation was carried out in April/May 2016. A total of 111 contributions were received from a wide range of stakeholders.

The replies show overall support for the simplification (65%) and flexibility (79%) measures proposed. With respect to simplifying EU grant rules, stakeholders continue to prefer the reimbursement of actual costs but do not oppose simplified reimbursement through unit costs, lump sums or flat rates or reimbursement on the basis of pre-defined results as long as those are not compulsory. These concerns are reflected in the proposal. In particular, simplified reimbursement of costs will remain only an additional option to be used by the authorising officer with regards to the nature of the supported actions and recipients. Implementing partners of the EU (national development agencies, international organizations, EIB/EIF, NGOs) request the Commission to rely more on their rules and policies once positively assessed. They complain about multiple prior assessments of their systems or procedures or repeated audits of the same activities by the EU and other donors, when cross-reliance on such assessments and audits could be possible. They also criticize different reporting requirements among donors 10 .

An Awareness Raising Event took place on 6 April 2016 in Brussels to allow stakeholders to voice their concerns/suggestions about the Financial Regulation. Their comments made are in line with the replies to the public consultation.

The measures contained in this proposal address these concerns.

Impact assessment

No impact assessment for this revision of the Financial Regulation has been carried out. The Financial Regulation as such has a limited economic, environmental or social impact (it provides the general rules for the implementation of the spending programmes, but the concrete economic or social impact incurs when making policy choices implementing the sectorial programmes). Changes proposed to the sectoral legislative acts are merely consequential to the simplifications proposed in the Financial Regulation

Regulatory fitness and simplification

While the revision of the Financial Regulation and the corresponding changes to the sectoral legislative acts do not fall under the Regulatory Fitness Programme, they are in line with – and contribute significantly to – the Better Regulation agenda: indeed, this proposal reduces the overall number of general financial rules applicable to the EU budget by some 25% and regroups them in a single rule book which will replace both the Financial Regulation and its Rules of Application:

·Key provisions of the Rules of Application are moved into the Financial Regulation, while less important elements will be integrated if needed and on a case by case basis in Commission’s internal rules or in guidelines made public by the Commission.

·The detailed procurement rules applicable to EU institutions and bodies are consolidated in an annex of the revised Financial Regulation, which could be modified by delegated act.

·Provisions of Part Two of the Financial Regulation relating to special provisions applicable to the European Agricultural Guarantee Fund, to Research, external action and to other specific EU funds are inserted in the relevant parts of the Financial Regulation unless they are no longer relevant.

The proposal to revise the Financial Regulation also stresses commonalities and reduces specificities to the minimum so as to make the rules easier to apply for the users: emphasis is put on common rules applicable to all methods of implementation (direct, indirect and shared) as well as for all legal instruments by regrouping them in dedicated chapters. Provisions on European offices, executive agencies, decentralised agencies and public-private partnership bodies currently spread over the Financial Regulation are pulled into the same chapter. Rules on EU trust funds, budget support and experts (including research experts) are regrouped under a new title “Other budget implementation instruments”.

The proposal also strongly focuses on achieving substantive simplification of the current EU financial rules. As mentioned in point 1 above, it contains numerous elements reducing the administrative burden for applicants and recipients of EU funds.

The proposal does not exempt micro-enterprises from its scope. Such enterprises can be beneficiaries of EU funds and must therefore be subject to the rules. However, in certain areas, it reduces the costs for businesses which are often SMEs (replacing in the area of financial instruments the publication of individual data of beneficiaries by aggregate statistics) and more generally the numerous simplification measures should benefit to all enterprises

Fundamental rights

The proposal is in line with the protection of fundamental rights.

4.BUDGETARY IMPLICATIONS

The proposal does not have budgetary implications.

Detailed explanation of the specific provisions of the proposal

1. Simplification for recipients of EU funds

1.1. Simplify grant use, lump sums and cost calculations

Many measures aim at simplifying life for recipients of EU funds. They relate to the content of grant applications, the value of contributions in kind, recognition of volunteers work, the conditions for award of grants without a call for proposals to Member States under specific conditions, the principle of no profit, the principles of non-cumulative award and the phasing out of grant decisions. Other measures demonstrate the move towards a simpler and leaner administration.

1.1.1. General financial rules

The proposal promotes the use of simplified forms of grants, open to all EU funded programmes where the nature of the actions and underlying expenditure allow such approach (e.g. training and mobility actions, travel costs, etc.). This would alleviate the administrative burden, reinforce certainty on the reimbursed amount to beneficiaries and stimulate the up-take of simplified forms of grants and their combinations (Article 175).

Use of expert judgment: the implementation of simplified forms of grants has been hampered by the lack of data needed to establish a reasonable approximation of the actual costs. This is often due to the innovative nature of the actions concerned or to the fact that actions are implemented only in certain countries and no data are available for other countries. In order to bridge this gap, it is proposed to make use of expert judgement in complement of or as an alternative to the statistical or historical data, depending on the nature of the action (Article 175).

Simplifying the authorisation of lump sums, unit costs and flat rates: to replace the lengthy and burdensome process of authorisation (College decision for amounts higher 60.000 EUR per grant) by enabling the responsible authorising officer to adopt decisions authorising simplified forms. This level is more appropriate given the highly technical content (calculation methodologies, overviews of data, etc.) of the decision (Article 175).

Simplifying and clarifying the content of grant applications including the accompanying supporting documents: no obligation to provide information demonstrating the applicants' financial and operational capacity if those are not verified (e.g. for public bodies); aligning the obligation to provide an audit report with the applicable EU and national law in the area of accounting (Article 189).

Simplification of the principle of non–cumulative award: grants like scholarships to natural persons, direct support to refugees, unemployed and other persons in most need will be exempted from this rule since traditionally their value is quite low (Article 185).

Removing the no profit principle: the practical importance of the no-profit principle has diminished substantially: revenue-generating projects are in principle supported throughfinancial instruments. For projects that are in principle not revenue-generating, the no profit principle creates disincentives: beneficiaries are not encouraged to ensure that their projects become sustainable or profitable. This has in turn a negative impact on the economy.

Simplifying the determination of the value of contributions in kind: these contributions do not constitute eligible costs. Therefore, their exact value is irrelevant. However, they may continue to be accepted as part of the co-financing. Any value reasonably established by the authorising officer at the time of acceptance of the estimated budget can demonstrate that there are other sources of financing of the action, apart from the EU grant, and that the co-financing principle is complied with (Article 184).

Recognition of volunteer work: In order to facilitate the participation of small organisations in the implementation of the EU policies in an environment of limited availability of resources, it is necessary to recognise the value of the work provided by volunteers as eligible costs. As a result, such organisations may rely to a greater extent on volunteers' work for sake of providing co-financing to the action (Articles 175, 180 and 184 ).

Simplifying and harmonising the conditions for award of grants without a call for proposals: it is proposed to extend the possibility to award direct grants to entities mandated by the Member States to the cases of a de facto or de jure monopoly or where direct beneficiaries have been chosen for their technical competencies, high degree of specialisation or administrative powers. In addition, the authorising officer would be authorised to combine the evaluation report and the award decision in one document. This will alleviate the administrative burden and will speed up the award of direct grants (Article 188).

Simpler record-keeping: the record-keeping period shall be a uniform five years (three years if the funding is of an amount lower than or equal to € 60.000), also for indirect implementation (Article 128).

Notional approach for grants: where grants are expressed only as an absolute value (not as a percentage of eligible costs), the eligibility of costs shall be verified at the latest at the time of the payment of the balance (Article 180). For this verification, a simplified ("notional") approach can be used (Article 150). Phasing out of grant decisions: it is proposed to phase out grant agreement and use predominantly grant agreements, subject to a review in the progress made towards e-grants at the end of the current MFF (Article 277). 

1.1.2. Sectoral rules

The improvements for using simplified cost options in the Financial Regulation are complemented by changes proposed for sectorial legislation extending the use of simplified cost options in

·Regulation (EU) No. 1303/2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund,

·European Social Fund Regulation (EU) No 1304/2013, 

·Regulation (EU) No 223/2014 on the Fund for European Aid for the most deprived.

2. From multiple layers of controls to cross reliance on audit, assessment or authorisation, and harmonised reporting requirements

The aim of these measures is to encourage reliance as far as possible on one single audit, assessment or authorisation (conformity to State aids for instance), when they meet the necessary conditions to be taken into account in the EU system. In order to avoid multiple layers of controls, the Commission shall promote the recognition of internationally accepted standards or international best practices in that area, as well as common reporting requirements among donors:

·Cross-reliance on ex-ante assessments and checks of recipients already conducted by other entities (donors) with regard to conditions equivalent to the EU ones (Article 122).

·Cross-reliance on audits conducted in accordance with internationally accepted standards is also encouraged always with a view of avoiding multi-audits of the same persons/entities for the same activities. This would allow the Commission to rely on independent audits conducted on the use of the EU funds by international partners (UN, World Bank etc.) or Member States (Article 123).

·Harmonisation of its reporting requirements with those of other donors: the Commission shall promote the adoption of common reporting requirements through the financial framework partnership agreements concluded with its main international partners (Article 126).

·Allowing the Commission to rely possible on the systems and procedures of the partners of the EU under indirect implementation if they have been positively assessed (Article 149) and impose remedies if certain rules/procedures are not sufficient to protect the EU financial interests; where the Commission requires the use of its own or specific procedures no assessment will be carried out. In all cases the level of supervision/control exercised should be adapted on the basis of the principle of proportionality.

·Enhancing Financial framework partnership agreements (Article 126): such agreements established with trusted partners for long term cooperation will in the future cover all the actions in direct and indirect implementation and reflect the extent to which the Commission may rely on the systems and procedures positively assessed as well as the application of a single set of rules for all legal instruments. Long term partnership agreements will offer a flexible framework for cross-reliance on assessments and audits where possible as well as for harmonising audit, reporting and other administrative requirements among donors.

3. Allowing the application of only one set of rules to hybrid actions or in the case of combination of measures or instruments

The proposal aims at achieving further simplification for the partners of the EU under indirect implementation to the maximum extent possible.

3.1. General financial rules

·The application to an implementation partner of the Commission of only one set of rules instead of two would be allowed in certain cases – regardless of the nature of the action and of the role of the partner as a manager of funds or a "do-er". Where hybrid actions combine indirect and direct implementation and currently imply two sets of rules, accessory elements that are currently submitted to direct implementation rules (very often the case for technical assistance) would follow the rules of the main elements of the action (e.g. the running of a financial instrument with guarantees or else (Article 208(2)).

·In order to facilitate combinations between grants and financial instruments, a single set of rules (those of the financial instruments) shall apply to grants complementary to financial instruments if combined in a single action (Article 208(2));

·The period for record-keeping for grants and financial instruments shall be aligned to five years (three years for amounts up to € 60.000 Article 128).

3.2. Sectoral rules

·Limiting state aid verifications to the state aid consistency check for the EU-level financial instruments foreseen under the Financial Regulation when ESI funds contribute to EU- level financial instruments (no double verification): Member States contributions to EU-level financial instruments which are made without any additional conditions as to the use of the contributions other than in relation to the geographic area for the use of the contribution shall not require another separate state aid verification as the financial instrument is already consistent with state aid rules based on the Financial regulation. This will be clarified through appropriate guidance.

·Extension of SME Initiative(SMEI), allowing for the use of the SME Initiative beyond 2016, making it possible for Member States to commit funding to the SMEI up to 2020.

·Extension and clarifications of CPR provisions on combinations between financial instruments and grants in order to facilitate their combined use.

·Introducing a new possibility to combine ESI Funds/EFSI and a new structure for combining ESI Funds with EIB and EIF: ESI Funds programmes should be able to contribute to financial instruments combined with EIB financing under EFSI.

4. More effective use of financial instruments

4.1. General financial rules

Experience with financial instruments and in particular input from key implementation partners (EIB/EIF) point at the following possibilities to improve further their management and effectiveness:

·All reflows (revenues + repayments) generated by a financial instrument should be used for the same instrument to pursue efficiency gains; full transparency is guaranteed through reporting (Article 202(2));

·EIB /EIF would retain their status as key EU partners in implementation but direct negotiations should be authorised between the Commission and a greater number of potential entities, to ensure a level-playing field amongst them (Article 149);

·Given the impossibility to impose the full respect of EU rules where the EU participates in a financial instrument as minority shareholder of a fund, it is proposed to allow a proportionate application of EU rules in such cases instead (Article 208(4));

·The publication of individual data of final recipients would be replaced with statistical data, aggregated per relevant criteria proposed for final beneficiaries receiving EU support of less than € 500.000 (policy area, type of support, type of beneficiary, geographical distribution (Article 36(5)).

·Final beneficiaries and intermediaries shall not be required to provide a declaration of honour confirming that they are not in one of the exclusion situations where the implementing partner has an exclusion policy considered equivalent to that of the EU (Article 131).

·Two new sections are proposed to regulate other instruments bearing a financial risk, such as budgetary guarantees and financial assistance to Member Stets or third countries (Sections 2 and 3 of Chapter 2 of Title X).

·Rules to authorise, manage and control non-provisioned contingent liabilities have been introduced (Articles 203 to 206).

4.2. Sectoral rules

To further optimise management and use of financial instruments in shared implementation, changes to the Common Provisions Regulation 1303/2013 (CPR) are proposed:

·Clarifying the possibility for Member State Management Authorities to directly award a contract, including technical assistance, to the EIB/EIF, other International Financial Institutions as well as National Promotional Banks.

·Treasury management: where the temporary investment of ESI Fund money paid into a Financial Instrument before the investments in final recipients generates negative interests, their payment from resources paid back when at least one cycle of investments has been carried out shall be authorised.

·Certain EAFRD measure specific rules shall be removed that have hindered the programming of financial instruments in Rural Development and their implementation by the fund managers, to increase the leverage effect of the EAFRD funding through a higher use of financial instruments.

5. More flexible budget management

5.1. General financial rules

The proposal sets out several ways for more budgetary flexibility, in order to allow the Union to respond to unforeseen challenges and new tasks more effectively:

·Allow for the establishment of EU trust funds also for emergency, post-emergency or thematic actions within the EU (and not only for third countries). Recent events in the European Union show the need for increased flexibility for funding within the EU. As the boundaries between external and internal policies are increasingly blurred, this would also provide a tool for replying to challenges crossing the borders (Article 227).

·Increase the "negative reserve" from EUR 200 million to EUR 400 million and thus also follow up to a Council request to limit the number of Draft Amending Budgets linked to payments (Article 48).

·Create a flexibility cushion for external action via the carry-over of non-allocated funds for the Instrument for Pre-accession Assistance (IPAII) , the European Neighbourhood Instrument (ENI) and the financing instrument for development cooperation (DCI) to year N+1 in the limit of 10% of the initial appropriations of each instrument (Article 12).

·Foresee more flexibility for crisis and emergency situations and humanitarian aid in grants: Administrative procedures are simplified to enable quick and efficient response (e.g. retroactive eligibility before the submission of the application to be decided by the authorising officer responsible, Article 186).

·Use of imprest accounts in the Union Delegations would be allowed for payment of limited amounts by budgetary procedures. Non-statutory staff in the field of crisis management aid and humanitarian aid operations could administrate such accounts and sign legal commitments executed from them up to EUR 2 500 (Article 109).

·Increase flexibility for autonomous transfers by the Commission by enlarging the current scope, i.e. by also allowing transfers of operational expenditure between different titles if they are covered by the same basic act, including support chapters, and from the administrative support lines to the corresponding operational lines (Article 28).

·Simpler mobilisation of the EU Solidarity Fund EUSF via an autonomous transfer from the reserve to the budget line once the decision of mobilisation has been adopted by the European Parliament and the Council (Article 28).

·Simpler mobilisation of the European Globalisation Fund EGF via automatic approval of transfers from the reserve to the budget line upon adoption by the Budgetary Authority on the mobilisation of the Fund (Article 30).

·Clarify that amounts corresponding to commitment appropriations for the Emergency Aid Reserve and the EU Solidarity Fund EUSF are carried over automatically (Article 12).

·Remove the obligation to first use the appropriations authorised for the current financial year until they are exhausted before using appropriations carried over.

·Allow use of internal assigned revenue for another purpose than the one for which it is assigned in case there are no identified needs allowing such revenue to be used for the same purpose (Article 30(3)).

·Allow the institutions and bodies to accept corporate in kind sponsoring for specific events or activities (i.e. not receptions or other exclusively social events). For that provision to be implemented, each institution would first authorise the principle of acceptance of sponsoring in kind and set out specific guidelines covering notably ethical aspects (Article 24).

·Foresee that, as part of the approval procedure of the sale of buildings or land, the Budget Authority may accept, on a case by case basis that the proceed of that sale is considered assigned revenue, in order to improve facility management by the Commission and facilitate the purchase of other buildings (Article 20(3)(g)).

·Create a EU crisis reserve with the reuse of decommitted appropriations.

·For the next Multiannual Financial Framework, create the possibility that financial operations other than financial instruments generate a contingent liability for the Union exceeding the financial assets provided to cover the financial liability of the Union (Article 203) and a common provisioning fund holding the resources provisioned for financial operations (Article 205).

5.2 Sectoral rules

·The possibility for the Member States to help also in case of man-made catastrophes like the refugee crisis and to use available funds immediately (without having to wait for the submission of a programme amendment) is introduced in Regulation (EU) No 1305/2013 on support for rural development by the European Agricultural Fund for Rural Development. Also, a specific investment priority for migrants and refugees is added to simplify the programming of measures to help migrants and refugees under the European Regional Development Fund Regulation (EU) No 1301/2013.

·European Union Programme for Employment and Social Innovation (EaSI-Regulation No 1296/2013): in order to increase the adjustment capacity of EaSI to crisis and changing political priorities, flexibility is needed concerning the indicative spending levels foreseen for each of the three axis of the program and for each of the thematic priorities within these. In addition, the derogation allowing use of the European Globalisation Fund for the benefit of young people not in employment, education or training should be maintained given the current economic context.

·Connecting Europe Facility Regulation Nr 1316/2013: Given the success of the Multi-Annual Work Programmes, it is necessary to increase the flexibility so that 95% can be spent on multi-annual programmes and further projects supported with most value added for the Trans European Transport Network (Core Network Corridors, cross border projects and projects on the other sections of the Core Network).

·Management of expenditure for the food chain, animal health and animal welfare (Regulation (EU) No 652/2014): given the positive experience with the application of this rule and the substantial reduction of the related workload on the part of the beneficiaries and of Commission services, it is proposed to extend the possibility to use budgetary commitments divided into annual instalments.

·In Regulation (EU) No 1305/2013 on support for rural development, targeting mutual funds helping farmers in case of sharp drops in income in specific sectors shall be allowed, and subsidisation of the initial capital stock of such funds.

6. Focus on results and streamlining reporting

The proposal includes a series of measures aimed at focusing better the budget on results, establishing a clear performance framework, enhancing transparency and streamlining reporting.

6.1 Focus on results

A number of proposals open to all policy areas and focusing on results rather than on what has been actually spent. They demonstrate the Commission's commitment to provide the necessary conditions for a result-oriented approach:

·Allowing for payments based on conditions fulfilled, output or performance in all management modes (e.g. payments per resettled refugee in the AMIF funds or the support for young farmer setting up, Article 121). In such cases, the financing of projects is delinked from the reimbursement of the costs incurred by the recipients of EU funds: it depends directly on the results delivered on the ground. What matters is either the fulfilment of certain conditions as set out ex ante in the basic act or Commission Decisions and/or the achievement of results measured through performance indicators (ex-post). Such system enhances ownership/commitment by the recipients of funds to achieve results. They allow a significant reduction of the administrative burden and of the cost of controls. Controls can indeed be limited to verifying whether the conditions/agreed results have been met and the administrative burden. This in turn limits the risk of legality and regularity errors. It has been advocated by the European Court of Auditors under the name “entitlements”.

·Facilitating "Prizes"(Title IX): the title on “Prizes” is shortened and simplified; the obligation to announce prizes of a value of EUR 1 million or more in the statements accompanying the draft budget is replaced by prior information of the European Parliament and an explicit announcement of such prizes in the financing decision.

·Single lump sum (Article 176): a "single lump sum" could in the future cover all eligible costs of the action. Checks and controls will focus exclusively on the outputs/deliverables. The single lump sum is based on the assessment of the budget proposed by the grant applicant in view of the principles of efficiency, economy and effectiveness including by reference to relevant data and/or expert judgment.

·Priority to simplified forms of grants where payment is triggered by output and results (Article 175): an input based approach should only be considered if the output based approach is impossible or not appropriate. Currently simplified forms are predominantly used to cover the value of inputs (e.g. number of man-days, number of travels, number of days spent in mission, etc.). The possibility to pay simplified forms against the delivery of concrete outputs (e.g. a conference delivered, a festival organized, a prototype built, etc.) is similarly encouraged.

·Clarifying the scope of controls of simplified forms of grants and of their consequences if outputs are not delivered (Article 177): controls concentrate on the fulfilment of the conditions triggering the payment (e.g. whether a supported European movie was produced with the needed quality and distributed with the needed quantity, whether an Erasmus student actually studied abroad, etc.). No reporting on the costs actually incurred by the beneficiary is required. If the conditions triggering the payment were not fulfilled or if the agreed activities were implemented poorly, partially or late, the Commission shall reduce the amount of the grant proportionately to the failure and to recover amounts unduly spent.

6.2 A clear performance framework

To complement the stronger focus on results, a clear performance framework is proposed:

·Linking performance, objective-setting, indicators, results and the principles of economy, efficiency and effectiveness in the use of appropriations (Article 31).

·Providing for performance based fees to remunerate organisations for managing EU funds (Article 150);

·Considering programme statements as the main source of programme performance information (Article 39);

·Merging of the "Synthesis" and "Article 318 TFEU" reports in one “Annual Management and Performance Report for the EU Budget” to deliver annually a single performance report on the EU budget (as from the 2015 financial year, Article 239).

·Aligning the terminology on evaluation to the provisions of the 2016 Inter Institutional Agreement on better law making and creating a link between ex-ante evaluations under the Financial Regulation and Impact Assessments (Article 32).

6.3 Streamlining reporting

6.3.1. General financial rules

Successive revisions of the Financial Regulation have significantly increased the number of reports and information requested including on accounts: reporting is now provided through scattered documents, delivered along a differed calendar. In order to increasing efficiency and transparency not only towards the budgetary authority but also towards the general public, without however affecting the level of information currently provided, it is proposed:

·To gather reporting obligations around two key moments: reports accompanying

·the draft budget; all reporting on EU-level financial instruments would be merged into a single document accompanying the draft budget (Article 39).

·and those submitted as part of the discharge process: "the integrated financial reporting package” – a separate Chapter would deal with budgetary and other financial reporting (Articles 239-245).

·To make the new Annual Management and Performance Report for the EU Budget, resulting from the merge as from the 2015 financial year, of the Synthesis and of the Article 318 TFEU report is a key element of the integrated reporting package (Article 239).

·To specify that the external audit by the Court of Auditors takes account of the multiannual character of programmes (Article 247(1)).

6.3.2. Reporting:

·Reporting obligations are streamlined by eliminating certain redundancies (CPR).

7.    A simpler and leaner EU administration

7.1.    General financial rules

A series of simplification measures aims at allowing the EU institutions to work more efficiently, notably by implementing jointly administrative appropriations to achieve economies of scale:

·Providing an explicit legal basis for Service Level Agreements (SLA) between departments of the EU institutions, EU bodies and European offices and extending to all institutions the possibility to conclude service-level agreements facilitating the implementation of administrative appropriations. In the future it will also be possible to delegate implementation of administrative appropriations to an office set up by the Commission.

·Clarifying the distinction between obligatory and non-obligatory tasks of offices (Articles 64 and 65): obligatory tasks must be covered by appropriations entered in the section of the budget relating to the office. Non-obligatory tasks which an office agrees voluntarily to conduct at the request of another institution or body are covered from the budget of the respective institution or body.

·Allowing multiannual financing decisions and reducing the amount of obligatory elements in a financing decision (Article 108). In addition, it is proposed that the financing decision constitutes at the same time the annual or the multi annual work programme. These changes would speed up the implementation of the budget in years 2 and following of a programme.

·Clarifying the rules on Executive Agencies (Article 68): they shall receive an annual contribution; their director acts as authorising officer by delegation when implementing operational appropriations; the delegation of an operational programme to an executive agency may include pilot projects and preparatory actions as well as the implementation of administrative expenditure in order to achieve synergies and economies of scale.

·Merging the Article 139 of the Financial Regulation Panel with the Financial Irregularity Panel (Article 90): for efficiency reasons, the Financial Regulation Panel recommending exclusion and financial penalties on economic operators would also become competent for financial irregularities by EU staff members, while the Disciplinary Board would continue to draw the consequences of these irregularities under the Staff Regulations.

7.2. Sectoral rules

·Several changes of the Common Provisions Regulation are proposed to facilitate programme management and nation-wide programmes as well as Joint Action Plans comprising projects focussing on output and results.

·In the area of direct payments for farmers, support is granted to active farmers and certain measures focus the support on young farmers. Proportionality for financial corrections linked to public procurement errors is introduced to avoid that such errors are always considered as affecting 100% of aid concerned.

8.    Other changes

Revenue operations: the following changes are proposed:

·The provision on negative adjustments of own resources for accounting purposes is modified for reasons of transparency (Article 94).

·A new provision sets a time limit within which a debit note shall be sent to the debtor (Article 96 (2)), reflecting recent case law of the Court of Justice.

·A new Article 107 sets the rules concerning the rate to be applied for compensatory interests in cases where an amount shall be reimbursed following a judgement of the Court of Justice of the European Union or an amicable settlement.

·The provision concerning fines, other penalties or sanctions is modified to make clear that the amounts provisionally cashed shall be repaid to the third party concerned taking into account the return; and that fines imposed by institutions other than the Commission (e.g. Council in line with Regulation 1173/2011) are also covered by the Financial Regulation (currently limited to fines imposed by the Commission, Article 106).

·Wording on assigned revenue is modified to reflect contributions to measures like the Turkey refugee facility (Article 20(2)).

List of sectoral acts modified by the proposal:

·Council Regulation (EC) No 2012/2002 of 11 November 2002 establishing the European Union Solidarity Fund (OJ L 311, 14.11.2002, p.3);

·Regulation (EU) No 1296/2013 of the European Parliament and of the Council of 11 December 2013 on a European Union Programme for Employment and Social Innovation ("EaSI") and amending Decision No 283/2010/EU establishing a European Progress Microfinance Facility for employment and social inclusion (OJ L 347 20.12.2013, p. 238);

·Regulation (EU) No 1301/2013 of the European Parliament and of the Council of 17 December 2013 on the European Regional Development Fund and on specific provisions concerning the Investment for jobs and growth goal and repealing Regulation (EC) No 1080/2006 (OJ L 347, 20.12.2013, p. 289–302);

·Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347 20.12.2013, p. 320);

·Regulation (EU) No 1304/2013 of the European Parliament and of the Council of 17 December 2013 on the European Social Fund and repealing Council Regulation (EC) No 1081/2006 (OJ L 347 20.12.2013, p. 470);

·Regulation (EU) No 1305/2013 of the European Parliament and of the Council of 17 December 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005 (OJ L 347, 20.12.2013, p. 487–548);

·Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council    Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ L 347, 20.12.2013, p.549);

·Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ L 347 20.12.2013, p. 608);

·Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007 (OJ L 347, 20.12.2013, p.671);

·Regulation (EU) No 1309/2013 of the European Parliament and of the Council of 17 December    2013 on the European Globalisation Adjustment Fund (2014-2020) and repealing Regulation (EC) No    1927/2006 (OJ L 347, 20.12.2013, p. 855–864);

·Regulation (EU) No 1316/2013 of the European Parliament and of the Council of 11 December 2013 establishing the Connecting Europe Facility, amending Regulation (EU) No 913/2010 and repealing Regulations (EC) No 680/2007 and (EC) No 67/2010 Text with EEA relevance (OJ L 348, 20.12.2013, p. 129–171);

·Regulation (EU) No 223/2014 of the European Parliament and of the Council of 11 March 2014 on the Fund for European Aid to the Most Deprived (OJ L 72, 12.3.2014, p. 1–41);

·Regulation (EU) No 283/2014 of the European Parliament and of the Council of 11 March 2014 on guidelines for trans-European networks in the area of telecommunications infrastructure and repealing Decision No 1336/97/EC Text with EEA relevance (OJ L 86, 21.3.2014, p. 14–26);

·Regulation (EU) No 652/2014 of the European Parliament and of the    Council of 15 May 2014 laying down provisions for the management of expenditure relating to the food chain, animal health and animal welfare, and relating to plant health and plant reproductive    material, amending Council Directives 98/56/EC, 2000/29/EC and 2008/90/EC, Regulations (EC) No 178/2002, (EC) No 882/2004    and (EC) No 396/2005 of the European Parliament and of the Council, Directive 2009/128/EC of the    European Parliament and of the Council and Regulation (EC) No 1107/2009 of the European    Parliament and of the Council and repealing Council Decisions 66/399/EEC, 76/894/EEC and 2009/470/EC (OJ L 189, 27.6.2014, p. 1–32);

·Decision No 541/2014/EU of the European Parliament and of the Council of 16 April 2014 establishing a Framework for Space Surveillance and Tracking Support (OJ L 158, 27.5.2014, p. 227–234).

2016/0282 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the financial rules applicable to the general budget of the Union and amending Regulation (EC) No 2012/2002, Regulations (EU) No 1296/2013, (EU) 1301/2013, (EU) No 1303/2013, EU No 1304/2013, (EU) No 1305/2013, (EU) No 1306/2013, (EU) No 1307/2013, (EU) No 1308/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014,(EU) No 283/2014, (EU) No 652/2014 of the European Parliament and of the Council and Decision No 541/2014/EU of the European Parliament and of the Council

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 42, 43(2), 46(d), 149, 153(2)(a), 164, 168(4)(b), 172, 175, 177, 178, 189(2), 209(1), 212(2), 322(2) and 349 thereof, in conjunction with the Treaty establishing the European Atomic Energy Community, and in particular Articles 106athereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee 11 ,

Having regard to the opinion of the Committee of the Regions 12 ,

Having regard to the opinion of the Court of Auditors 13

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1)Since following three years of implementation further amendments are to be made to the financial rules applicable to the general budget of the Union in order remove bottlenecks in implementation by increasing flexibility, to simplify delivery for the stakeholders and the services and to focus more on results, Regulation (EU, Euratom) no 966/2012 14  of the European Parliament and of the Council should be repealed and replaced by this Regulation.

(2)In order to reduce the complexity of financial rules applicable to the general budget of the Union ('the budget') and to include the relevant rules in one single regulation ("single rule book"), Commission Delegated Regulation (EU) No 1268/2012 15 should be repealed. In the interest of clarity, main rules from Regulation (EU) No 1268/2012 should be included in this Regulation, others should be included in guidance for services.

(3)The fundamental budgetary principles should be maintained. Derogations from those fundamental principles for specific areas such as research, external actions and structural funds should be reviewed and simplified as far as possible, taking into account their continuing relevance, their added-value for the budget, and the burden they impose on stakeholders.

(4)Up to 10% of the funds of the Instrument for Pre-accession Assistance (IPA II), the European Neighbourhood Instrument and the financing instrument for development cooperation (DCI) may be kept unallocated at the beginning of the financial year to allow additional funding to respond to major unforeseen needs, new crises situations or significant political shifts in third countries, in addition to the amounts already programmed. These unallocated funds, if not committed during the year, should be carried over by a Decision of the Commission.

(5)Carry-over rules should be presented more clearly, making a distinction between the automatic and non-automatic carry-overs.

(6)In order to optimise the implementation of the budget, it is important to allow for the carrying over and use of external assigned revenues for the succeeding programme or action. It should be possible to carry over internal assigned revenue for one year only, except where this Regulation provides otherwise.

(7)The rules governing transfers of appropriations should allow for greater flexibility in order to ensure better budget implementation. To that end, it is important for the Commission to have the possibility of deciding on transfers, of up to 10%, of operational appropriations between Titles when they are covered by the same basic act. Transfers from administrative support lines to the corresponding operational lines should also be done autonomously by the Commission.

(8)In order to improve agility of the implementation of special instruments, simplified mobilisation and transfer procedures are necessary for the European Globalisation Adjustment Fund and the European Union Solidarity Fund.

(9)Concerning internal assigned revenue, derogation from the principle of specification should be introduced to allow optimal use of all types of appropriations available. In this respect, in case there are no identified needs allowing such revenue to be used for the purposes for which it is assigned, its use for a different purpose should be allowed.

(10)Union institutions should be able to accept any donation made to the Union.

(11)An enabling clause should be introduced to allow for in-kind sponsoring by a legal person of an EU event or activity for promotional or corporate social responsibility purposes.

(12)The concept of performance as regards the EU budget should be clarified. Performance should be described as a direct application of the principle of sound financial management. There should be a link between performance, objective-setting, indicators, results and economy, efficiency and effectiveness in the use of appropriations. To avoid conflicts with existing performance frameworks of the different programmes, references in terms of performance terminology should be limited to objectives and monitoring progress in achieving them.

(13)Union legislation should be of high quality, focus on areas where it produces greatest added value for European citizens and is as effective and efficient as possible in delivering the common policy objectives of the Union 16 . Subjecting existing and new spending programmes and activities entailing significant spending to evaluation can help achieve these objectives.

(14)The principle of transparency, enshrined in Article 15 TFEU which requires the institutions to work as openly as possible, implies, in the area of the implementation of the budget, that citizens are able to know where, and for what purpose, funds are spent by the Union. Such information fosters democratic debate, contributes to the participation of citizens in the Union's decision-making process and reinforces institutional control and scrutiny over Union expenditure. Such objectives should be achieved by the publication, preferably using modern communication tools, of relevant information concerning all recipients of Union funds which takes into account such all recipients' legitimate interests of confidentiality and security and, as far as natural persons are concerned, their right to privacy and the protection of their personal data. Institutions should therefore adopt a selective approach in the publication of information, in accordance with the principle of proportionality. Decisions to publish should be based on relevant criteria in order to provide meaningful information.

(15)The information on the use of Union funds implemented under direct implementation should be published on an internet website of the institutions and should include at least the name, the locality, the amount and the purpose of the funds. That information should take into account relevant criteria such as the periodicity, the type and the importance of the measure.

(16)The name and locality of the recipients of Union funds should be published for prizes, grants and contracts awarded following the opening-up of a public procedure to competition, as it is the case in particular for contests, call for proposals and call for tenders, in the respect of the principles of the TFEU and in particular the principles of transparency, proportionality, equal treatment and non-discrimination. Moreover such publication should contribute to the control of the public selection procedures by the rejected applicants of the competition.

(17)The publication of personal data referring to natural persons should not exceed the duration during which the funds are being used by the recipient and should therefore be removed after two years. The same should apply to personal data referring to legal persons for whom the official title identifies one or more natural persons.

(18)In most of the cases covered by this Regulation, the publication concerns legal persons.

(19)When natural persons are concerned, such publication should only be envisaged respecting the principle of proportionality between the importance of the amount granted and the need to control the best use of the funds. Where natural persons are concerned, the publication of the region on NUTS 2 level is consistent with the objective of publication of recipients, ensures equal treatment between Member States of different sizes while respecting the recipients’ right to private life and in particular the protection of their personal data.

(20)Information on scholarships, and other direct support paid to natural persons in most need should remain exempt from publication.

(21)In order to ensure the respect of the principle of equal treatment between recipients, the publication of information related to natural persons should also be ensured in line with the obligation for the Member States to establish a large transparency of the contracts above the amount laid down in Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts.

(22)The name and the locality of the recipient and the amount and the purpose of the funds should not be published if it risks endangering the integrity of the recipient as protected by the Charter of Fundamental Rights of the European Union or would harm the legitimate commercial interests of the recipient.

(23)In the case of indirect and shared implementation, it should be for the persons, entities or designated bodies implementing Union funds to make available information on recipients and final recipients. Where applicable, the level of detail and criteria should be defined in the relevant sector specific rules and may be further defined in the financial framework partnership agreements. The Commission should make available a reference of the website where the information on recipients and final recipients can be found.

(24)In the interest of increased readability and transparency of data on financial instruments implemented under direct and indirect implementation, it is appropriate to merge all reporting requirements in one single working document attached to the draft budget.

(25)It is appropriate to provide for a possibility for the Commission to conclude service-level agreements with other insitutions in order to facilitate the implementation of administrative appropriations and also for an explicit possibility to conclude such agreements between departments of the institutions, Union bodies, European offices, bodies or persons entrusted with implementation of specific actions in the CFSP pursuant to Title V of the TEU and the Office of the Secretary General of the Board of Governors of the European schools for the provision of services, supply of products, execution of works or the implementation of building contracts.

(26)It is appropriate to define the European offices and to distinguish between obligatory and non-obligatory tasks of such offices. A possibility for the Union institutions, Union bodies and other European offices to delegate authorising officer powers to the director of the European office should be introduced. European offices should also have the possibility to conclude service-level agreements for the provision of services, supply of products, for execution of works or for implementation of building contracts. It is appropriate to set out specific rules for the provision of accounting records, provisions authorising the Commission's accounting officer to delegate some of his tasks to staff in those offices and operating procedures for the bank accounts which the European offices may be authorised to open in the Commission's name.

(27)In order to further improve the cost-efficiency of executive agencies and in the light of the practical experience gained with other Union bodies, the accounting officer of the Commission should be allowed to be entrusted with all or part of the tasks of the accounting officer of the executive agency.

(28)For reasons of legal certainty, it is necessary to clarify that the directors of executive agencies act as authorising officers by delegation when managing operational appropriations of programmes delegated to their agency. To achieve the full effect of efficiency gains resulting from a global centralisation of certain support services the possibility for executive agencies to implement administrative expenditures should be explicitly mentioned.

(29)It is necessary to establish rules on the powers and responsibilities of financial actors, in particular authorising officers and the accounting officers.

(30)The European Parliament and Council should be informed of the appointment or termination of duties of an authorising officer by delegation, internal auditor and accounting officer within two weeks.

(31)Authorising officers should be fully responsible for all revenue and expenditure operations executed under their authority, including in terms of internal control systems, and should be held accountable for their actions, including, where necessary, through disciplinary proceedings.

(32)Consequently, the tasks, responsibilities and principles of the procedures to be observed should also be laid down. It is also necessary to provide that the authorising officers by delegation shall ensure that the authorising officers by subdelegation and their staff receive information concerning the control standards and respective methods and techniques and that measures are taken in order to ensure the functioning of the control system which should replace the obligation to establish specific code of professional standards applicable to financial verifications only. The responsibilities assumed are accounted for in an annual report to the institution and the report shall include the required financial and management information to support the authorising officer by delegation’s declaration of assurance on the performance of his or her duties, including the information on the overall performance of the operations carried out. The supporting documents relating to the operations carried out should be kept. Finally, all the various forms of negotiated procedure for the award of public contracts should, since those contracts represent derogations from the usual award procedures, be the subject of a special report to the institution and of a communication to the European Parliament and Council.

(33)The double role of the Head of Union delegation, and of their deputies in their absence, as authorising officer by subdelegation for the European External Action Service (hereinafter ‘EEAS’) and, as regards operational appropriations, for the Commission should be taken into account.

(34)The delegation of powers of budget implementation by the Commission concerning the operational appropriations of its own section to the deputy Heads of Delegations is restricted to situations where the performance of these tasks by the deputy Heads of Delegations is strictly necessary in order to ensure business continuity during the absence of the Heads of Delegations. The deputy Heads of Delegations cannot exercise these powers on a systematic basis or for reasons of internal work division.

(35)The accounting officer continues to be responsible for the proper execution of payments, the collection of revenue and the recovery of amounts receivable. He/She manages the treasury, bank accounts and third party files, keeps the accounts and is responsible for drawing up the institution's financial statements. The accounting officer of the Commission is the only person who is entitled to define the accounting rules and harmonised charts of accounts, while accounting officers of all other Union institutions define accounting procedures applicable in their institutions.

(36)The arrangements for the appointment and termination of the accounting officer’s duties should also be established.

(37)It is appropriate that the accounting officer should set up procedures to ensure that the accounts opened for the requirements of treasury management and imprest accounts are not in debit.

(38)The conditions for the use of imprest accounts, a system of management which constitutes an exception to normal budgetary procedures, should also be laid down, and the tasks and responsibilities of the imprest administrators, as well as those of the authorising officer and accounting officer in connection with the control of imprest accounts, should be set out. The European Parliament and Council should be informed of any appointment or termination of duties. For reasons of efficiency, imprest accounts should be set up in Union delegations, for appropriations from both the Commission and EEAS sections of the budget. It is also appropriate to allow under specific conditions for the use of imprest accounts in the Union delegation for payments of limited amounts by budgetary procedures. As regards the appointment of imprest administrators, it has proven necessary to choose them also from personnel employed by the Commission in the field of crisis management aid and humanitarian aid operations whenever there is no Commission statutory staff available.

(39)In order to take into account the situation in the field of humanitarian aid operations whenever there is no respective Commission statutory staff available and the technical difficulties to have all legal commitments signed by the authorising officer responsible, it should be allowed for the personnel employed by the Commission in that field to sign legal commitments of a very low value up to EUR 2500 which are linked to the payments executed from the imprest accounts, and for the Heads of Union delegations or their deputies to sign legal commitments on the instruction of the authorising officer responsible.

(40)Once the tasks and responsibilities of each financial actor have been defined, they may be held liable only under the conditions laid down in the Staff Regulations of Officials of the European Union and the Conditions of Employment of Other Servants of the European Union. The specialised financial irregularities panels have been set up in the Union institutions, however due to limited number of cases submitted to them and for reasons of efficiency, it is appropriate to transfer their functions to the newly established inter-institutional panel which has been set up to assess requests and issue recommendations on the imposition on administrative sanctions (exclusion and financial penalty) referred to it by the Commission or other Union institutions and Union bodies. This transfer also aims at avoiding duplication and mitigating the risks of contradictory recommendations or opinions, in cases where both an economic operator and an EU staff member are involved. The procedure should be maintained by which an authorising officer may seek confirmation of an instruction which that officer considers to be irregular or contrary to the principle of sound financial management, and thus be released from any liability. The composition of this panel should be modified when it fulfils this role.

(41)As regards revenue, it is necessary to address negative adjustments of own resources covered by Council Regulation on the system of the European Union's own resources. Except for the special case of own resources, it is necessary to keep the tasks and controls falling within the responsibility of the authorising officers at the different stages of the procedure: establishment of the estimate of amounts receivable, recovery order, dispatch of the debit note informing the debtor that the amount receivable has been established, calculation of any default interest due, and the decision, where necessary, to waive an entitlement subject to criteria guaranteeing compliance with sound financial management in order to ensure an efficient collection of revenue.

(42)The authorising officer should be able to waive totally or partially the recovery of an established amount receivable when the debtor has entered into any of the insolvency proceeding as defined by Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings, in particular in cases of judicial arrangements, compositions and analogous proceedings.

(43)Specific provisions on procedures of adjustment or cancellation of an estimate of amount receivable should be applied.

(44)Due to the recent developments on the financial markets and the ECB rate applied to its principal refinancing operations, it is necessary to review the provisions concerning interest rate for fines or other penalties and to provide for rules in cases of negative interest rate.

(45)To reflect the specific nature of receivables consisting in fines or other penalties imposed by the Institutions under the TFEU or Euratom Treaty, it is necessary to introduce specific provisions on the interest rates applicable on amounts due but not yet paid, in the case such amounts are increased by the Court of Justice of the European Union.

(46)The rules on recovery should be both clarified and strengthened. In particular, it should be specified that the accounting officer shall recover amounts by offsetting them also against amounts owed to the debtor by an executive agency when it implements the Union budget.

(47)For the sake of legal security, the rules regarding the delays when a debit note is to be sent should be defined.

(48)In order to secure the management of assets whilst also yielding financial remuneration, it is necessary to have the amounts provisionally cashed, such as competitions fines which are being contested, invested in financial assets, and to determine the assignment of the return on them. Since the Commission is not the only institution which is entitled to impose fines or other penalties, it is necessary to set provisions concerning such fines or other penalties imposed by other institutions and to set rules for their recovery which should be equivalent to those for the fines or penalties imposed by the Commission.

(49)In order to ensure that the Commission has all the necessary information for the adoption of the financing decisions, it is necessary to lay down the minimum requirements for the contents of financing decisions on grants, procurement, trust funds, prizes, financial instruments, blending facilities and budgetary guarantees. At the same time, in order to give a longer-term perspective to the potential recipients, it is necessary to allow that the financing decisions are adopted for more than one year but the implementation being subject to the availability of budget appropriations for the respective year. In order to enable such longer-term perspective it is necessary to reduce the number of the elements required for the financing decision. With the aim of simplification, the financing decision should at the same time constitute an annual or multi-annual programme. Since the contribution to the bodies referred to in Articles 69 and 70 is already established in the annual budget, it should not be required to adopt a specific financing decision in this respect.

(50)As regards expenditure, the relationship between financing decisions, global commitments and individual commitments as well as concepts of budgetary and legal commitment of expenditure should be clarified in order to establish a clear framework for the different stages of budget implementation.

(51)In order to take into account in particular the number of legal commitments concluded in the Union delegations and representations and the exchange rate fluctuations experienced by them, the provisional commitments should be possible also in cases where the final recipients and the amounts are known.

(52)In order to make better use of the appropriations available for the implementation of external actions, the time limit during which individual legal commitments may be made on the basis of global budgetary commitment should be removed as well as the obligation to conclude a contribution agreement until 31 December of year n+1 in cases where a financing agreement with the third country presents the global budgetary commitment covering also the contribution agreement.

(53)As regards the typology of payments which may be made by authorising officers, clarification of the various types of payments should, in accordance with the principle of sound financial management, be provided. The rules for clearing of pre-financing payments should further be clarified in particular for situations where no interim clearing is possible. To this effect, appropriate provisions should be included in legal commitments signed.

(54)This Regulation should stipulate that the payments must be made within a specified time limit and that in the event of failure to respect this time limit creditors will be entitled to default interests to be charged to the budget, with the exception of Member States and as newly introduced, also the European Investment Bank and the European Investment Fund.

(55)It is considered appropriate to integrate the provisions concerning validation and authorisation of expenditure in one article and to introduce a definition of de-commitments. Since the transactions are carried out in computerised systems, the concept of "signing a 'passed for payment' voucher" has been replaced by "electronically secured signature" except in a limited number of cases. It is also necessary to clarify that the validation of expenditure applies to all eligible costs, i.e. also such which are not associated with a request for payment, this being the case for the clearing of pre-financing.

(56)In order to reduce complexity, streamline existing rules and improve the readability of this Regulation rules common to more than one budget implementation instruments should be established. For those reasons certain provisions should be regrouped, the wording and scope of other provisions should be aligned and unnecessary repetitions and cross referencing should be removed.

(57)More emphasis should be put on performance and results. It is thus appropriate to define an additional form of financing not linked to costs of the relevant operations in addition to the forms of Union contribution already well established (reimbursement of the eligible costs actually incurred, unit cost, lump sums and flat-rate financing). This form of financing should be either based on the fulfilment of certain conditions ex ante or the achievement of results measured by reference to the previously set milestones or through performance indicators.

(58)Where the Commission carries out assessments of the operational and financial capacity of recipients of EU funds or of their systems and procedures, it should be able to rely on the assessments already conducted by other entities or donors such as international organizations, in order to avoid duplicating assessments of the same recipients. The possibility to cross-rely on assessments conducted by other entities should be used where these assessments were made with regard to conditions equivalent to those set out in this Regulation for the applicable method of implementation. Therefore, in order to foster cross reliance on assessments among donors, the Commission should promote the recognition of internationally accepted standards or international best practices.

(59)It is also important to avoid that recipients of EU funds are audited several times by different entities on the use of these funds. It is therefore necessary to foresee the possibility to rely on audits already carried out by independent auditors provided that they are based on internationally accepted standards, that they provide reasonable assurance, and that they have been conducted on the financial statements and reports setting out the use of the Union contribution. Such audits should then form the basis of the overall assurance on the use of EU funds.

(60)It is important to allow Member States to request that resources allocated to them under shared implementation are transferred at Union level and implemented by the Commission in direct or indirect implementation, where possible for the benefit of the Member State concerned. This would optimise the use of these resources and of the instruments established under this Regulation or under sector specific Regulations including the EFSI Regulation, to which the Member States would request these resources to be transferred. In order to guarantee an efficient implementation of these instruments, it is necessary to foresee that where resources are transferred to instruments established under this Regulation or under sector specific Regulations including the EFSI Regulation, the rules of those regulations shall apply.

(61)In order to provide for a long term cooperation mechanism with recipients of Union funding, the possibility of signing financial framework partnership agreements should be provided for. Financial framework partnerships should be implemented through grants or through cooperation agreements with entities implementing Union funds. For this purpose the minimum content of such agreements should be specified. Financial framework partnerships should not unduly restrict access to Union funding.

(62)The conditions and procedures for suspending, terminating and reducing the Union contribution should be harmonised across the different budget implementation instruments (for example grants, procurement, indirect implementation, prizes, etc.). The grounds for such suspension, termination or reduction should be defined.

(63)This Regulation should establish standard periods for which documents relating to Union contributions should be kept by recipients so as to avoid divergent or disproportionate contractual requirements while still providing the Commission, the European Anti-fraud office and the Court of Auditors with sufficient time to obtain access to such data and documents and perform the ex post checks and audits. In addition, participants and recipients should be obliged to cooperate in the protection of the Union's financial interest.

(64)In order to provide adequate information to participants and recipients and to ensure that they have the possibility to exercise their right of defence this Regulation should allow participants and recipients to submit their observations before adoption of any measure adversely affecting their rights and to be informed on the means of redress they dispose of for challenging such a measure.

(65)In order to protect the Union's financial interests, a single early detection and exclusion system should be set up by the Commission.

(66)The early detection and exclusion sytem should apply to participants, recipients, entities on whose capacity the candidate or tenderer intends to rely or to subcontractors of a contractor, any person or entity receiving Union funds where the budget is implemented under indirect implementation, any person or entity receiving Union funds under financial instruments directly implemented and participants or recipients of entities implementing the budget under shared implementation.

(67)It should be clarified that where a decision to register a person or entity in the early detection and exclusion system database is taken on the basis of the exclusion situations of a nаtural or legal person who is a member of the administrative, management or supervisory body of that person or entity, or who has powers of representation, decision or control with regard to that person or entity or a natural or legal person that assumes unlimited liability for the debts of that person or entity or a natural person who is essential for the award or for the implementation of the legal commitment, the information registered in the database shall include the information concerning these persons.

(68)The decision to exclude a person or entity from participation in award procedures or the imposition of a financial penalty and the decision to publish the related information should be taken by the authorising officer responsible, in light of their autonomy in administrative matters. In the absence of a final judgment or final administrative decision and in cases related to a serious breach of contract, the authorising officers responsible should take their decision having regard to the recommendation of the panel on the basis of a preliminary classification in law.. The panel should also assess the duration of an exclusion in cases where the duration has not been set by the final judgment or the final administrative decision.

(69)The role of the panel should be to ensure the coherent operation of the exclusion system. The panel should be composed of a standing chair, representatives of the Commission and a representative of the authorising officer responsible.

(70)The preliminary classification in law does not prejudge the final assessment of the conduct of the person or entity concerned by the competent authorities of Member States under national law. The recommendation of the panel, as well as the decision of the authorising officer responsible, should therefore be reviewed following the notification of such a final assessment.

(71)A person or entity should be excluded by the authorising officer responsible when a final judgment or a final administrative decision has been taken in the case of grave professional misconduct, non-compliance, whether intentional or not, with the obligations related to the payment of social security contributions or the payment of taxes, fraud affecting the budget , corruption, participation in a criminal organisation, money laundering, terrorist financing, terrorist related offences, child labour or other forms of trafficking in human beings or irregularity. It should also be excluded in the case of a serious breach of a legal commitment or bankruptcy.

(72)When deciding on the exclusion or the imposition of a financial penalty and on the publication thereof or on the rejection of person or entity, the authorising officer responsible should ensure compliance with the principle of proportionality by taking into particular account the seriousness of the situation, its budgetary impact, the time which has elapsed since the relevant conduct, its duration and its recurrence, the intention or degree of negligence and the degree of collaboration of the person or entity with the relevant competent authority and its contribution to the investigation.

(73)The authorising officer responsible should also be able to exclude a person or entity where a natural or legal person assuming unlimited liability for the debts of that economic operator is bankrupt or in a similar situation of insolvency or where that natural or legal person fails to comply with its obligations to pay social security contributions or taxes, where such situations impact the financial situation of the economic operator.

(74)A person or entity should not be subject to a decision of exclusion when it has taken remedial measures, thus demonstrating its reliability. That possibility should not apply in case of the most severe criminal activities.

(75)In light of the principle of proportionality, cases where a financial penalty may be imposed as an alternative to the exclusion and cases where the gravity of the conduct of the recipient concerned in respect of attempting to unduly obtain Union funds justifies the imposition of a financial penalty in addition to the exclusion so as to ensure a deterrent effect should be distinguished. The minimum and maximum financial penalty which can be imposed by the contracting authority should also be defined.

(76)A financial penalty should only be imposed on a recipient and not on a participant given that the amount of the financial penalty to be imposed is calculated on the basis of the value of the legal commitment at stake.

(77)The possibility to apply administrative and/or financial penalties on a regulatory basis is independent from the possibility to apply contractual penalties, such as liquidated damages and should be noted.

(78)The duration of exclusion should be limited in time, as is the case in Directive 2014/24/EU 17 and in accordance with the principle of proportionality.

(79)It is necessary to determine the commencement date and the duration of the limitation period for imposing administrative sanctions.

(80)It is important to be able to reinforce the deterrent effect achieved by the exclusion and the financial penalty. In that regard, the deterrent effect should be reinforced by the possibility to publish the information related to the exclusion and/or to the financial penalty, with full respect for the data protection requirements set out in Regulation (EC) No 45/2001 of the European Parliament and of the Council (6) and in Directive 95/46/EC of the European Parliament and of the Council (7). This should contribute to ensuring that the same conduct is not repeated. For reasons of legal certainty and in accordance with the principle of proportionality it should be specified in which situations a publication should not take place. In its assessment, the authorising officer responsible should have regard to any recommendation of the panel. As far as natural persons are concerned, personal data should only be published in exceptional cases justified by the seriousness of the conduct or its impact on the Union's financial interests.

(81)The information related to an exclusion or a financial penalty should only be published in the case of grave professional misconduct, fraud, a significant deficiency in complying with the main obligations of a contract financed by the budget or an irregularity.

(82)The criteria for exclusion should be clearly separated from the criteria leading to a possible rejection from a given procedure.

(83)The information on the early detection of risks and on the imposition of administrative sanctions on a person of entity should be centralised. For that purpose, related information should be stored in a database set up and operated by the Commission as the owner of the centralised system. That system should operate in full compliance with the right to privacy and the protection of personal data.

(84)While the setting up and the operation of the early detection and exclusion system should be the responsibility of the Commission, other institutions and bodies, as well as all entities implementing the budget under direct, shared and indirect implementation should participate in that system by transmitting relevant information to the Commission. The authorising officer responsible and the panel should guarantee the right of defence of economic operators. The same right should be given to a person of entity, in the context of an early detection, where an act envisaged by an authorising officer could adversely affect the rights of the person of entity concerned. In cases of fraud, corruption or any other illegal activity affecting the Union's financial interests which are not yet subject to a final judgment, the authorising officer responsible and the panel should be given the possibility to defer the opportunity given to the person of entity to submit its observations. Such deferral should only be justified where there are compelling legitimate grounds to preserve the confidentiality of the investigation.

(85)The Court of Justice of the European Union should be given unlimited jurisdiction with regard to penalties imposed pursuant to this Regulation, in accordance with Article 261 of the Treaty on the Functioning of the European Union (TFEU).

(86)In order to facilitate the protection of the Union's financial interests across all implementation modes, it should be possible for the entities involved in the implementation of the budget in shared and indirect implementation to take into account, as appropriate, exclusions decided upon by the authorising officers at Union level.

(87)This Regulation should foster the objective of e-Government, and in particular the use of electronic data in the exchange of information between the institutions and third parties.

(88)Progress towards the electronic exchange of information and electronic submission of documents, which constitute a major simplification measure, should be accompanied by clear conditions for the acceptance of the systems to be used, so as to establish a legally sound environment while preserving flexibility in the management of Union funds for the participants, recipients and the authorising offices as provided for in this Regulation.

(89)Rules on the composition and tasks of the committee in charge of assessing application documents in procurement, grant award procedures and in contests for prizes should be laid down. The committee may be composed of external experts if provided so in the basic act.

(90)In line with the principle of good administration the authorising officer should request clarifications or missing documents while respecting the principle of equality of treatment and without substantially changing the application documents. The authorising officer may decide not to do so only in duly justified cases. In addition, the authorising officer should be able to correct an obvious clerical error or request the participant to correct it.

(91)Sound financial management should require that the Commission protects itself by requesting guarantees at the time of paying pre-financing. The requirement for contractors and beneficiaries to lodge guarantees should not be automatic, but should be based on a risk analysis. Where during the course of implementation the authorising officer discovers that a guarantor is no longer authorised to issue guarantees in accordance with the applicable national law, the authorising officer should be able to require replacement of the guarantee.

(92)The different sets of rules for direct and indirect implementation, in particular the definition of budget implementation tasks, have created confusion and entailed risk in errors of qualification both for the Commission and for the partners and should thus be simplified and harmonised.

(93)The provisions on the ex-ante pillar assessment should be revised to enable the Commission to rely as much as possible on the systems and procedures of the partners which have deemed equivalent to the ones used by the Commission. In addition, it is important to clarify that where the assessment reveals areas where the procedures in place are not sufficient to protect the financial interests of the Union, the Commission may sign contribution agreements while imposing additional supervisory measures. It is also important to clarify where the Commission does not require a pillar assessment in order to sign contribution agreements.

(94)It is appropriate to indicate that the remuneration of the Organisations implementing the EU budget should, where relevant and possible, have a performance based nature.

(95)The Commission enters into partnerships with third countries by means of financing agreements. It is important to clarify the content of the financing agreement particularly for those parts that are implemented by the third country in indirect implementation.

(96)It is important to recognise the specific nature of blending facilities where the Commission blends its contribution with that of Financial Institutions and to clarify the application of Title X on Financial Instruments.

(97)Procurement rules and principles applicable to public contracts awarded by the Union institutions on their own account should be based on the rules contained in the Directive 2014/23/EU of the European Parliament and of the Council 18  and Directive 2014/24/EU.

(98)In the case of mixed contracts, the methodology of the contracting authorities for determining the applicable rules should be clarified.

(99)The ex ante and ex post publicity measures necessary to launch a procurement procedure should be clarified in the case of contracts above and below the thresholds set out in Directive 2014/24/EU and for those falling outside the scope of that Directive..

(100)This Regulation should include an exhaustive list of all the procurement procedures available to the Union institutions regardless of the thresholds.

(101)In the interests of administrative simplification and in order to encourage the participation of small and medium-sized enterprises, negotiated procedures for middle-value contracts should be provided for.

(102)As is the case in Directive 2014/24/EU, this Regulation should allow for market consultation prior to the launch of a procurement procedure. In order to ensure that the innovation partnership is used only when the desired product does not exist on the market, an obligation to carry out such preliminary market consultation before using an innovation partnership should be laid down in this Regulation.

(103)The contribution of contracting authorities the protection of the environment and the promotion of sustainable development, while ensuring that they can obtain the best value for money for their contracts, in particular through requiring specific labels or through the use of appropriate award methods, should be clarified.

(104)In order to ensure that, when executing contracts, economic operators comply with the applicable environmental, social and labour law obligations established by Union law, national law, collective agreements or the applicable international social and environmental conventions listed in Annex X to Directive 2014/24/EU, such obligations should be part of the minimum requirements defined by the contracting authority and should be integrated in the contracts signed by the contracting authority.

(105)It is appropriate that different cases usually referred to as situations of conflict of interest be identified and treated distinctly. The notion of a ‘conflict of interest’ should be solely used for cases where an entity or person with responsibilities for budget implementation, audit or control or an official or an agent of a Union institution is in such a situation. In cases where an economic operator attempts to unduly influence a procedure or obtain confidential information, this should be treated as grave professional misconduct. In addition, economic operators may be in a situation where they should not be selected to implement a contract because of a professional conflicting interest. For instance, a company should not evaluate a project in which it has participated or an auditor should not be in a position to audit accounts it has previously certified.

(106)In accordance with Directive 2014/24/EU, it should be possible to verify whether an economic operator is excluded, to apply selection and award criteria, as well as to verify compliance with the procurement documents in any order. As a result, it should be possible to reject tenders on the basis of award criteria without a prior check on exclusion or selection criteria of the corresponding tenderer.

(107)Contracts should be awarded on the basis of the most economically advantageous tender in line with Article 67 of Directive 2014/24/EU. It should be clarified that selection criteria are strictly linked to the evaluation of candidates or tenderers and award criteria are strictly linked to the evaluation of the tenders.

(108)Union public procurement should ensure that Union funds are used in an effective, transparent, and appropriate way. In that regard, electronic procurement should contribute to the better use of Union funds and enhance access to contracts for all economic operators.

(109)The existence of an opening phase and an evaluation for any procedure should be clarified. An award decision should always be the outcome of an evaluation.

(110)When notified of the outcome of a procedure, candidates and tenderers should be informed of the grounds on which the decision was taken and should receive a detailed statement of reasons based on the content of the evaluation report.

(111)Given that criteria are applied in no particular order, rejected tenderers who submitted compliant tenders should receive the characteristics and relative advantages of the successful tender if they so request.

(112)For framework contracts with reopening of competition, the obligation to provide the characteristics and relative advantages of the successful tender to an unsuccessful contractor should be waived on the basis that the receipt of such information by parties to the same framework contract each time a competition is reopened might prejudice fair competition between them.

(113)A contracting authority should be able to cancel a procurement procedure before the contract is signed, without the candidates or tenderers being entitled to claim compensation. This should be without prejudice to situations where the contracting authority has acted in such a way that it may be held liable for damages in accordance with the general principles of Union law.

(114)As is the case in Directive 2014/24/EU, it is necessary to clarify the conditions under which a contract may be modified during its performance without a new procurement procedure. In particular, cases such as administrative changes, universal succession and application of clear and unequivocal revision clauses or options do not alter the minimum requirements of the initial procedure. A new procurement procedure should be required in the case of material modifications to the initial contract, in particular to the scope and content of the mutual rights and obligations of the parties, including the distribution of intellectual property rights. Such modifications demonstrate the parties' intention to renegotiate the essential terms or conditions of that contract, in particular if the modifications would have had an influence on the outcome of the procedure had they been part of the initial procedure.

(115)It is necessary to provide for the option of a performance guarantee in relation to works, supplies and complex services in order to guarantee compliance with substantial contractual obligations and to ensure proper performance throughout the duration of the contract. It is also necessary to provide for a retention money guarantee to cover the contract liability period, in line with customary practice in these sectors.

(116)In order to determine the applicable thresholds and procedures, it is necessary to clarify whether Union institutions, executive agencies and bodies are deemed to be contracting authorities. They should not be deemed to be contracting authorities in cases where they purchase from a central purchasing body. In addition, Union institutions form a single legal entity and cannot conclude contracts but only service-level agreements between their departments.

(117)It is appropriate to include a reference in this Regulation to the two thresholds set out in Directive 2014/24/EU applicable to works and to supplies and services, respectively. Those thresholds should also be applicable to concession contracts for reasons of simplification as well as sound financial management, considering the specificities of the Union institutions' contracting needs. The revision of those thresholds as provided for in Directive 2014/24/EU should therefore be directly applicable to procurement by Union institutions.

(118)For harmonisation and simplification purposes, the standard procedures applicable for public procurement should also be applied to purchases provided for under the light regime in Directive 2014/24/EU. Therefore, the threshold for light regime purchases should be aligned with the threshold for service contracts.

(119)It is necessary to clarify the conditions of application of the standstill period.

(120)The rules applicable to procurement in the field of external actions should be consistent with the principles laid down in the Directive 2014/23/EU and Directive 2014/24/EU.

(121)In order to reduce complexity, streamline existing rules and improve the readability of the procurement rules, it is necessary to regroup the general provisions on procurement and the specific provisions applicable to procurement in external actions and to remove unnecessary repetitions and cross referencing.

(122)It is necessary to clarify which economic operators have access to procurement by Union institutions depending on their place of establishment and to provide explicitly for the possibility of such access also to international organisations.

(123)In order to achieve a balance between the need for transparency and greater coherence of procurement rules on the one hand, and the need to provide flexibility on certain technical aspects of these rules on the other hand, the technical rules on procurement should be aggregated in the Annex to this Regulation and the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of amendments to this Annex.

(124)It is necessary to clarify the scope of the Title on grants, particularly with regard to the type of action or body eligible for a grant as well as with regard to legal commitments that may be used to cover grants. In particular, grant decisions should be phased out due to their limited use and progressive introduction of e-grants. The structure should be simplified by moving the provisions on instruments which are not grants to other parts of the Regulation. The nature of bodies which may receive operating grants should be clarified since the notion of bodies pursuing an aim of general Union interest is covered by the notion of bodies having an objective forming part of and supporting a Union policy. In addition, the restrictive definition of a body pursuing an aim of general Union interests should be removed.

(125)In order to simplify procedures and improve the readability of this Regulation provisions related to the content of the grant application, of the call for proposals and of the grant agreement should be simplified and streamlined. 

(126)In order to facilitate the implementation of actions financed by multiple donors where the overall financing of the action is not known at the time of commitment of the Union contribution, it is necessary to clarify the way the Union contribution is defined and the method of verifying its use.

(127)Experience gained in the use of lump sums, unit costs or flat-rate financing has shown that, such forms of financing significantly simplified administrative procedures and reduced the risk of error substantially. Lump sums, flat rates and unit costs are a suitable form of financing independently of the area of Union intervention and in particular for standardised and recurrent actions, e.g. mobility, institutional twinning, training activities, etc. In this context, the conditions for using lump sums, unit costs and flat rates should be made more flexible. It is necessary to provide explicitely for the establishment of single lump sums covering the entire eligible costs of the action or the work programme. In addition, in order to foster focus on results, priority should be given to output-based funding. Input bаsed lump sums, unit costs and flat rates should remain an option where output based ones are not possible or appropriate.

(128)The administrative procedures for authorising lump sums, unit costs and flat rates should be simplified by vesting the power for such authorisation in the authorising officer. Where appropriate, this authorisation may be given by the Commission in light of the nature of the activities or of the expenditure or in light of the number of authorising officers concerned.

(129)In order to bridge the gap in the availability of data used to establish lump sums, unit costs and flat rates, the use of an expert judgement should be allowed.

(130)The scope of checks and controls as opposed to the periodic assessment of lump sums, unit costs or flat rates should be clarified. Those checks and controls should focus on the fulfilment of the conditions triggering the payment of lump sums, unit costs or flat-rates, including, where required, the achievement of outputs. Those conditions should not require reporting on the costs actually incurred by the beneficiary. Where the amounts of lump sums, unit costs or flat-rate financing have been decided ex ante by the authorising officer responsible or the Commission they should not be challenged by ex post controls. The periodic assessment of lump sums, unit costs or flat rates may require access to the accounts of the beneficiary for statistical and methodological purposes. The periodic assessment may lead to updates of the lump sums, unit costs or flat rates applicable to future agreements but should not be used for questioning the value of the lump sums, unit costs or flat rates already agreed upon. Access to the beneficiary's accounts is also necessary for fraud-prevention and detection purposes.

(131)In order to facilitate the participation of small organisations in the implementation of the EU policies in an environment of limited availability of resources, it is necessary to recognise the value of the work provided by volunteers as eligible costs. As a result, such organisations may rely to a greater extent on volunteers' work for sake of providing co-financing to the action. Without prejudice to the maximum co-financing rate specified in the basic act, in such cases, the Union grant needs to be limited to the estimated eligible costs other than those covering volunteers' work. As volunteers work is a work provided by third parties without a remuneration being paid to them by the beneficiary, the limitation avoids reimbursing costs which the beneficiary did not incur.

(132)As a valuable type of financial support not related to predictable costs, the use of prizes should be facilitated and the applicable rules should be clarified. Prizes should be seen as complementing, not substituting, other funding instruments such as grants.

(133)In order to allow for the more flexible implementation of prizes, the obligation to announce prizes of value of EUR 1 000 000 or more in the statements accompanying the draft budget should be replaced by prior information of the European Parliament and an explicit announcement of such prizes in the financing decision.

(134)Prizes should be subject to the principles of transparency and equal treatment. In that context, the minimum characteristics of contests should be laid down, notably the conditions for paying the prize to the winners in case of award, and the appropriate publication means. It is also necessary to establish a clearly defined award procedure, from submission of the entries to information of applicants and notification to the winning applicant, which mirrors the procedure for award of grants.

(135)This Regulation should lay down the principles and conditions for financial instruments, budgetary guarantees and financial assistance and the rules on the limitation of the financial liability of the Union, the fight against fraud and money laundering, the winding down of financial instruments and reporting.

(136)In recent years the Union has increasingly used financial instruments that allow a higher leverage of the EU budget to be achieved but, at the same time, they generate a financial risk for that budget. Among those financial instruments are not only the financial instruments already covered by the Financial Regulation, but also other instruments such as budgetary guarantees and financial assistance that previously have been governed only by the rules established in their respective basic acts. It is important to establish a common framework to ensure the homogeneity of the principles applicable to that set of instruments and to regroup them under a new Title, comprising sections on budgetary guarantees and on financial assistance to Member States or third countries in addition to the existing rules applicable to Financial Instruments.

(137)Financial instruments can be valuable in multiplying the effect of Union funds when those funds are pooled with other funds and include a leverage effect. Financial instruments should only be implemented if there is no risk of market distortion or inconsistency with state aid rules.

(138)Within the framework of the annual appropriations authorised by the European Parliament and the Council for a given programme, financial instruments should be used on the basis of an ex ante evaluation demonstrating that they are effective for the achievement of the Union's policy objectives.

(139)Financial instruments, budgetary guarantees and financial assistance should be authorised by means of a basic act. Where financial instruments are established without a basic act in duly justified cases, they should be authorised by the European Parliament and the Council in the budget.

(140)The instruments that potentially fall under Title X, such as loans, guarantees, equity investments, quasi-equity investment and risk-sharing instruments should be defined. The definition of risk-sharing instruments should allow for the inclusion of credit enhancements for project bonds, covering the debt service risk of a project and mitigating the credit risk of bond holders through credit enhancements in the form of a loan or a guarantee.

(141)Any reflow from a financial instrument should be used for the instrument which produced them with a view to enhance the efficiency of the instrument and possibly reduce the allocation of fresh resources from the budget to that instrument, unless specified otherwise in the basic act.

(142)It is appropriate to recognise the alignment of interests in pursuing Union policy objectives and, in particular, that the European Investment Bank and the European Investment Fund have the specific expertise to implement financial instruments.

(143)The European Investment Bank and the European Investment Fund, acting as a group, should have the possibility to transfer part of the implementation to each other, where it may benefit the implementation of a given action and as further defined in the relevant agreement with the Commission.

(144)It should be clarified that, where financial instruments are combined with other forms of support from the Union budget, the rules on financial instruments should apply. Such rules should be complemented, where applicable, by specific requirements stemming from the sector specific legislation.

(145)In addition, the implementation of financial instruments and budgetary guarantees should comply with Union's tax policy objectives and achievements regarding tax avoidance, in particular aggressive tax planning and tax good governance. In that respect, attention should be given to the Commission Recommendation on aggressive tax planning (C(2012)8806), the Commission Recommendation regarding measures to encourage third countries to apply minimum standards of good tax governance in tax matters (C(2012)8805), the Commission Communication on an Anti-Tax Avoidance Package: Next steps towards delivering effective taxation and greater tax transparency in the EU (COM(2016)23), includingin particular the Commission Communication on an External Strategy for Effective Taxation (COM(2016)24), and related developments at Union level.

(146)Budgetary guarantees and financial assistance to Member States or third countries are off-budget operations that have a significant impact on the balance sheet of the Union. While remaining off-budget operations, their inclusion in the Financial Regulation provides a stronger protection of the financial interests of the Union and a clearer framework for their authorisation, management and accounting.

(147)The Union has recently launched important initiatives based on budgetary guarantees such as the European Fund for Strategic Investments (EFSI) or the European Fund for Sustainable Development (EFSD). The characteristics of those instruments are that they generate a contingent liability for the Union and imply the provisioning of funds to make available of a liquidity cushion that allows the budget to respond in an orderly manner to the payment obligations that may arise from those contingent liabilities. In order to guarantee the credit rating of the Union and, hence, its capacity to deliver effective financing, it is essential that the authorisation, provisioning and monitoring of contingent liabilities follow a robust set of rules that should be applied to all budgetary guarantees.

(148)The contingent liabilities arising from budgetary guarantees may cover a wide range of financing and investment operations. The possibility of the budgetary guarantee being called cannot be scheduled with full certainty on a yearly basis as in the case of loans that have a defined schedule for repayment. It is, therefore, indispensable to set up a framework for the authorisation and monitoring of contingent liabilities ensuring the full respect, at any moment, of the annual ceiling for payments established in the Decision (EC, Euratom) 2007/436 on the system of own resources of the Union.

(149)That framework should also provide for management and control, including reporting regularly on the financial exposure of the Union. The rate of provisioning of financial liabilities should be set on the basis of a proper risk assessment of the financial risks stemming from the related instrument. The sustainability of the contingent liabilities should be assessed annually in the context of the annual budgetary procedure. An early warning mechanism should be established to avoid a shortage of provisions to cover financial liabilities.

(150)The increasing use of financial instruments, budgetary guarantees and financial assistance requires a significant volume of payment appropriations to be mobilised and provisioned. In order to deliver leverage while ensuring an adequate level of protection against financial liabilities, it is important to optimise the amount of provisioning required and to achieve efficiency gains by pooling those provisions into a common provisioning fund. In addition, the more flexible use of those pooled provisions permits an effective global provisioning rate that delivers the protection requested with an optimised amount of resources.

(151)The rules applicable to provisioning and to the common provisioning fund should provide a solid internal control framework. The guidelines for the asset management of the provisions should be established at the level of the Commission after having consulted the accounting officer. The authorising officers should actively monitor the financial liabilities under their responsibility and the authorising officer for the common provisioning fund should manage the cash and the assets in the fund following the rules and procedures set out by the accounting officer.

(152)Budgetary guarantees and financial assistance should follow the same set of principles already established for financial instruments. Budgetary guarantees, in particular, should comply with the following principles: they should be irrevocable, unconditional and on demand; they should be indirectly implemented or, only in exceptional cases, directly; they may only cover financing and investment operations and their counterparts should contribute with their own resources to the operations covered.

(153)Financial assistance to Member States or third countries should take the form of a loan, of a credit line or any other instrument deemed appropriate to ensure the effectiveness of the support. The resources to be provided are borrowed by the Commission that should be empowered to that end, on the capital markets or from financial institutions, avoiding the involvement of the Union in any transformation of maturities that would expose it to an interest risk or any other market risk.

(154)The provisions related to financial instruments should apply as soon as possible and at the latest from 1 January 2018 in order to achieve the simplification and effectiveness sought. The provisions related to the budgetary guarantees and to financial assistance, as well as the common provisioning fund, should apply as from the post 2020 multiannual financial framework. That calendar will allow a thorough preparation of the new tools for managing contingent liabilities. It will also permit an alignment between the principles set out in the Title X and, on the one hand, the proposal for the multiannual financial framework after 2020 and, on the other hand, the specific programmes related to the latter.

(155)On 22 October 2014 the European Parliament and the Council adopted Regulation (EU, Euratom) No 1141/2014 (5) repealing Regulation (EC) No 2004/2003 and laying down new rules for, inter alia, the funding of political parties and political foundations at European level, in particular with regard to funding conditions, the award and distribution of funding, donations and contributions, financing of campaigns for elections to the European Parliament, reimbursable expenditure, the prohibition of funding, accounts, reporting and audit, implementation and control, penalties, cooperation between the Authority for European political parties and foundations, the Authorising Officer of the European Parliament and the Member States, and transparency. This Regulation shall apply from 1 January 2017.

(156)Rules should be included on contributions from the general budget of the Union to European political parties as envisaged by Regulation (EU, Euratom) No 1141/2014. Those rules should allow political parties at European level to have a broader degree of flexibility as regards the time limits for using those contributions, as the nature of their activities so requires.

(157)The financial support given to European political parties should take the form of a specific contribution, to match the specific needs of the European political parties.

(158)Although financial support is awarded without an annual work programme being required, European political parties should justify ex post the sound use of Union funding. In particular, the authorising officer responsible should verify if the funding has been used to pay reimbursable expenditure as established in the call for contributions within the time limits laid down in this Regulation. Contributions to European political parties should be spent by the end of the financial year following that of their award, after which, any unspent funding should be recovered by the authorising officer responsible.

(159)Union funding awarded to finance the operating costs of the European political parties should not be used for other purposes than those established in Regulation (EU, Euratom) No 1141/2014, in particular to directly or indirectly finance other entities such as national political parties. The European political parties should use the contributions to pay a percentage of current and future expenditure and not expenditure or debts incurred before the submission of their applications for contributions.

(160)The award of contributions should also be simplified and adapted to the specificities of the European political parties, in particular by the absence of selection criteria, the establishment of a single full prefinancing payment as a general rule, and by the possibility to use lump sums, flat-rate, unit cost financing and financing not linked to costs of the relevant operations.

(161)The contributions from the general budget of the Union should be suspended, reduced or terminated if the European political parties infringe the obligations laid down in Regulation (EU, Euratom) No 1141/2014.

(162)Penalties that are based both on the Financial Regulation and on Regulation (EU, Euratom) No 1141/2014, should be imposed in a coherent way and should respect the principle of ne bis in idem. In accordance with Regulation (EU, Euratom) No 1141/2014, administrative and/or financial penalties provided for by the Financial Regulation are not to be imposed in one of the cases for which penalties have already been imposed on the basis of Regulation (EU, Euratom) No 1141/2014.

(163)This Regulation should establish a general framework under which budget support may be used as an instrument in external action including the obligation for the third country to provide the Commission adequate and timely information to evaluate the fulfilment of the agreed conditions and provisions ensuring the protection of the financial interests of the Union. 

(164)The Commission should be authorised to create and manage Union trust funds for emergency, post-emergency or thematic actions not only in external actions but also in EU-internal actions. Recent events in the European Union show the need for increased flexibility for funding within the EU. As the boundaries between external and internal policies are increasingly blurred, this would also provide a tool for replying to cross-border challenges. It is necessary to specify the principles applicable to the contributions to Union Trust Funds, to clarify the responsibilities of the financial actors and of the Board of the Trust Fund. It is also necessary to define rules ensuring a fair representation of the participating donors in the Board of the Trust Fund and a mandatory positive vote of the Commission for the use of the funds.

(165)In line with the streamlining of the existing rules and in order to avoid undue repetition, the Part two of the Financial Regulation, dedicated to special provisions applicable to the European Agricultural Guarantee Fund, to Research, external action and to specific EU funds, should be removed. The provisions of this Part two should be either introduced in the relevant parts of the Financial Regulation, or, in case the provisions are not used or no longer relevant, simply deleted.

(166)The provisions on the presentation of accounts and accounting should be simplified and clarified. It is therefore relevant to gather all provisions on annual accounts and other financial reporting under a specific Title.

(167)The manner in which the institutions currently report on building projects to the European Parliament and the Council should be maintained. Institutions should be allowed to finance new building projects with the appropriations received for buildings already sold, therefore a reference to assigned revenue provisions should be introduced. This would allow meeting the changing needs in the building policy of the institutions, while saving costs and introducing more flexibility.

(168)In order to adapt technical elements and detailed rules on procurement and on the rules applicable to certain Union bodies, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of the Annex to this Regulation, the Framework Financial Regulation for bodies set up under the TFEU and the Euratom Treaty and the Model Financial Regulation for public-private partnership bodies. It is of particular importance that the Commission carries out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(169)In order to improve agility of implementation of special instruments, it is appropriate to simplify mobilisation and transfer procedures by using Commission internal transfers for the European Globalisation Adjustment Fund and the European Union Solidarity Fund.

(170)In order to ensure that the European Union Programme for Employment and Social Innovation (EaSI) provides swiftly adequate resources to support changing political priorities, the indicative shares for each of the three axis and the minimum percentages for each of the thematic priorities within the individual axis should allow for a greater flexibility. This should improve the management of the Programme and allow focussing budgetary resources on actions producing better employment and social results.

(171)In order to facilitate investments in cultural and sustainable tourism infrastructure, without prejudice to the full application of EU environmental legislation, in particular the Directives on Strategic Environmental Assessment and Environmental Impact Assessment as appropriate, certain restrictions as regards the scope of support for these investments should be removed.

(172)With a view to responding to the challenges posed by increasing flows of migrants and refugees, the objectives to which the ERDF may contribute in its support of migrants and refugees should be spelled out.

(173)As the amendment of provisions of Regulation (EU) No 1303/2013 of the European Parliament and of the Council 19 provides more favourable conditions for certain revenue generating operations for which amounts or rates of support are defined in Annex II to EMFF Regulation it is necessary to establish a different date of entry into force for these provisions to ensure equal treatment of operations supported on the basis of Regulation (EU) No 1303/2013.

(174)With a view to facilitating the implementation of operations the scope of potential beneficiaries should be enlarged. Therefore, natural persons should be eligible for cohesion policy support.

(175)With a view to ensure sound financial management in ESI Funds which are managed under shared implementation, and clarify Member States obligations, the general principles should explicitly refer to the principles of internal control of budget implementation and of avoidance of conflict of interests established in the Financial Regulation.

(176)In view of maximising the synergies between all Union funds to address the challenges of migration and asylum in an effective way, it should be ensured that, when the thematic objectives are translated into priorities in the Fund-specific rules, such priorities cover the appropriate use of each Fund for these areas.

(177)In order to ensure coherence of programming, an alignment between Partnership Agreements and operational programmes should be carried out once per year.

(178)In view of optimising the use of the financial resources allocated to Member States under Cohesion policy, it is necessary to allow Member States to transfer ESI Funds allocation to instruments established under the Financial Regulation or under sector specific Regulations.

(179)In order to facilitate the preparation and implementation of community-led local development strategies the lead fund should be allowed to cover preparatory, running and animation costs.

(180)In order to facilitate the implementation of community-led local development and integrated territorial investments, the roles and responsibilities of local action groups in the case of community-led local development strategies and local authorities, regional development bodies or non-governmental organisations in the case of ITIs in relation to other programme bodies should be clarified. Designation as intermediate body should only be required in cases where the relevant bodies carry out tasks which go beyond those described in the relevant Article or where it is required by the Fund specific rules.

(181)It is necessary to clarify that managing authorities should have the possibility to implement financial instruments through a direct contract award to the EIB and to international financial institutions (IFIs).

(182)Many Member States have established publicly-owned banks or financial institutions that operate under a public policy mandate to promote economic development. Such banks or financial institutions have specific characteristics which differentiate them from private commercial banks in relation to their ownership, their development mandate and the fact that they do not have the objective of maximising profits. The role of such banks is notably to mitigate market failures, where in certain regions or for certain policy areas or sectors financial services are underprovided by commercial banks. These publicly-owned banks or financial institutions are well-placed to promote access to the ESI funds while maintaining competitive neutrality. Their specific role and characteristics can allow Member States to increase the use of financial instruments for delivering ESI funds in order to maximise the impact of these funds in the real economy. Such an outcome would be in line with the Commission policy to facilitate the role of such banks or institutions as fund managers both in the implementation of ESI funds as well as in the combination of ESI funds with EFSI financing, as set out in particular in the Investment Plan for Europe. It is justified therefore to allow managing authorities to award contracts directly to such public banks or financial institutions. Nevertheless, in order to ensure that this possibility of direct award remains consistent with the principles of the internal market, strict conditions to be fulfilled by public banks or institutions should be laid down for this provision to be applicable.

(183)In order to maintain the option of the SME Initiative as an instrument to help increase the competitiveness of the SMEs, it is necessary to provide that Member States can contribute to joint uncapped guarantee and securitisation financial instruments in favour of SMEs during the entire programming period and to update relevant provisions relating to this option, such as those on ex-ante assessments and evaluations.

(184)In adopting Regulation (EU) 2015/1017 of the European Parliament and of the Council of 25 June 2015 on the European Fund for Strategic Investments, the European Investment Advisory Hub and the European Investment Project Portal – the European Fund for Strategic Investments (EFSI) – it was desired to enable Member States to use ESI Funds to contribute to the financing of eligible projects that are supported by the EU guarantee covered by the EFSI. A specific provision should be introduced to set out the terms and conditions to allow for better interaction and complementarity that will facilitate the possibility to combine ESI funds with EIB financial products under the EFSI's Union Guarantee.

(185)In order to simplify and harmonise the control and audit requirements and to improve the accountability of the financial instruments implemented by EIB and other International Financial Institutions, it is necessary to amend the provisions on management and control for financial instruments to facilitate the assurance process.

(186)In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission in respect of the model of the control reports and the annual audit reports as defined in Article 40(1) of this Regulation. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council 20 .

(187)In order to ensure consistency with the treatment of financial corrections during the 2007-2013 programming period, it is necessary to clarify that in the case of financial instruments, it should be possible to allow for an individual irregularity to be replaced by regular expenditure within the same operation so that the related financial correction will not have the consequence of a net loss for the financial instrument operation.

(188)In order to incentivise private investors to co-invest in public policy projects, the concept of differentiated treatment of investors, which allows under specific conditions that ESI Funds can take a subordinated position to a private investor and EIB financial products under the EFSI's EU Guarantee, should be introduced. At the same time, the conditions for application of such a differentiated treatment when implementing ESI funds should be laid down.

(189)Given the protracted low interest environment and in order not to unduly penalise bodies implementing financial instruments, it is necessary, subject to active and diligent treasury management, to enable financing of negative interest generated as a result of investments of ESI Funds pursuant to Article 43 of the Common Provisions Regulation from resources paid back into the financial instrument.

(190)In order to align reporting requirements with the new Article 43(a) on differentiated treatment of investors and to avoid a duplication between the 'value of investments' in Article 46(2)(h) and 'equity investments' in Article 46(2)(i), it is necessary to update Article 46 of the Common Provisions Regulation.

(191)In order to facilitate the implementation of the ESI funds, it is necessary to grant Member States the possibility of direct award for technical assistance actions implemented by EIB/EIF, other IFIs and publicly-owned banks or financial institutions.

(192)With a view to facilitate the implementation of revenue generating operations, reduction of the co-financing rate should be allowed at any time of the programme implementation and possibilities for the establishment offlat rate net revenue percentages at national level should be provided.

(193)Due to the late adoption of the Regulation (EU) No 508/2014 of the European Parliament and of the Council and the fact that aid intensity levels have been established by that Regulation, it is necessary to set out certain exemptions for the EMFF as regards revenue generating operations.

(194)To reduce administrative burden for beneficiaries the threshold which exempts certain operations from calculating and taking into account revenue generated during their implementation should be raised.

(195)In order to facilitate synergies between ESI Funds and other Union instruments, expenditure incurred may be reimbursed from different ESI Funds and Union instruments based on a proportion agreed in advance.

(196)In order to promote the use of lump sums, and given the fact that lump sums need to be based on a fair, equitable and verifiable calculation method which should ensure sound financial management, the applicable upper limit for their use should be removed.

(197)In view of the aim to reduce the addministrative burden of the implementation of projects by beneficiairies a new form of simplified costs option for financing based on conditions others than costs of operations should be introduced.

(198)Taking into account the fact that, in accordance with Article 71 of Regulation (EU) No 1303/2013, the obligation to ensure the durability of investment operations applies from the last payment to the beneficiary, and that, when the investment consists in the lease purchase of a new machinery and equipment, the last payment occurs at the end of the contract period, this obligation should not apply to this type of investment.

(199)In order to ensure a broad application of simplified cost options, an obligatory use of standard scales of unit costs, lump sums or flat rates should be set out for operations below a certain threshold for the ERDF and ESF. At the same time the use of draft budgets as an additional methodology for determining simplified costs should be introduced.

(200)In order to facilitate earlier and more targeted application of simplified cost options, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of the definition of the standard scales of unit costs or the flat rate financing, the fair, equitable and verifiable method on which they may be established, and the financing based on the fulfilment of conditions related to the realisation of progress in implementation or the achievement of objectives of programmes rather than on costs. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(201)In order to reduce the administrative burden, the use of flat rates which do not require a methodology to be established by Member States should be increased. Two additional flat rates should therefore be introduced; one for calculating direct staff costs and the other one for calculating the remaining eligible costs based on staff costs. In addition, further clarification should be provided on the methods to calculate staff costs.

(202)With a view to improving the effectiveness and impact of operations implementation of nation-wide operations or operations covering different programme areas should be facilitated and possibilities for expenditure outside the Union for certain investments should be increased .

(203)In order to encourage Member States to make use of major projects appraisal by independent experts, the declaration of expenditure relating to the major project to the Commission prior to the positive appraisal by the independent expert should be allowed once the Commission has been informed about the submission of the relevant information to the independent expert.

(204)In order to promote the use of joint action plans which will reduce administrative burden for beneficiaries it is necessary to reduce regulatory requirements linked to the setting up of a joint action plan.

(205)In order to avoid unnecessary administrative burden for beneficiaries, the rules on information and communication should respect the principle of proportionality. Accordingly, it is important to clarify the scope of application of the rules on information and communication.

(206)With a view to reducing the administrative burden and ensuring the effective use of technical assistance across Funds and categories of regions flexibility for the calculation and monitoring of the respective limits applicable to technical assistance of Member States should be increased

(207)With a view to streamline implementation structures, it should be clarified that the possibility for the managing authority, certifying authority and the audit authority to be part of the same public body is also available to programmes under the European Territorial Cooperation Goal.

(208)The responsibilities of the managing authorities regarding the verification of expenditure when simplified cost options are being used should be specified more in detail.

(209)To ensure that beneficiaries can fully benefit from the simplification potential of e-governance solutions in the implementation of the ESI Funds and the Fund for European Aid to the Most Deprived (FEAD), especially with a view to facilitating full electronic document management, it is necessary to clarify that a paper trail is not necessary if certain conditions are met.

(210)In order to ensure equal treatment of operations supported on the basis of this Regulation, it is necessary to establish the date of application of certain amendments to Regulation (EU) No 1303/2013 of the European Parliament and of the Council 21 .

(211)With a view to facilitate certain target groups' access to the ESF, the collection of data for certain indicators should be based on representative samples and twice in the programming period.

(212)In order to ensure legal certainty and harmonised and non-discriminatory implementation of support to young farmers, it is necessary to provide that in the context of Rural Development the "date of setting up", referred to in the relevant rules, is the date when the setting up process begins by means of an action to be performed by the applicant, and that the application for support is to be submitted within 24 months from that date. Moreover, experience from the negotiations of the programmes has shown that rules for joint setting up of young farmers and thresholds for access to support required in Article 19(4) of Regulation (EU) No 1305/2013 should be clarified, and that provisions on duration of the business plan should be streamlined.

(213)In order to be sufficiently attractive to the private sector, it is essential that financial instruments are designed and implemented in a flexible manner. However, experience has shown that certain measure-specific eligibility rules limit the uptake of financial instruments in the rural development programmes, as well as the flexible use of financial instruments by fund managers. Therefore, it is appropriate to provide that certain measure-specific eligibility rules do not apply to financial instruments. For the same reason, it is also appropriate to provide that start-up support to young farmers under Article 19 of Regulation (EU) No 1305/2013 may also be provided in the form of financial instruments. In view of these changes, it should be provided that where support for investments under Article 17 of Regulation (EU) No 1305/2013 is granted in the form of financial instruments, the investment must contribute to one or more Union priorities for rural development.

(214)Nowadays farmers are exposed to increasing economic risks as a consequence of market developments. However, those economic risks do not affect all agricultural sectors equally. Consequently, Member States should have the possibility, in duly justified cases, to help farmers with sector-specific income stabilisation tools, in particular for sectors affected by a severe income drops, which would have a significant economic impact for a specific rural area, provided that the international obligations of the Union are respected. In addition, in order to monitor the expenditure made in relation to this new tool, the content of the financial plan of the programme should be adapted. Moreover, the specific reporting requirement for the risk management measure in 2018 referred to in Article 36(5) of Regulation (EU) No 1305/2013 is already covered by the report to the European Parliament and the Council on the monitoring and evaluation of the CAP referred to in Article 110(5) of Regulation (EU) No 1306/2013. Therefore the second subparagraph of Article 36(5) should be deleted.

(215)Concerning mutual funds, it appears that the prohibition of any contribution by public funds to initial capital stock laid down in Articles 38(3) and 39(4) of Regulation (EU) No 1305/2013 hinders the effective functioning of these funds. This prohibition should therefore be deleted

(216)Support for investments for the restoration of production potential after natural disasters and catastrophic events under Articles 18(1)(b) and 24(1)(d) of Regulation (EU) No 1305/2013 is usually granted to all eligible applicants. Therefore, Member States should not be obliged to define selection criteria for restoration operations. Moreover, in duly justified cases, where it is not possible to define selection criteria due to the nature of the operations, Members States should be allowed to define alternative selection methods.

(217)Article 59 of Regulation (EU) No 1305/2013 defines the maximum EAFRD contribution rates. In order to ease the pressure on the national budget of some Member States and to accelerate much-needed investments in Cyprus, the maximum contribution rate of 100% referred to in Article 59(4)(f) should be extended until the programme closure. In addition, a reference to the specific contribution rate introduced in Regulation (EU) No 1303/2013 for the new financial instrument referred to in point (c) of Article 38(1) of the same Regulation should be mentioned in Article 59(4).

(218)Pursuant to Article 60(1) of Regulation (EU) No 1305/2013, in cases of emergency measures due to natural disasters, eligibility of expenditure relating to programme changes may start from the date when the natural disaster occurred. This possibility to make eligible expenditure made before the submission of a programme amendment should be extended to other circumstances, such as catastrophic events or a significant and sudden change in the socio-economic conditions of the Member State or region, including sudden and significant demographic changes resulting from migration or reception of refugees.

(219)According to the second subparagraph of Article 60(2) of Regulation (EU) No 1305/2013, in respect of investments in the agricultural sector, only expenditure incurred after the submission of an application is eligible. Members States should be given the possibility to provide in their programmes that, where the investment is related to emergency measures due to natural disasters, catastrophic events or adverse climatic events or a significant and sudden change in the socio-economic conditions of the Member State or region, expenditure incurred after the occurrence of event is eligible.

(220)In order to increase the use of the simplified cost options referred to in points (b) to (d) of Article 67(1) of Regulation (EU) No 1303/2013, it is necessary to limit the EAFRD specific rules laid down in Article 62(2) of Regulation (EU) No 1305/2013 to aid granted in accordance with points (a) and (b) of Article 21(1), concerning income forgone and maintenance costs, and Articles 28 to 31, 33 and 34 of Regulation (EU) No 1305/2013.

(221)Article 74 of Regulation (EU) No 1305/2013 requires the Member States to consult the Monitoring Committee of the rural development programme on the selection criteria within four months from the approval of the programme. This creates an indirect obligation for the Member States to have defined all the selection criteria by that date even for the calls for applications which will be launched subsequently. In order to reduce unnecessary administrative burden, whilst ensuring that financial resources are used in the best possible way, the Member States should be allowed to define the selection criteria and to ask for the opinion of the Monitoring Committee at any time before the publication of the calls for applications.

(222)The financial discipline is used to ensure that the budget for the European Agricultural Guarantee Fund complies with the respective annual ceilings and to establish the reserve for crises in the agricultural sector. Given the technical character of the determination of the adjustment rate and its inherent links with the Commission's estimates of expenditure set out in its annual Draft Budget, the procedure for setting the adjustment rate should be simplified by authorising the Commission to adopt it in accordance with the advisory procedure. The new Financial Regulation does not define the population of beneficiaries eligible for reimbursement of financial discipline. The present regulation should be adapted to that while maintaining the current definition of eligible beneficiaries.

(223)In order to harmonise the rules on automatic decommitment of Article 87 of Regulation (EU) No 1303/2013 and Article 38 of Regulation (EU) No 1306/2013, the date by which Member States have to send to the Commission information on exceptions to the decommitment, referred to in Article 38(3), should be adapted.

(224)In order to provide for the legal clarity as regards the treatment of the recoveries generated from the temporary reductions under Article 41(2) of Regulation (EU) No 1306/2013, the latter should be included in the list of sources of the assigned revenue under Article 43 of that Regulation.

(225)Experience has shown that the rule, first introduced with Regulation (EU) No 1290/2005, of equally sharing between the budget and the Member States the risk of the lack of recovery of sums due for irregularities when these sums had not been recovered within reasonable deadlines (so called 50/50 rule), has worked well for the safeguarding of the budget. However, such a system entails a heavy administrative and book-keeping burden for both the European Commission and the Member States. It is therefore considered appropriate to further change this approach and charge the related sums entirely to the Member States concerned after the expiry of the related deadlines allowing them, on the other side, to keep in their national budgets the sums subsequently recovered at the end of the related recovery procedures.

(226)In order to ensure that the refusal or recovery of payments affected by a non-compliance with public procurement rules reflects the gravity of such non-compliance and respects the principle of proportionality, such refusal or recovery should be limited to the levels laid down by the Commission for financial corrections to be made to expenditure under shared implementation for non-compliance with such rules. It is further appropriate to clarify that such non-compliances affect the legality and regularity of the transactions only by the same level.

(227)The experience gained so far shows that through implementing the three criteria for being regarded an active farmer, listed in the third subparagraph of Article 9(2) of Regulation (EU) No 1307/2013 of the European Parliament and of the Council 22 , has proven difficult for many Member States. In order to reduce the administrative burden associated with the implementation of the three criteria, Member States should have the possibility of making available only one or two of them. The experience further shows that in some Member States the administrative costs of implementing the active farmer clause as a whole outweighs the benefit of excluding a very limited number of non-active beneficiaries from the direct support schemes. In order to allow Member States to address such situations in future claim years, the application of Article 9 as a whole should become optional for them.

(228)The experience gained in the first year of implementation of Regulation (EU) No 1307/2013 has shown that certain Member States applying the single area payment scheme did not use the entire amount of the funds available under the budgetary ceilings laid down in the Commission Implementing Regulation (EU) No 2015/1089. Member States applying the basic payment scheme have already the possibility, within certain limits, of distributing payment entitlements for a higher value than the amount available for their basic payment scheme in order to ensure a more efficient use of the funds. Member States applying the single area payment scheme should also be allowed, within the same common limits and without prejudice to the respect of the net ceilings for direct payments, to calculate the necessary amount by which their single area payment scheme ceiling may be increased.

(229)In order to ensure a maximum outreach of the young farmer payment under Regulation (EU) No 1307/2013, it is appropriate for Member States to limit the number of payment entitlements or eligible hectares but only in cases where this limitation serves to ensure respecting the relevant provisions on financing the young farmer payment.

(230)Pursuant to Article 52 of Regulation (EU) No 1307/2013, Member States may grant, under certain conditions, coupled support to farmers in specific agricultural sectors or types of farming, to the extent necessary to create an incentive to maintain current levels of production in the sectors or regions concerned. In order to avoid that the levels of production are to be maintained where this is not appropriate due to structural market imbalances, the Commission should be empowered to adopt delegated acts allowing that voluntary coupled support can continue to be paid until 2020 on the basis of the production units for which such support was granted in a past reference period. In the context of the current crisis this temporary derogation aims at attaining in the long term the objective of voluntary coupled support of maintaining the level of production in the areas concerned. 

(231)One of the major obstacles to the formation of producer organisations, mainly in Member States which are lagging behind as regards the degree of organisation, appears to be the lack of mutual trust and past experiences. In this context, coaching, whereby producer organisations which are functioning show the way to other producer organisations, producer groups or individual producers of fruit and vegetables, could offset that obstacle and should thus be included among the objectives of producer organisations in the fruit and vegetables sector.

(232)In addition to withdrawals for free distribution, it is also appropriate to grant coaching actions intended to encourage producers to set up organisations meeting the criteria to be recognised a full Union financing within the operational programmes of existing producer organisations.

(233)Crisis prevention and management measures should be extended to cover refilling of mutual funds which could as new instruments help to combat crises.

(234)In Member States where the organisation of production in the fruit and vegetables sector is weak, granting of additional national financial contributions should be allowed.

(235)In order to ensure an efficient, targeted and sustainable support of producer organisations and their associations in the fruit and vegetables sector, the power to adopt certain acts should be delegated to the Commission in respect of the list of Member States that may grant national financial assistance to producer organisations.

(236)In order to simplify the current procedure of first authorising Member States to grant additional national financial assistance to producer organisations in regions of the Union where the organisation degree is particularly low and second reimbursing a part of the national financial assistance if further conditions are complied with, a new system could be established. Member States where the organisation rate is particularly low was below 20% at national level in 2013 could grant an additional percentage of the value of the marketed production as national aid with a result similar to the current scheme of prior authorisation and subsequent Union reimbursement. The Commision should regularly review the list of Member States that may grant additional national assistance to keep it updated.

(237)The experience gained through the application of Article 188 of Regulation (EU) No 1308/2013 of the European Parliament and of the Council 23 has proven that the need to adopt implementing acts for the management of simple, mathematical processes linked to the way quotas are allocated is cumbersome and resource intense without any specific advantage linked to such an approach. The Commission has in fact no margin of discretion in this context considering that the related formula is already fixed by the provisions of Article 7 (2) of Commission Regulation (EC) 1301/2006 24 . In order to reduce the related administrative burden and streamline the process it should be provided that the Commission makes the results of the allocation of the import tariff quotas public through an appropriate web-publication. Moreover a specific provision should be included providing that Member States should only issue licences following the publication of the allocation results by the Commission.

(238)The EGF should continue after 31 December 2017 to temporarily provide assistance to young people not in employment, education or training (NEETs) who reside in regions eligible under the Youth Employment Initiative, since those regions are disproportionately impacted by major redundancies.

(239)In order to increase the efficiency of the intervention, a blending facility or blending facilities may be established under the Connecting Europe Facility (CEF). Such blending facilities should finance blending operations which are actions combining non-reimbursable forms of support and/or financial instruments from the Union budget, including combination of CEF equity and CEF debt financial instruments, and financing from EIB Group (including EIB financing under EFSI) development or other finance institutions as well as investors.

(240)A blending facility under CEF should aim to enhance the multiplier effect of Union spending by attracting additional resources from private investors. In addition, it should ensure that the actions supported become economically and financially viable.

(241)In order to support the implementation of projects with most value added for the Trans European Transport Network concerning the Core Network Corridors, cross border projects and projects on the other sections of the Core Network, it is necessary to allow flexibility in the use of the multiannual work programme allowing to reach up to 95% of the financial budgetary resources indicated in the Regulation (EU) No 1316/2013.

(242)Only grants and procurement may currently be used to support actions in the area of Digital Service Infrastructures. In order to ensure as efficient as possible, financial instruments should also be made available to support these actions.

(243)The intervention in the area of Digital Service Infrastructures should be based on simple and flexible principles to enable the Union react to emerging political priorities and related funding needs. In particular, to achieve the objectives of an intervention in a given area it may be necessary to finance "gateway services" linking one or more national infrastructure(s) to core service platform(s) such as elements of a given Digital Service Infrastructure: computing, data storage and management, connectivity.

(244)In order to avoid unnecessary administrative burden for managing authorities that could hinder efficient implementation of the FEAD, it is appropriate to simplify and facilitate the procedure for amendment of non-essential elements of operational programmes.

(245)With a view to further simplify the use of the FEAD, it is appropriate to establish additional provisions as regards eligibility of expenditure, in particular, as regards the use of standard scales of unit costs, lump sums and flat rates.

(246)In order to avoid unfair treatment of partner organisations, irregularities that are imputable only to the body in charge of purchasing the assistance, should not affect the eligibility of expenditure of partner organisations.

(247)It is appropriate to clarify the definition of 'eligibility rules' in order to ensure legal certainty in operations supported by the FEAD.

(248)In order to simplify the implementation of the FEAD and avoid legal uncertainty, certain responsibilities of Member States on management and control should be clarified.

(249)In order to simplify the implementation of the ESI Funds and the FEAD and avoid legal uncertainty, certain responsibilities of Member States on management and control should be clarified.

(250)Regulation (EU) No 652/2014 of the European Parliament and of the Council 25 provides for the possibility to divide budgetary commitments into annual instalments only in the case of approval of multiannual programmes for the eradication, control and surveillance of animal diseases and zoonoses, for survey programmes concerning the presence of pests and for programmes concerning the control of pests in outermost regions of the Union. In the interest of simplification and in order to reduce the administrative burden this possibility should be extended to the other actions provided for in Regulation (EU) No 652/2014.

(251)The Space Surveillance and Tracking (SST) support framework established by Decision No 541/2014/EU is financed from the budgets of three Union funding programmes, Copernicus programme established by Regulation (EU) No 377/2014, satellite navigation programmes established by Regulation (EU) No 1285/2013 and specific programme implementing Horizon 2020 established by Council Decision No 2013/743/EU. As a result, the SST support framework has been subject to three sets of applicable rules. This has led to suboptimal implementation of the framework and caused disproportionate administrative burden for the Commission and the beneficiaries. While the aims, objectives and the scope of each of the three funding programmes need to be respected, in order to simplify the implementation of the SST support framework in the future, only one set of rules should be applicable to the award and management of grants within SST support framework.

(252)This Regulation should be revised only when necessary, and at the latest two years before the end of each multiannual financial framework. Excessively frequent revisions generate a disproportionate cost in adjusting administrative structures and procedures to the new rules. Furthermore, time may be too short to allow for valid conclusions to be drawn from the application of the rules in force.

(253)Transitional provisions should be set out. In order not to hamper the application of the relevant sector-specific rules which may refer to grant decisions, it is appropriate to specify that grants decisions may still be adopted in accordance with their basic act. In order to ensure the transition with the new adoption mechanism of decisions authorising the use of lump sum, unit costs or flat rates, it is appropriate to allow the authorising officer responsible to amend the relevant existing decisions.

HAVE ADOPTED THIS REGULATION:

PART ONE
FINANCIAL REGULATION

TITLE I
SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1
Subject matter

This Regulation lays down the rules for the establishment and the implementation of the general budget of the European Union and of Euratom and the presentation and auditing of the accounts.

Article 2
Definitions

For the purposes of this Regulation, the following definitions shall apply:

1.‘applicant’ means a natural person or an entity with or without a legal personality who has submitted an application in a grant award procedure or in a contest for prizes;

2.‘application documents’ means a tender, a request to participate, a grant application or an application in a contest for prizes;

3.‘award procedure’ means a procurement procedure, a grant award procedure, a contest for prizes, or a procedure for the selection of experts or entities implementing Union funds pursuant to point (c) of Article 61 (1);

4.‘basic act’ means a legal act which provides a legal basis for an action and for the implementation of the corresponding expenditure entered in the budget or of the budgetary guarantee or financial assistance backed by the budget.

A basic act may take any of the following forms:

(a)in implementation of the Treaty on the Functioning of the European Union (TFEU) and the Treaty establishing the European Atomic Energy Community (the Euratom Treaty), the form of a regulation, a directive or a decision within the meaning of Article 288 TFEU; or

(b)in implementation of Title V of the Treaty on European Union (TEU), one of the forms specified in Articles 28(1), 31(2), 33, 42(4) and 43(1)TEU.

Recommendations and opinions shall not constitute basic acts.

5.‘beneficiary’ means a natural person or an entity with or without a legal personality with whom a grant agreement has been signed;

6.‘blending operation’ means an action carried out within a blending facility which combines non-repayable forms of support and/or financial instruments from the EU budget and financial instruments from development or other public finance institutions as well as from commercial finance institutions and investors. Blending operations may include preparatory action leading to potential investments from finance institutions;

7.‘blending facility’ means a facility established as a cooperation framework between the Commission and development or other public finance institutions as well as commercial finance institutions and investors which aims at achieving certain Union priority objectives and policies in using blending operations and other individual actions;

8.'budgetary commitment' means the operation by which the authorising officer responsible reserves appropriations in the budget for subsequent payments.

9.'budgetary guarantee' means a legal commitment of the Union to support a programme of actions by taking on the budget of the Union a financial obligation should a specified event materialise during the implementation of the programme;

10.‘building contracts’ means a contract covering the purchase, long lease, usufruct, leasing, rental or hire purchase, with or without option to buy, of land, buildings or other immovable property. It shall cover both existing buildings and buildings before completion provided that the candidate has obtained a valid building permit for it, save when the building has been designed in accordance with the specifications of the contracting authority;

11.‘candidate’ means an economic operator that has sought an invitation or has been invited to take part in a restricted procedure, a competitive procedure with negotiation, a competitive dialogue, an innovation partnership, a design contest or a negotiated procedure;

12.‘central purchasing body’ means a contracting authority providing centralised purchasing activities and, where applicable, ancillary purchasing activities;

13.‘check’ means the verification of a specific aspect of a revenue or expenditure operation;

14.‘concession contract’ means a contract for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities within the meaning of Articles 168 and 172, in order to entrust the execution of works or the provision and management of services to an economic operator (the ‘concession’). The remuneration shall consist either solely in the right to exploit the works or services or in that right together with payment. The award of a concession contract shall involve the transfer to the concessionaire of an operating risk in exploiting those works or services encompassing demand risk or supply risk, or both. The concessionaire shall be deemed to assume an operating risk where, under normal operating conditions, there is no guarantee of recouping the investments made or the costs incurred in operating the works or the services at stake;

15.'contingent liability' is a potential financial obligation that may be incurred depending on the outcome of a future event;

16.‘contract’ means a public contract or a concession contract;

17.‘contractor’ means an economic operator with whom a procurement contract has been signed;

18.‘control’ means any measure taken to provide reasonable assurance regarding the effectiveness, efficiency and economy of operations, the reliability of reporting, the safeguarding of assets and information, the prevention and detection and correction of fraud and irregularities and their follow-up, and the adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the nature of the payments concerned. Controls may involve various checks, as well as the implementation of any policies and procedures to achieve the objectives described in the first sentence;

19.‘contribution agreement’ means an agreement concluded with entities and persons pursuant to points (ii) to (viii) of Article 61(1)(c);

20.'counterpart' is the other party that is granted a budgetary guarantee of the Union;

21.'Crisis situations' shall be understood as situation of immediate or imminent danger threatening to escalate into an armed conflict or to destabilise a country. Crisis situations shall also be understood as situations caused by natural disasters, manmade crisis such as wars and other conflicts or extraordinary circumstances having comparable effects related inter alia to climate change, environmental degradation, privation of access to energy and natural resources or extreme poverty.

22.‘dynamic purchasing system’ means a completely electronic process for making commonly used purchases;

23.‘economic operator’ means any natural or legal person, including a public entity, or a group of such persons, which offers to supply products, execute works or provide services or immovable property;

24.‘equity investment’ means the provision of capital to a firm, invested directly or indirectly in return for total or partial ownership of that firm and where the equity investor may assume some management control of the firm and may share the firm’s profits;

25.‘final administrative decision’ means a decision of an administrative authority having final and binding effect in accordance with the applicable law;

26.'financial asset' is any asset that is cash, an equity instrument of another entity or a contractual right to receive cash or another financial asset from another entity;

27.‘financial instruments’ means Union measures of financial support provided from the budget in order to address one or more specific policy objectives of the Union. Such instruments may take the form of equity or quasi-equity investments, loans or guarantees, or other risk-sharing instruments, and may, where appropriate, be combined with other forms of financial support or with funds under shared implementation or EDF funds;

28.'financial liability' is any liability that is a contractual obligation to deliver cash or another financial asset to another entity;

29.‘framework contract’ means a public contract concluded between one or more economic operators and one or more contracting authorities, the purpose of which is to establish the terms governing specific contracts under it to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged;

30.‘guarantee’ means a written commitment to assume responsibility for all or part of a third party’s debt or obligation or for the successful performance by that third party of its obligations if an event occurs which triggers such guarantee, such as a loan default;

31.'guarantee on demand' means a guarantee that must be honoured by the guarantor upon counterpart's demand, notwithstanding any deficiencies in the enforceability of the underlying obligation;

32.'legal commitment' means the act whereby the authorising officer responsible enters into or establishes an obligation which results in subsequent payment or payments and the recognition of expenditure a charged to the budget. For the purposes of Title V of Part I, with the exception of Article 134, 'legal commitment' encompases also financial framework partnership agreements and framework contracts;

33.'leverage effect' means the amount of finance to eligible final recipients divided by the amount of the Union contribution;

34.‘loan’ means an agreement which obliges the lender to make available to the borrower an agreed sum of money for an agreed period of time and under which the borrower is obliged to repay that amount within the agreed time;

35.‘low value grant’ means a grant lower than or equal to EUR 60 000;

36.‘method of implementation’ means the methods of budget implementation described in Articles 61, 62 or 149, i.e. direct implementation, indirect and shared implementation;

37.‘multi-donor action’ means any action where Union funds are pooled with at least one other donor;

38.'multiplier effect' means the investment by eligible final recipients divided by the amount of the Union contribution.

39.'pari passu' means an equal claim on some right;

40.‘participant’ means a candidate or tenderer in a procurement procedure, an applicant in a grant award procedure, an expert in a procedure for selection of experts, an applicant in a contest for prizes or an entity or person participating in a procedure for implementing Union funds pursuant to point (c) of Article 61(1);

41.‘procurement document’ means any document produced or referred to by the contracting authority to describe or determine elements of the procurement procedure, including:

(a)the publicity measures set out in Article 157;

(b)the invitation to tender;

(c)the tender specifications, which shall include the technical specifications and the relevant criteria, or the descriptive documents in case of a competitive dialogue;

(d)the draft contract;

42.‘public contract’ means a contract for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities within the meaning of Articles 168 and 172, in order to obtain, against payment of a price paid in whole or in part from the budget, the supply of movable or immovable assets, the execution of works or the provision of services.

43.Public contracts comprise:

(a)building contracts;

(b)supply contracts;

(c)works contracts;

(d)service contracts;

44.‘prize’ means a financial contribution given as a reward following a contest;

45.‘procurement’ means the acquisition by means of a contract of works, supplies or services and the acquisition or rental of land, buildings or other immovable property, by one or more contracting authorities from economic operators chosen by those contracting authorities;

46.‘quasi-equity investment’ means a type of financing that ranks between equity and debt, having a higher risk than senior debt and a lower risk than common equity. Quasi equity investments can be structured as debt, typically unsecured and subordinated and in some cases convertible into equity, or as preferred equity;

47.‘recipient’ means a beneficiary, a contractor, a remunerated external expert, any person or entity receiving prizes or funds under a financial instrument or implementing Union funds pursuant to point (c) of Article 61(1);

48.'repurchase agreement' means the sale of securities for cash with an agreement to repurchase them on a specified future date, or on demand;

49.‘research and technological development appropriations’ means the appropriations entered either in one of the titles of the budget relating to the policy areas linked to "Indirect research" and "Direct research" or in a chapter relating to research activities in another title;

50.‘risk-sharing instrument’ means a financial instrument which allows for the sharing of a defined risk between two or more entities, where appropriate in exchange for an agreed remuneration;

51.‘service contracts’ means a contract covering all intellectual and non-intellectual services other than those covered by supply contracts, works contracts and building contracts;

52.‘Staff Regulations’ means the Staff Regulations of Officials of the European Union and the Conditions of Employment of Other Servants of the European Union laid down in Council Regulation (EEC, Euratom, ECSC) No 259/68;

53.‘subcontractor’ means an economic operator that is proposed by a candidate or tenderer or contractor to perform part of a contract or by a beneficiary to perform part of the tasks co-finаnced by the grant.

54.‘subscription’ means sums paid to bodies of which the Union is member, in accordance with the budgetary decisions and the conditions of payment established by the body concerned;

55.‘supply contracts’ means a contract covering the purchase, leasing, rental or hire purchase, with or without option to buy, of products. A supply contract may include, as an incidental matter, siting and installation operations.

56.‘technical assistance’ means, without prejudice to sector-specific rules, support and capacity-building activities necessary for the implementation of a programme or an action, in particular preparatory, management, monitoring, evaluation, audit and control activities.

57.‘tenderer’ means an economic operator that has submitted a tender;

58.‘Union’ means the European Union, the European Atomic Energy Community, or both, as the context may require.

59.‘Union institution’ means the European Parliament, the European Council, the Council, the European Commission, the Court of Justice of the European Union, the Court of Auditors, the European Economic and Social Committee, the Committee of the Regions, the European Ombudsman, the European Data Protection Supervisor and the European External Action Service (the ‘EEAS’); the European Central Bank shall not be considered as an institution of the Union;

60.‘vendor’ means an economic operator registered in a list of vendors to be invited to submit requests to participate or submit tenders;

61.‘work’ shall mean the outcome of building or civil engineering works taken as a whole that is sufficient in itself to fulfil an economic or technical function;

62.‘works contracts’ means a contract covering either the execution, or both the execution and design, of work(s) related to one of the activities referred to in Annex II to Directive 2014/24/EU of the European Parliament and of the Council on public procurement 26 or the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work;

Article 3
Compliance of secondary legislation with this Regulation

1.Provisions concerning the implementation of the revenue and expenditure of the budget, and contained in a basic act, shall comply with the budgetary principles set out in Title II.

2.Without prejudice to paragraph 1, any proposal or amendment to a proposal submitted to the legislative authority containing derogations from provisions other than those in Title II or from delegated acts adopted pursuant to this Regulation shall clearly indicate such derogations and shall state the specific reasons justifying them in the recitals and in the explanatory memorandum of such proposals.

Article 4
Periods, dates and time limits

Unless otherwise provided, Council Regulation (EEC, Euratom) No 1182/71( 27 ) shall apply to deadlines set by this Regulation.

Article 5
Protection of personal data

Personal data collected pursuant to this Regulation shall be processed in accordance with Directive 95/46/EC ( 28 )and Regulation (EC) No 45/2001.A candidate or tenderer in a procurement procedure, an applicant in a grant award procedure, an expert in a procedure for the selection of experts, an applicant in a contest for prizes or an entity or person participating in a procedure for implementing Union funds in accordance with point (c) of Article 61(1)as well as a beneficiary, a contractor, a remunerated external expert or any person or entity that receives prizes or implements Union funds pursuant to point (c) of Article 61(1) shall be informed accordingly.

TITLE II
BUDGET AND BUDGETARY PRINCIPLES

Article 6
Respect for budgetary principles

The budget shall be established and implemented in accordance with the principles of unity, budgetary accuracy, annuality, equilibrium, unit of account, universality, specification, sound financial management which requires effective and efficient internal control, and transparency as set out in this Regulation, unless otherwise provided for in this Regulation.

CHAPTER 1
Principles of unity and of budgetary accuracy

Article 7
Scope of the budget

1.For each financial year, the budget shall forecast and authorise all revenue and expenditure considered necessary for the Union. It shall comprise:

(a)the revenue and expenditure of the Union, including administrative expenditure resulting from the provisions of the TEU relating to the common foreign and security policy, and the operational expenditure occasioned by implementation of those provisions where it is charged to the budget;

(b)the revenue and expenditure of the European Atomic Energy Community.

2.The budget shall contain differentiated appropriations, which consist of commitment appropriations and payment appropriations, and non-differentiated appropriations.

The appropriations authorised for the financial year shall consist of:

(a)appropriations provided in the budget, including by amending budgets;

(b)appropriations carried over;

(c)appropriations made available again in accordance with Article 14;

(d)appropriations arising from pre-financing payments which have been repaid in accordance with point (b) of Article 12(3);

(e)appropriations provided following the receipt of revenue assigned during the financial year or during previous financial years and not used.

3.Commitment appropriations shall cover the total cost of the legal commitments entered into during the financial year, subject to Article 112(2).

4.Payment appropriations shall cover payments made to honour the legal commitments entered into in the financial year or preceding financial years.

5.Paragraphs 2 and 3 of this Article shall not prevent appropriations being committed globally or budgetary commitments being made in annual instalments as respectively provided for in point (b) of Article 110(1) and 110(2).

Article 8
Specific rules on the principles of unity and budgetary accuracy

1.All revenue and expenditure shall be booked to a line in the budget.

2.No expenditure may be committed or authorised in excess of the authorised appropriations.

3.Interest generated by pre-financing payments made from the budget shall not be due to the Union except as otherwise provided for in the contribution agreements or financing agreements.

CHAPTER 2
Principle of
annuality

Article 9
Financial year

The appropriations in the budget shall be authorised for a financial year which shall run from 1 January to 31 December.

Article 10
Budgetary accounting for revenue and appropriations

1.The revenue of a financial year shall be entered in the accounts for the financial year on the basis of the amounts collected during that financial year. However, the own resources for the month of January of the following financial year may be made available in advance pursuant to Council Regulation (EU, Euratom) No 609/2014 29  .

2.The entries in respect of Value Added Tax and Gross National Income-based own resources may be adjusted in accordance with Regulation (EU, Euratom) No 609/2014.

3.Commitments shall be entered in the accounts on the basis of the legal commitments entered into up to 31 December. By way of exception, the global budgetary commitments referred to in Article 110(4) shall be entered in the accounts on the basis of the budgetary commitments up to 31 December.

4.Payments shall be entered in the accounts for a financial year on the basis of the payments made by the accounting officer by 31 December of that year.

5.By way of derogation from paragraphs 3 and 4:

(a)the expenditure of the European Agricultural Guarantee Fund (EAGF) shall be booked to the accounts for a financial year on the basis of the repayments made by the Commission to the Member States by 31 December of that financial year, provided that the payment order has reached the accounting officer by 31 January of the following financial year;

(b)expenditure managed under shared implementation with the exception of the EAGF shall be booked to the accounts for a financial year on the basis of reimbursements made by the Commission to the Member States by 31 December of that financial year, including the expenditure charged by 31 January of the following financial year as laid downin Articles 28 and 29.

Article 11
Commitment of appropriations

1.The appropriations entered in the budget may be committed with effect from 1 January, once the budget has been adopted,

2.As of 15 October of the financial year, routine administrative expenditure and routine management expenditure for the EAGF may be committed in advance against the appropriations provided for the following financial year.

Such commitments shall not, however, exceed:

a)one quarter of the appropriations decided upon by the European Parliament and the Council on the corresponding budget line for the current financial year for routine administrative expenditure provided that this expenditure has been approved in the last budget duly adopted;

b)three quarters of the total corresponding appropriations decided upon by the European Parliament and the Council for the current financial year for routine management expenditure for the EAGF provided that the principle of this expenditure is laid down in an existing basic act.

Article 12
Cancellation and carry-over of appropriations

1.Appropriations which have not been used by the end of the financial year for which they were entered shall be cancelled, unless they are carried over in accordance with paragraphs 2 and 3.

2.Appropriations may be carried over, but only to the following financial year, by a decision taken by 15 February by the institution concerned in respect of:

(a)amounts corresponding to commitment appropriations and non-differentiated appropriations, for which most of the preparatory stages of the commitment procedure have been completed by 31 December. Such amounts may then be committed up to 31 March of the following year, with the exception of the non-differentiated appropriations related to building projects which may be committed up to 31 December of the following financial year;

(b)amounts which are necessary when the legislative authority has adopted a basic act in the final quarter of the financial year and the Commission has been unable to commit the appropriations provided for this purpose by 31 December. Such amounts may be committed up to 31 December of the following financial year;

(c)payment appropriations which are needed to cover existing commitments or commitments linked to commitment appropriations carried over, where the payment appropriations provided for in the relevant budget lines for the following financial year are not sufficient to cover requirements;

(d)non-committed appropriations relating to the actions referred to in Article 4(1) of Regulation (EU) No 1306/2013 of the European Parliament and of the Council.

Such carryover shall not exceed, within a limit of 2 % of the initial appropriations voted by the Budgetary Authority, the amount of the adjustment of direct payments applied in accordance with Article 26 of Regulation (EU) No 1306/2013 during the preceding financial year. Appropriations which are carried over shall be returned to the budgetary lines which cover the actions referred to in point (b) of Article 4(1) of Regulation (EU) No 1306/2013.

(e)appropriations kept unallocated at the beginning of the financial year relating to the funds referred to in Regulation (EU) No 231/2014 of the European Parliament and of the Council of 11 March 2014 establishing an Instrument for Pre-accession Assistance (IPA II), Regulation (EU) No 232/2014 of the European Parliament and of the Council of 11 March 2014 establishing a European Neighbourhood Instrument (ENI) and Regulation (EU) No 233/2014 of the European Parliament and of the Council of 11 March 2014 establishing a financing instrument for development cooperation for the period 2014-2020 (DCI), within a limit of 10% of the initial appropriations of each instrument.

The institution concerned shall inform the European Parliament and the Council by 15 March of the carry-over decision it has taken. It shall also state, for each budget line, how the criteria in points (a), (b) and (c) have been applied to each carry-over.

3.Appropriations shall be automatically carried over in respect of:

(a)amounts corresponding to commitment and payment appropriations for the Emergency Aid Reserve and for the European Union Crisis Reserve and to commitment appropriations for the European Union Solidarity Fund;

(b)amounts corresponding to internal assigned revenue;

The amounts referred to in points (a) and (b) may be carried over only to the following financial year and may be committed up to 31 December, with the exception of the internal assigned revenue from lettings and the sale of buildings and land referred to in point (g) of Article 20(3) which may be carried over until it is fully used. Commitment appropriations, referred to in Regulation (EU) No 1303/2013 and in Regulation (EU) No 514/2014 30 ,, available on 31 December arising from repayments of pre financing payments may be carried over until the closure of the programme and used when necessary provided that other commitment appropriations are no longer available.

(c)amounts corresponding to external assigned revenue.

These amounts shall be carried over automatically and shall be fully used by the time all the operations relating to the programme or action to which it is assigned have been carried out or may be carried over and used for the succeeding programme or action.

This shall not apply to the revenue referred to in point (iii) of Article 20(2)(g) for which appropriations not committed within five years shall be cancelled.

The treatment of external assigned revenue resulting from the participation from European Free Trade Association (EFTA) States in certain Union programmes as referred to in point (e) of Article 20(2) shall be in line with Protocol 32 annexed to the Agreement on the European Economic Area (EEA Agreement).

(d)payment appropriations related to the EAGF resulting from suspensions in accordance with Article 41 of Regulation (EU) No 1306/2013.

4.Non-differentiated appropriations legally committed at the end of the financial year shall be paid until the end of the following financial year.

5.Without prejudice to paragraph 3, appropriations placed in reserve and appropriations for staff expenditure shall not be carried over. For the purposes of this Article, staff expenditure comprises the remuneration and allowances for members and staff of the institutions subject to the Staff Regulations.

Article 13
Decommitment of appropriations

1.Where appropriations are decommitted in any financial year after that in which the appropriations were committed as a result of total or partial non-implementation of the actions for which they were earmarked, the appropriations concerned shall be cancelled, unless otherwise provided for in paragraph 3 and Article 14.

2.In the case of amounts which have to be committed up to 31 March in accordance with Article 12(2), where the corresponding appropriations are decommitted after 31 March, they shall be cancelled.

3.Appropriations referred to in Regulation (EU) No 1303/2013 shall be decommitted automatically in accordance with that Regulation.

4.Appropriations referred to in Regulation (EU) No 514/2014 shall be decommitted automatically in accordance with that Regulation.

5.Paragraphs 1, 2 and 3 of this Article shall not apply to external assigned revenue referred to in Article 20(2).

Article 14
Making
decommitted appropriations available again

1.The decommitted appropriations referred to in Regulation (EU) No 1303/2013 and Regulation (EU) No 223/2014 31  may be made available again in the event of a manifest error attributable solely to the Commission.

To that end, the Commission shall examine decommitments made during the preceding financial year and decide, by 15 February of the current financial year, on the basis of requirements, whether it is necessary to make the corresponding appropriations available again.

2.The decommitted appropriations shall be made available again in the event of:

(a)the decommitment of appropriations from a programme under the arrangements for the implementation of the performance reserve established in Article 20 of Regulation (EU) No 1303/2013;

(b)the decommitment of appropriations from a programme dedicated to a specific financial instrument in favour of SMEs following the discontinuance of the participation of a Member State in the financial instrument, as referred to in the seventh subparagraph of Article 39(2) of Regulation (EU) No 1303/2013.

3.Without prejudice to paragraphs (1) and (2), decommitted appropriations made in year n-2 shall be made available again to the European Union Crisis Reserve in the framework of the budgetary procedure for the year n.

When the Commission considers that the Reserve needs to be called on, it shall present to the European Parliament and the Council a proposal for a transfer from the Reserve to the corresponding budgetary lines, in line with Article 30 (4).

4.The commitment appropriations corresponding to the amount of the decommitted appropriations as a result of total or partial non-implementation of the corresponding research projects may also be made available again to the benefit of the research programme the projects belong to or its successor in the context of the annual budgetary procedure.

Article 15
Rules applicable in the event of late adoption of the budget

1.If the budget has not been definitively adopted at the beginning of the financial year, the procedure set out in the first paragraph of Article 315 TFEU (the provisional twelfths regime) shall apply. Commitments and payments may be made within the limits laid down in paragraph 2 of this Article.

2.Commitments may be made per chapter up to a maximum of one quarter of the total appropriations authorised in the relevant chapter of the previous financial year plus one twelfth for each month which has elapsed.

The limit of the appropriations provided for in the draft budget shall not be exceeded.

Payments may be made monthly per chapter up to a maximum of one twelfth of the appropriations authorised in the relevant chapter of the preceding financial year. That sum shall not, however, exceed one twelfth of the appropriations provided for in the same chapter of the draft budget.

3.The appropriations authorised in the relevant chapter of the preceding financial year, as specified in paragraphs 1 and 2, shall be understood as referring to the appropriations voted in the budget, including by amending budgets, and after adjustment for the transfers made during that financial year.

4.If the continuity of action by the Union so require, the Council, acting by qualified majority on a proposal of the Commission, may authorise expenditure in excess of one provisional twelfth but not exceeding the total of four provisional twelfths, excluding the one twelfth made automatically available, except in duly justified cases, both for commitments and for payments over and above those automatically made available in accordance with paragraphs 1 and 2. It shall forward the decision on authorisation without delay to the European Parliament.

The decision referred to in the first subparagraph shall enter into force 30 days following its adoption unless the European Parliament takes any of the following actions:

(a)acting by a majority of its component Members, decides to reduce that expenditure within that time limit, in which case the Commission shall submit a new proposal;

(b)informs the Council and the Commission that it does not wish to reduce that expenditure, in which case the decision shall enter into force before the expiry of the 30 days.

The additional twelfths shall be authorised in full and shall not be divisible.

5.If, for a given chapter, the authorisation of four provisional twelfths granted in accordance with paragraph 4 is not sufficient to cover the expenditure necessary to avoid a break in continuity of action by the Union in the area covered by the chapter in question, authorisation may exceptionally be given to exceed the amount of the appropriations entered in the corresponding chapter of the budget of the preceding financial year. The European Parliament and the Council shall act in accordance with the procedures provided for in paragraph 4. However, the overall total of the appropriations available in the budget of the preceding financial year or in the draft budget, as proposed, may in no circumstances be exceeded.

CHAPTER 3
Principle of equilibrium

Article 16
Definition and scope

1.Revenue and payment appropriations shall be in balance.

2.The Union and the Union bodies referred to in Articles 69 and 70 may not raise loans within the framework of the budget.

Article 17
Balance from financial year

1.The balance from each financial year shall be entered in the budget for the following financial year as revenue in the case of a surplus or as a payment appropriation in the case of a deficit.

2.The estimates of such revenue or payment appropriations shall be entered in the budget during the budgetary procedure and in a letter of amendment presented pursuant to Article 40. The estimates shall be drawn up in accordance with Article 1 of Council Regulation (EU, Euratom) No 608/2014 32  .

3.After the presentation of the provisional accounts for each financial year, any discrepancy between those accounts and the estimates shall be entered in the budget for the following financial year through an amending budget. In such a case, the Commission shall submit the draft amending budget simultaneously to the European Parliament and the Council within 15 days of submission of the provisional accounts.

CHAPTER 4
Principle of unit of account

Article 18
Use of euro

1.The multiannual financial framework and the budget shall be drawn up and implemented in euro and the accounts shall be presented in euro. However, for the cash-flow purposes referred to in Article 76, the accounting officer and, in the case of imprest accounts, the imprest administrators, and, for the needs of the administrative management of the Commission and the European External Action Service (EEAS), the authorising officer responsible, shall be authorised to carry out operations in other currencies.

2.Without prejudice to specific provisions arising from the application of sector-specific regulations, or from specific procurement contracts, grant agreements, contribution agreements and financing agreements, conversion by the responsible authorising officer shall be made using the daily euro exchange rate published in the C series of the Official Journal of the European Union of the day on which the payment order or recovery order is drawn up by the authorising department.

If no such daily rate is published, the responsible authorising officer shall use the one referred to in paragraph 3.

3.For the purposes of the accounts provided for in Articles 80 and 81, conversion between the euro and another currency shall be made using the monthly accounting rate of the euro. That accounting exchange rate shall be established by the Commission’s accounting officer by means of any source of information regarded as reliable, on the basis of the exchange rate on the penultimate working day of the month preceding that for which the rate is established.

4.Currency conversion operations shall be carried out in such a way as to avoid having a significant impact on the level of the Union co-financing or a detrimental impact on the Union budget. Where appropriate, the rate of conversion between the euro and other currencies may be calculated using the average of the daily exchange rate in a given period.

CHAPTER 5
Principle of universality

Article 19
Scope

Without prejudice to Article 20, total revenue shall cover total payment appropriations. Without prejudice to Article 25, all revenue and expenditure shall be entered in full without any adjustment against each other.

Article 20
Assigned revenue

1.External assigned revenue and internal assigned revenue shall be earmarked to finance specific items of expenditure.

2.The following shall constitute external assigned revenue:

(a)financial contributions from Member States, third countries and bodies not set up under the TFEU and the Euratom Treaty to certain actions or programmes financed by the Union as well as to supplementary research and technological development programmes, and managed by the Commission on their behalf;

(b)appropriations relating to the revenue generated by the Research Fund for Coal and Steel established by Protocol No 37 on the financial consequences of the expiry of the European Coal and Steel Community (ECSC) Treaty and on the Research Fund for Coal and Steel annexed to the TEU and the TFEU.

(c)interest on deposits and the fines provided for in Council Regulation (EC) No 1467/97 33 ;

(d)revenue earmarked for a specific purpose, such as income from foundations, subsidies, gifts and bequests, including the earmarked revenue specific to each institution;

(e)financial contributions to Union activities from third countries or from non-Union bodies not covered by point (b);

(f)internal assigned revenue referred to in paragraph 3, to the extent that it is ancillary to the other revenue under this paragraph;

(g)revenue from the activities of a competitive nature conducted by the Joint Research Centre (JRC) which consist of any of the following:

(i)grant and procurement procedures in which the JRC participates;

(ii)activities of the JRC on behalf of third parties;

(iii)activities undertaken under an administrative agreement with other institutions or other Commission departments, in accordance with Article 57, for the provision of technical-scientific services.

3.The following shall constitute internal assigned revenue:

(a)revenue from third parties in respect of goods, services or work supplied at their request;

(b)proceeds from the sale of, vehicles, equipment, installations, materials, and scientific and technical;

(c)revenue arising from the repayment, in accordance with Article 99, of amounts wrongly paid;

(d)revenue arising from interest on prefinancing payments, subject to Article 8(3);

(e)proceeds from the supply of goods, services and works for other departments within an institution, institutions or bodies, including refunds by other institutions or bodies of mission allowances paid on their behalf;

(f)insurance payments received;

(g)revenue from lettings and from the sale of buildings and land;

(h)revenue from the sale of publications and films, including those on an electronic medium;

(i)revenue and repayments arising from financial operations other than borrowing and lending and their assets held in the common provisioning fund;

(j)revenue arising from subsequent reimbursement of taxes pursuant to point (b) of Article 25(3). Assigned revenue shall be carried over and transferred in accordance with the provisions of points (b) and (c) of Article 12(3) and Article 30.

4.A basic act may also assign the revenue for which it provides to specific items of expenditure. Unless specified otherwise in the basic act, such revenue shall constitute internal assigned revenue.

5.The budget shall include lines to accommodate external assigned revenue and internal assigned revenue and wherever possible shall indicate the amount.

Article 21
Structure to accommodate assigned revenue and provision of corresponding appropriations

1.Without prejudice to point (c) of paragraph 2 of this Article and to Article 22, the structure to accommodate assigned revenue in the budget shall comprise:

(a)in the statement of revenue of each institution’s section, a budget line to receive the revenue;

(b)in the statement of expenditure, the budget remarks, including general remarks, showing which lines may receive the appropriations corresponding to the assigned revenue which are made available.

In the case referred to in point (a) of the first subparagraph, a token entry pro memoria shall be made and the estimated revenue shall be shown for information in the remarks.

2.The appropriations corresponding to assigned revenue shall be made available automatically, both as commitment appropriations and as payment appropriations, when the revenue has been received by the institution, save in any of the following cases:

(a)in the case provided for in point (a) of Article 20(2) for Member States and where the contribution agreement is expressed in euro, commitment appropriations may be made available upon signature by the Member State of the contribution agreement.

(b)in the case provided for in Article 20(2)(b) and points (i) and (iii) of Article 20(2)(g), the commitment appropriations shall be made available as soon as the amount receivable has been estimated.

(c)in the case provided for in point (c) of Article 20(2), the entry of those amounts in the statement of revenue shall give rise to the provision, in the statement of expenditure, of commitment and payment appropriations.

Appropriations referred to in point (c) of this paragraph shall be implemented in accordance with Article 19.

3.The estimates of amounts receivable referred to in point (b) of Article 20(2) and point (h) of Article 20(2) shall be sent to the accounting officer for registration.

Article 22
Assigned revenue resulting from the participation of EFTA States in certain Union programmes

1.The budget structure to accommodate the revenue provided for in Article 20(2)(e) shall be as follows:

(a)in the statement of revenue, a line with a token entry pro memoria shall be entered to accommodate the full amount of the EFTA States’ contribution for the financial year in question;

(b)in the statement of expenditure, an annex, forming an integral part of the budget, shall set out all the lines covering the Union activities in which the EFTA States participate.

2.Under Article 82 of the EEA Agreement the amounts of the annual participation of the EFTA States, as confirmed to the Commission by the Joint Committee of the European Economic Area in accordance with Article 1(5) of Protocol 32 annexed to the EEA Agreement, shall give rise to the provision, at the start of the financial year, of the full amounts of the corresponding commitment appropriations and payment appropriations.

Article 23
Donations

1.Union institutions may accept any donation made to the Union, such as income from foundations, subsidies, gifts and bequests.

2.Acceptance of a donation of a value of EUR 50 000 or more which involves a financial charge, including follow-up costs, exceeding 10 % of the value of the donation made, shall be subject to the authorisation of the European Parliament and of the Council. In light of such an authorisation, the European Parliament and the Council, shall act on the matter within two months of receiving the request from the Commission. If no objection is made within that period, Union institutions shall take a final decision regarding the acceptance of the donation. Union institutions shall explain the financial charges entailed by the acceptance of donations made to the Union.

Article 24
Corporate sponsoring

1.Corporate sponsoring means an agreement by which a legal person supports in-kind an event or an activity for promotional or corporate social responsibility purposes.

2.On the basis of specific internal rules Union institutions and bodies may exceptionally accept in kind corporate sponsoring provided that:

(a)there is due regard to the principles of non-discrimination, proportionality, equal treatment, transparency;

(b)it contributes to the positive image of the Union and is directly linked to the to the core objective of an event or of an action;

(c)it does neither generate conflict of interest nor concern exclusively social events.

Article 25
Rules on deductions and exchange rate adjustments

1.The following deductions may be made from payment requests which shall then be passed for payment of the net amount:

(a)penalties imposed on parties to procurement contracts or beneficiaries;

(b)discounts, refunds and rebates on individual invoices and cost statements;

(c)interest generated by pre-financing payments;

(d)adjustments for amounts unduly paid.

The adjustments referred to in point (d) of the first subparagraph may be made, by means of direct deduction, against a new interim payment or payment of a balance to the same payee under the chapter, article and financial year in respect of which the excess payment was made.

Union accounting rules shall apply to the deductions referred to in points (c) and (d) of the first subparagraph.

2.The cost of products or services, provided to the Union, incorporating taxes refunded by the Member States pursuant to the Protocol on the Privileges and Immunities of the European Union, shall be charged to the budget for the ex-tax amount.

3.The cost of products or services, provided to the Union, incorporating taxes refunded by third countries on the basis of relevant agreements, may be charged to the budget for any of the following amounts:

(a)the ex-tax amount;

(b)the tax-inclusive amount. In such a case, subsequently reimbursed taxes shall be treated as internal assigned revenue.

4.Adjustments may be made in respect of exchange differences occurring in the implementation of the budget. The final gain or loss shall be included in the balance for the year.

CHAPTER 6
Principle of specification

Article 26
General provisions

1.Appropriations shall be earmarked for specific purposes by title and chapter. The chapters shall be further subdivided into articles and items.

2.The Commission and the other institutions may transfer appropriations within the budget subject to the specific conditions laid down in Articles 27 to 30.

Appropriations may only be transferred to budget lines for which the budget has authorised appropriations or which carry a token entry pro memoria.

The percentages referred to in Articles 27 and 28 shall be calculated at the time the request for transfer is made and with reference to the appropriations provided in the budget, including amending budgets.

The amount to be taken into consideration shall be the sum of the transfers to be made on the line from which transfers are being made, after adjustment for earlier transfers made. The amount corresponding to the transfers which shall be carried out autonomously by the Commission or the institution concerned without a decision of the European Parliament and Council shall not be taken into consideration.

Without prejudice to the additional conditions for transfer requests laid down in Article 30, proposals for transfers and all information for the European Parliament and Council concerning transfers made under Articles 27, 28 and 29 shall be accompanied by appropriate and detailed supporting documents showing the most recent information available for the implementation of appropriations and estimates of requirements up to the end of the financial year, both for the lines to which the appropriations are to be transferred and for those from which they are to be taken.

Article 27
Transfers by institutions other than the Commission

1.Any institution other than the Commission may, within its own section of the budget, transfer appropriations:

(a)from one title to another up to a maximum of 10% of the appropriations for the year shown on the line from which the transfer is made;

(b)from one chapter to another without limit.

2.Three weeks before making a transfer, as referred to in paragraph 1, the institution shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified reasons are raised within that period by either the European Parliament or the Council, the procedure laid down in Article 29 shall apply.

3.Any institution other than the Commission may propose to the European Parliament and the Council, within its own section of the budget, transfers from one title to another exceeding the limit of 10 % of the appropriations for the year shown on the line from which the transfer is to be made. Those transfers shall be subject to the procedure laid down in Article 29.

4.Any institution other than the Commission may, within its own section of the budget, make transfers within articles and within each chapter without informing the European Parliament and the Council beforehand. It may also make transfers from one chapter to another of the same title up to a maximum of 10% of the appropriations for the year shown on the line from which the transfer is to be made without informing the European Parliament and the Council beforehand.

Article 28
Transfers by the Commission

1.The Commission may, within its own section of the budget, autonomously:

(a)transfer appropriations within each chapter;

(b)with regard to expenditure on staff and administration which is common to several titles, transfer appropriations from one title to another up to a maximum of 10 % of the appropriations for the year shown on the line from which the transfer is made, and up to a maximum of 30 % of the appropriations for the year shown on the line to which the transfer is made;

(c)with regard to operational expenditure, transfer appropriations between chapters within the same title or between different titles covered by the same basic act, including the administrative support chapters, up to a maximum of 10 % of the appropriations for the year shown on the line from which the transfer is made;

(d)with regard to research and technological development appropriations implemented by the JRC, the Commission may, within the title of the budget relating to the "Direct research" policy area, make transfers between chapters of up to 15 % of the appropriation in the line from which the transfer is made;

(e)with regard to the European Union Solidarity Fund (EUSF), transfer appropriations from the reserve to the line upon the adoption by the Parliament and the Council of the decision of mobilisation of the Fund;

(f)with regard to operational expenditure of the funds managed under shared implementation, with the exception of the EAGF, transfer appropriations from one title to another, provided that the appropriations concerned are for the same objective within the meaning of the Regulation concerned or are technical assistance expenditure;

(g)transfer appropriations from the budgetary item of a budgetary guarantee to the budgetary item of another budgetary guarantee when the provisioned resources in the common provisioning fund of the latter are insufficient to pay a guarantee call.

For the purposes of point (c) of the first subparagraph autonomous transfers from the administrative support lines to the corresponding operational lines shall be allowed.

The Commission shall take its decisions by 31 January of the following financial year.

The expenditure referred to in point (b) of the first subparagraph of this Article shall cover, for each policy area, the items referred to in Article 45(3).

Where the Commission transfers EAGF appropriations pursuant to paragraph 1 after the 31 December, it shall take its decision by 31 January of the following financial year. The Commission shall inform the European Parliament and the Council within two weeks after its decision on those transfers.

Three weeks before making the transfers referred to in point (b) of the first subparagraph of this Article, the Commission shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified reasons are raised within that period by the European Parliament or the Council, the procedure laid down in Article 29 shall apply.

By way of exception from the second subparagraph, the Commission may, during the last two months of the financial year, autonomously transfer appropriations concerning expenditure on staff, external staff and other agents from one title to another within the total limit of 5 % of the appropriations for the year. The Commission shall inform the European Parliament and the Council within two weeks after its decision on those transfers.

2.The Commission may, within its own section of the budget, decide on the following transfer of appropriations from one title to another, provided it immediately informs the European Parliament and the Council of its decision:

(a)transfer of appropriations from the ‘provisions’ title referred to in Article 47 of this Regulation, where the only condition for lifting the reserve is the adoption of a basic act pursuant to Article 294 TFEU;

(b)in duly justified exceptional cases such as international humanitarian disasters and crises occurring after 1 December of the financial year, transfer unused appropriations for that financial year still available in the budget titles falling under heading 4 of the multiannual financial framework to the budget titles concerning crisis management aid and humanitarian aid operations.

Proposals for transfers and all information for the European Parliament and Council concerning transfers made under Articles 27 and 28 shall be accompanied by appropriate and detailed supporting documents showing the implementation of appropriations and estimates of requirements up to the end of the financial year, both for the lines to which the appropriations are to be transferred and for those from which they are to be taken.

Article 29
Transfer proposals submitted to the European Parliament

and the Council by the institutions

1.Each institution shall submit its transfer proposals simultaneously to the European Parliament and the Council.

2.The Commission may submit proposals for transfers of payment appropriations to the funds managed under shared implementation with the exception of the EAGF to the European Parliament and the Council by 10 January of the following financial year. The transfer of the payment appropriations may be made from any item of the budget. The six-week period referred to in paragraph 3 shall be reduced to three weeks.

If the transfer is not approved or only partially approved by the European Parliament and the Council, the corresponding part of the expenditure referred to in point (b) of Article 10(5) shall be charged to the payment appropriations of the following financial year.

3.The European Parliament and the Council shall take decisions on transfers of appropriations as provided for in paragraphs 4 to 8.

4.Except in urgent circumstances, the European Parliament and the Council, the latter acting by qualified majority, shall deliberate upon each transfer proposal within six weeks of its receipt by both institutions.

5.Where the Commission transfers EAGF appropriations in accordance with this Article it shall submit transfer proposals to the European Parliament and the Council by 10 January of the following financial year.

The six-week period referred to in paragraph 4 shall be reduced to three weeks.

6.The transfer proposal shall be approved, if, within the six-week period, any of the following occurs:

(a)the European Parliament and the Council approve it;

(b)either the European Parliament or the Council approves it and the other institution refrains from acting;

(c)the European Parliament and the Council refrain from acting or do not take a decision to amend or refuse the transfer proposal.

7.The six-week period referred to in paragraph 4 shall be reduced to three weeks, unless either the European Parliament or the Council requests otherwise, in the following cases:

(a)the transfer represents less than 10% of the appropriations of the line from which the transfer is made or does not exceed EUR 5 000 000;

(b)the transfer concerns only payment appropriations and the overall amount of the transfer does not exceed EUR 100 000 000.

8.If either the European Parliament or the Council has amended the amount of the transfer while the other institution has approved it or refrains from acting, or if the European Parliament and the Council have both amended the amount of the transfer, the lesser of the two amounts shall be deemed approved, unless the institution concerned withdraws its transfer proposal.

Article 30
Transfers subject to special provisions

1.Appropriations corresponding to assigned revenue may be transferred only if such revenue is used for the purpose for which it is assigned.

2.A token entry pro memoria shall be added on an entry without appropriations authorised through a specific request from the Commission. The rules for adoption of the request of the Commission shall be the ones laid down in Article 29. 

3.Paragraph 1 shall not apply to internal assigned revenue in the event that there are no identified needs allowing such revenue to be used for the purpose for which it is assigned.

4.Decisions on transfers to allow the use of the emergency aid reserve and the European Union Crisis Reserve shall be taken by the European Parliament and the Council on a proposal from the Commission.

For the purposes of this paragraph, the procedure provided for in paragraphs 3 and 4 of Article 29 shall apply. If the European Parliament and the Council do not agree to the Commission proposal and cannot reach a common position on the use of this reserve, they shall refrain from acting on the Commission’s transfer proposal.

Proposals for transfers from the emergency aid reserve and the European Union Crisis Reserve shall be accompanied by appropriate and detailed supporting documents demonstarting:

(a)the most recent information available for the implementation of appropriations and the estimate of requirements up to the end of the financial year for the line to which the transfer is to be made;

(b)an analysis of the possibilities of reallocating appropriations.

5.Transfers from the reserve for the European Globalisation Adjustment Fund shall be deemed approved by the European Parliament and the Council upon the adoption of the decision to mobilise the Fund.

CHAPTER 7
Principle of sound financial management and performance

Article 31
Performance and principles of economy, efficiency and effectiveness

1.Appropriations shall respect the principle of sound financial management, and thus be implemented in accordance with the following principles:

(a)the principle of economy which requires that the resources used by the institution in the pursuit of its activities shall be made available in due time, in appropriate quantity and quality and at the best price

(b)the principle of efficiency which concerns the best relationship between resources employed and achievement of objectives.

(c)the principle of effectiveness which concerns the extent to which the intended objectives are achieved.

2.In line with the principle of sound financial management, the use of appropriations shall focus on performance and for this purpose:

(a)objectives for programmes and activities shall be established ex ante;

(b)progress in the achievement of objectives shall be monitored with performance indicators;

(c)achievements shall be reported to the European Parliament and the Council in accordance with point (h) of Article 39(3) and with point (ii) of Article 239(1)(b).

Article 32
Evaluations

1.Programmes and activities which entail significant spending shall be subject to ex-ante and retrospective evaluation ("evaluation"), which shall be proportionate to the objectives and expenditure.

2.Ex-ante evaluations supporting the preparation of programmes and activities shall be based on evidence on the performance of related programmes or activities and shall identify and analyse the issues to be addressed, EU added value, objectives, expected effects of different options and monitoring and evaluation arrangements.

3.Retrospective evaluations shall assess the performance of the programme or activity, including aspects such as effectiveness, efficiency, coherence, relevance and EU added value. They shall be undertaken periodically and in sufficient time for the findings to be taken into account in ex-ante evaluations which support the preparation of related programmes and activities.

Article 33
Compulsory financial statement

1.Any proposal or initiative submitted to the legislative authority by the Commission, the High Representative of the Union for Foreign Affairs and Security Policy (the ‘High Representative’) or by a Member State, which may have an impact on the budget, including changes in the number of posts, shall be accompanied by a financial statement and by an ex ante evaluation as provided for in Article 32.

Any amendment to a proposal or initiative submitted to the legislative authority which may have appreciable implications for the budget, including changes in the number of posts, shall be accompanied by a financial statement prepared by the institution proposing the amendment.

The financial statement shall contain the financial and economic data for the assessment by the legislative authority of the need for Union action. It shall provide appropriate information as regards coherence with other activities of the Union and any possible synergy.

In the case of multiannual operations, the financial statement shall contain the foreseeable schedule of annual requirements in terms of appropriations and posts, including for external staff, and an evaluation of their medium-term financial impact.

2.During the budgetary procedure, the Commission shall provide the necessary information for a comparison between changes in the appropriations required and the initial forecasts made in the financial statement in the light of the progress of deliberations on the proposal or initiative submitted to the legislative authority.

3.In order to reduce the risk of fraud,irregularities and non-achievement of objectives, the financial statement referred to in paragraph 1 shall provide information on the internal control system set up, an estimate of the costs and benefits of the controls implied by such system and an assessment of the expected level of risk of error, as well as existing and planned fraud prevention and protection measures.

Such analysis shall take into account the likely scale and type of errors, as well as the specific conditions of the policy area concerned and the rules applicable thereto.

4.When presenting revised or new spending proposals, the Commission shall estimate the costs and benefits of control systems, as well as the level of risk of error as referred to in paragraph 3.

Article 34
Internal control of budget implementation

1.Pursuant to the principle of sound financial management, the budget shall be implemented in compliance with effective and efficient internal control as appropriate in each method of budget implementation, and in accordance with the relevant sector-specific rules.

2.For the purposes of the implementation of the budget, internal control is defined as a process applicable at all levels of management and designed to provide reasonable assurance of achieving the following objectives:

(a)effectiveness, efficiency and economy of operations;

(b)reliability of reporting;

(c)safeguarding of assets and information;

(d)prevention, detection, correction and follow-up of fraud and irregularities;

(e)adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the nature of the payments concerned.

3.Effective internal control shall be based on best international practices and include, in particular, the following:

(a)segregation of tasks;

(b)an appropriate risk management and control strategy including control at recipient level;

(c)avoidance of conflict of interest;

(d)adequate audit trails and data integrity in data systems;

(e) procedures for monitoring effectiveness and efficiency and for follow-up of identified internal control weaknesses and exceptions;

(f)periodic assessment of the sound functioning of the internal control system.

4.Efficient internal control shall be based on the following elements:

(a)the implementation of an appropriate risk management and control strategy coordinated among appropriate actors involved in the control chain;

(b)the accessibility for all appropriate actors in the control chain of the results of controls carried out;

(c)reliance, where appropriate, on management declarations of implementation partners and independent audit opinions, provided that the quality of the underlying work is adequate and acceptable and that it was performed in accordance with agreed standards;

(d)the timely application of corrective measures including, where appropriate, dissuasive penalties;

(e)clear and unambiguous legislation underlying the policies;

(f)the elimination of multiple controls;

(g)improving the costbenefit ratio of controls.

5.If, during implementation, the level of error is persistently high, the Commission shall identify the weaknesses in the control systems, analyse the costs and benefits of possible corrective measures and take or propose appropriate action, such as simplification of the applicable provisions, improvement of the control systems and redesign of the programme or delivery systems.

CHAPTER 8
Principle of transparency

Article 35
Publication of accounts, budgets

1.The budget shall be established and implemented and the accounts presented in accordance with the principle of transparency.

2.The President of the European Parliament shall have the budget and any amending budget, as definitively adopted, published in the Official Journal of the European Union.

The budgets shall be published within three months of the date on which they are declared definitively adopted.

Pending official publication in the Official Journal of the European Union, the final detailed budget figures shall be published in all languages on the Internet site of the institutions, on the Commission's initiative, as soon as possible and no later than four weeks after the final adoption of the budget.

The consolidated annual accounts shall be published in the Official Journal of the European Union.

Article 36
Publication of information on recipients and other information

1.The Commission shall make available, in an appropriate and timely manner, information on recipients, as well as the nature and purpose of the measure financed from the budget, where the latter is implemented directly in accordance with point (a) of Article 61(1).

The obligation set out in the first subparagraph shall also apply to other institutions when they implement the Union budget.

The information on recipients of Union’s funds implemented under direct implementation shall be published on an internet site of the Union institutions, no later than 30 June of the year following the financial year in which the funds were legally committed.

2.The information referred to in paragraph 1 of the first subparagraph shall be made available, having due regard for the requirements of confidentiality and security, in particular the protection of personal data and shall include the following:

(a)the name of the recipient;

(b)the locality of the recipient;

(c)the amount legally committed;

(d)the nature and purpose of the measure.

For the purposes of point b) of the first subparagraph the term ‘locality’ shall mean:

(i)the address of the recipient when the latter is a legal person;

(ii)the Region on NUTS 2 level when the recipient is a natural person.

This information shall only be published for prizes, grants and contracts which have been awarded as a result of contests or grant award procedures or public procurement procedures, and for experts which have been selected pursuant to Article 230(2). The information shall not be published for:

(a)education supports paid to natural persons and other direct support paid to natural persons most in need as referred to in point (b) of Article 185(4);

(b)very low value contracts awarded to experts selected pursuant to Article 230(2) as well as very low value contracts below the amount referred to in point 14.4 of the Annex to this Regulation.

The internet site of the Union institutions shall contain at least a reference to the address of the website where the information can be found if it is not published directly on the dedicated place of the internet site of the Union institutions.

3.Where natural persons are concerned, the publication shall be limited to the name and locality of the recipient, the amount legally committed and the purpose of the measure. The disclosure of those data shall be based on relevant criteria such as the periodicity, or the type or importance of the measure. As far as personal data are concerned, the information shall be removed two years after the end of the financial year in which the amount was legally committed. The same shall apply to personal data referring to legal persons for whom the official title identifies one or more natural persons.

4.The publication shall be waived if such disclosure risks threatening the rights and freedoms of individuals concerned as protected by the Charter of Fundamental Rights of the European Union or harm the commercial interests of the recipients.

5.Persons or entities implementing Union funds pursuant to point (c) of Article 61 (1) and bodies designated pursuant to paragraph 3 of Article 62 shall make information on their recipients available in an appropriate and timely manner.

The information on final recipients of funds provided through financial instruments who receive support from the Union budget for an amount lower than EUR 500 000, shall be limited to statistical data, aggregated in accordance with relevant criteria, such as geographical situation, economic typology of recipients, type of support received and the Union policy area under which such support was provided.

Where applicable, the level of detail and criteria shall be defined in the relevant sectorspecific rules and may be further refined in the financial framework partnership agreements.

The Commission shall make information about the website where the information referred to in the first subparagraph can be found available in an appropriate and timely manner.

TITLE III
ESTABLISHMENT AND STRUCTURE OF THE BUDGET

CHAPTER 1
Establishment of the budget

Article 37
Estimates of revenue and expenditure

1.Each institution other than the Commission shall draw up an estimate of its revenue and expenditure, which it shall send to the Commission, and in parallel, for information, to the European Parliament and the Council, before 1 July each year.

2.The High Representative shall hold consultations with the Members of the Commission responsible for development policy, neighbourhood policy and international cooperation, humanitarian aid and crisis response, regarding their respective responsibilities

3.The Commission shall draw up its own estimates, which it shall also send, directly after their adoption, to the European Parliament and the Council.

In preparing its estimates, the Commission shall use the information referred to in Article 38.

Article 38
Estimated budget of the bodies referred to in Article
69

By 31 January each year, each body referred to in Article 69 shall, in accordance with the instrument establishing it, send the Commission, the European Parliament and the Council its draft single programming document.

Article 39
Draft budget

1.The Commission shall submit a proposal containing the draft budget to the European Parliament and the Council by 1 September of the year preceding that in which the budget is to be implemented. It shall transmit that proposal, for information, also to the national parliaments.

The draft budget shall contain a summary general statement of the revenue and expenditure of the Union and shall consolidate the estimates referred to in Article 37. It may also contain different estimates from those drawn up by the institutions.

The draft budget shall follow the structure and presentation set out in Articles 45 to 50.

Each section of the draft budget shall be preceded by an introduction drawn up by the institution concerned.

The Commission shall draw up the general introduction to the draft budget. The general introduction shall comprise financial tables covering the main data by titles and justifications for the changes in the appropriations from one financial year to the next by categories of expenditure of the multiannual financial framework.

2.In order to provide more precise and reliable forecasts of the budgetary implications of legislation in force and of pending legislative proposals, the Commission shall attach to the draft budget an indicative financial programming for the following years, structured by category of expenditure, policy area and budget line. The complete financial programming shall cover all categories of expenditure with the exception of agriculture, cohesion policy and administration for which only summary data shall be provided

The indicative financial programming shall be updated after the adoption of the budget, to incorporate the results of the budgetary procedure and any other relevant decisions.

3.The Commission shall attach to the draft budget

(a)the reasons for which the draft budget contains different estimates from those drawn up by other institutions;

(b)any working document it considers useful in connection with the establishment plans of the institutions. Any such working document, showing the latest authorised establishment plan, shall present:

(i)all staff employed by the Union, displayed by type of contract;

(ii)a statement of the policy on posts and external personnel and on gender balance;

(iii)the number of posts actually filled at the beginning of the year in which the draft budget is presented, indicating their distribution by grade and administrative unit;

(iv)a list of posts broken down per policy area;

(v)for each category of external staff, the initial estimated number of full-time equivalents on the basis of the authorised appropriations, as well as the number of persons actually in place at the beginning of the year in which the draft budget is presented, indicating their distribution by function group and, as appropriate, by grade.

(c)for the bodies referred to in Articles 69 and 70, a working document presenting the revenue and expenditure, as well as all information on staff as referred to in points (i) to (v) of subparagraph (b).

Where Public Private Partnershipss make use of financial instruments, the information relating to those instruments shall be included in the working document referred to in paragraph 4.

(d)a working document on the planned implementation of appropriations for the financial year and on commitments outstanding;

(e)as regards appropriations for administration, a working document presenting administrative expenditure to be implemented by the Commission under its section of the budget;

(f)a working document on pilot projects and preparatory actions which shall also contain an assessment of the results and follow-up envisaged;

(g)as regards funding to international organisations, a working document containing:

(i)a summary of all contributions, with a breakdown per Union programme or fund and per international organisation;

(ii)a statement of reasons explaining why it was more efficient for the Union to fund those international organisations rather than to act directly;

(h)programme statements or any other relevant document containing the following:

(i)an indication of which Union policies and objectives the programme shall contribute to;

(ii)a clear rationale for intervention at Union level in accordance, inter alia, with the principle of subsidiarity;

(iii)updates in achieving programme objectives;

(iv)a full justification, including a cost-benefit analysis for proposed changes in the level of appropriations;

(v)information on the implementation rates of the programme for the current and preceding years;

(i)a summary statement of the schedule of payments due in subsequent financial years to meet budgetary commitments entered into in previous financial years.

4.Where the Commission makes use of financial instruments, it shall attach to the draft budget a working document presenting for each financial instrument the following:

(a)a reference to the financial instrument and its basic act, together with a general description of the instrument, its impact on the budget and the added value of the Union contribution;

(b)the financial institutions involved in implementation, including any issues relating to the application of Article 150(2);

(c)its contribution to the achievement of the objectives of the programme concerned as measured by the established indicators including, where applicable, the geographical diversification;

(d)the envisaged operations, including target volumes based on the target leverage or, when unavailable, on the leverage effect arising from the existing financial instruments;

(e)budget lines corresponding to the relevant operations and the aggregate budgetary commitments and payments from the budget;

(f)the average duration between the budgetary commitment to the financial instruments and the legal commitments for individual projects in the form of equity or debt, where their duration exceeds three years. The Commission shall explain the reasons and provide, where appropriate, an action plan for the reduction of the duration in the framework of the annual discharge procedure;

(g)revenues and repayments under Article 202(2), including an evaluation of their use;

(h)the value of equity investments, with respect to previous years;

(i)the total amount of provisions for risks and liabilities, as well as any information on the financial risk exposure of the Union;

(j)impairments of assets and called guarantees both for the preceding year and the respective accumulated figures;

(k)the performance of the financial instrument, including the investments realised, the target leverage effect and the achieved leverage effect;

(l)the provisioned resources in the common guarantee fund and, when applicable, the balance on the fiduciary account.

This working document shall also include an overview of the administrative expenditure arising from management fees and other financial and operating charges paid for the management of financial instruments in total and per managing party and per financial instrument managed.

5.Where the Commission has given a budgetary guarantee, it shall attach to the draft budget a working document presenting for each budgetary guarantee and for the common guarantee fund the following:

(a)a reference to the budgetary guarantee and its basic act, together with a general description of the guarantee, its impact on the financial liabilities of the budget and the added value of the Union support;

(b)the counterparts for the guarantee, including any issues relating to the application of Article 150(2);

(c)its contribution to the achievement of the objectives of the budgetary guarantee as measured by the established indicators, including, where applicable, the geographical diversification and the mobilisation of private sector resources;

(d)information on operations covered by the guarantee on an aggregated basis by sectors, countries and instrument, including, where applicable, portfolios and combined support with other Union actions;

(e)the financial amount transferred to beneficiaries as well as an assessment of the leverage effect achieved by the projects supported under the guarantee;

(f)information aggregated on the same basis than in point (d) on calls on the guarantee, losses, returns, amounts recovered and any other payments received;

(g)information about the financial management, the performance and the risk of the common guarantee fund at the end of the previous calendar year;

(h)the effective provisioning rate of the common guarantee fund and, where applicable, the subsequent transfers following Article 206(3);

(i)the financial flows in the common provisioning fund during the previous calendar year as well as the significant transactions and any relevant information on the financial risk exposure of the Union;

(j)pursuant to Article 203(3), an assessment of the sustainability of the contingent liabilities borne by the budget of the Union arising from financial operations.

6.Where the Commission makes use of Union Trust Funds, it shall attach to the draft budget a working document on the activities supported by Union Trust Funds, on their implementation and performance.

7.The Commission shall also attach to the draft budget any further working document it considers useful to support its budget requests.

8.In accordance with Article 8(5) of Council Decision 2010/427/EU ( 34 ) and in order to ensure budgetary transparency in the area of external action of the Union, the Commission shall transmit to the European Parliament and the Council, together with the draft budget, a working document presenting, in a comprehensive way:

(a)all administrative and operational expenditure relating to the external actions of the Union, including common foreign and security policy (CFSP) and common security and defence policy tasks, and financed from the budget;

(b)the EEAS’ overall administrative expenditure for the preceding year, broken down into expenditure per Union delegation and expenditure for the EEAS’ central administration; together with operational expenditure, broken down by geographic area (regions, countries), thematic areas, Union delegation and mission.

9.The working document referred to in paragraph 6 shall also:

(a)show the number of posts for each grade in each category and the number of permanent and temporary posts, including contractual and local staff authorised within the limits of the appropriations in each Union delegation, as well as in the central administration of the EEAS;

(b)show any increase or reduction of posts by grade and category in the central administration of the EEAS, and in all Union delegations based on the preceding financial year.

Article 40
Letter of amendment to the draft budget

On the basis of any new information which was not available at the time the draft budget was established, the Commission may, on its own initiative or if requested by one of the other institutions in respect of its respective section, submit simultaneously to the European Parliament and the Council letters of amendment to the draft budget before the Conciliation Committee referred to in Article 314 TFEU is convened. The letters may include a letter of amendment updating, in particular, expenditure estimates for agriculture.

Article 41
Obligations of the Member States stemming from the adoption of the budget

1.The President of the European Parliament shall declare the budget definitively adopted in accordance with the procedure provided for in Article 314(9) TFEU and Article 106a of the Euratom Treaty.

2.Once the budget has been declared definitively adopted, each Member State shall, from 1 January of the following financial year or from the date of the declaration of definitive adoption of the budget if this occurs after 1 January, be bound to make the payments due to the Union, as specified in Regulation (EU, Euratom) No 609/2014.

Article 42
Draft amending budgets

1.The Commission may present draft amending budgets which are primarily revenue-driven in the following circumstances:

(a)to enter in the budget the balance of the preceding financial year, in accordance with the procedure laid down in Article 17;

(b)to revise the forecast of own resources on the basis of updated economic forecasts;

(c)to update the revised forecast of own resources and other revenue, as well as to review the availability of, and need for, payment appropriations.

As far as possible, and when justified, the Commission may propose expenditure-driven amendments combined with the revenue-driven amendments referred to in the first subparagraph.

If there are unavoidable, exceptional and unforeseen circumstances, the Commission may present draft amending budgets which are primarily expenditure-driven.

2.Requests for amending budgets, in the same circumstances as referred to in paragraph 1, from institutions other than the Commission shall be sent to the Commission.

Before presenting a draft amending budget, the Commission and the other institutions shall examine the scope for reallocation of the relevant appropriations, with particular reference to any expected under-implementation of appropriations.

Article 41 shall apply to amending budgets. Amending budgets shall be substantiated by reference to the budget the estimates of which they are amending.

3.The Commission shall, except in duly justified exceptional circumstances submit its draft amending budgets simultaneously to the European Parliament and the Council by 15 October at the latest of each financial year. It may attach an opinion to the requests for amending budgets from the other institutions.

4.Draft amending budgets shall be accompanied by statements of grounds and the information on the implementation of the budget for the preceding and current financial years available at the time of their establishment.

Article 43
Early transmission of estimates and draft budgets

The Commission, the European Parliament and the Council may agree to bring forward certain dates for the transmission of the estimates, and for the adoption and transmission of the draft budget. Such an arrangement may not, however, have the effect of shortening or extending the periods for which provision is made for consideration of those texts under Article 314 TFEU and Article 106a of the Euratom Treaty.

CHAPTER 2
Structure and presentation of the budget

Article 44
Structure of the budget

The budget shall consist of the following:

(a)a general statement of revenue and expenditure;

(b)separate sections for each institution, with the exception of the European Council and the Council which shall share the same section, subdivided into statements of revenue and expenditure.

Article 45
Budget nomenclature

1.Commission revenue and the revenue and expenditure of the other institutions shall be classified by the European Parliament and the Council according to their type or the use to which they are assigned under titles, chapters, articles and items.

2.The statement of expenditure for the Commission section shall be set out on the basis of a nomenclature adopted by the European Parliament and the Council and classified according to purpose.

Each title shall correspond to a policy area and each chapter shall, as a rule, correspond to a programme or an activity.

Each title may include operational appropriations and administrative appropriations. The administrative appropriations for a title shall be grouped in a single chapter.

The budget nomenclature shall comply with the principles of specification, transparency and sound financial management. It shall provide the clarity and transparency necessary for the budgetary process, facilitating the identification of the main objectives as reflected in the relevant legal bases, making possible choices on political priorities and enabling efficient and effective implementation.

3.When presented by purpose, administrative appropriations for individual titles shall be classified as follows:

(a)expenditure on staff authorised in the establishment plan: there shall be an amount of appropriations and a number establishment plan posts corresponding to that expenditure;

(b)expenditure on external personnel and other expenditure referred to in point (b) of the first subparagraph of Article 28(1) and financed under the "administration" heading of the multiannual financial framework;

(c)expenditure on buildings and other related expenditure, including cleaning and maintenance, rental and hiring, telecommunications, water, gas and electricity;

(d)external personnel and technical assistance directly linked to the implementation of programmes.

Any administrative expenditure of the Commission of a type which is common to several titles shall be set out in a separate summary statement classified by type.

Article 46
Negative revenue

1.The budget shall not contain negative revenue, except where it results from negative remuneration of deposits.

2.The own resources paid under the Council Decision on the system of own resources of the European Union shall be net amounts and shall be shown as such in the summary statement of revenue in the budget.

Article 47
Provisions

1.Each section of the budget may include a "provisions" title. Appropriations shall be entered in that title in any of the following cases:

(a)no basic act exists for the action concerned when the budget is established;

(b)there are serious grounds for doubting the adequacy of the appropriations or the possibility of implementing, under conditions in accordance with the principle of sound financial management, the appropriations entered on the lines concerned.

The appropriations in that title may be used only after transfer in accordance with the procedure laid down in point (c) of the first subparagraph of Article 28(1) of this Regulation, where the adoption of the basic act is subject to the procedure laid down in Article 294 TFEU, and in accordance with the procedure laid down in Article 29 of this Regulation, for all other cases.

2.In the event of serious implementation difficulties, the Commission may propose, in the course of a financial year, that appropriations be transferred to the "provisions" title. The European Parliament and the Council shall take a decision on such transfers as provided for in Article 29.

Article 48
Negative reserve

The Commission section of the budget may include a "negative reserve" limited to a maximum amount of EUR 400 000 000. Such a reserve, which shall be entered in a separate title, shall comprise payment appropriations only.

That negative reserve shall be drawn upon before the end of the financial year by means of transfer in accordance with the procedure laid down in Articles 28 and 29.

Article 49
Emergency Aid Reserve and European Union Crisis Reserve

1.The Commission section of the budget shall include a reserve for emergency aid for third countries and a European Union Crisis Reserve.

2.The reserves referred to in paragraph 1 shall be drawn upon before the end of the financial year by means of transfer in accordance with the procedure laid down in Articles 28 and 30.

Article 50
Presentation of the budget

1.The budget shall show:

(a)in the general statement of revenue and expenditure:

(i)the estimated revenue of the Union for the financial year concerned (‘year n’);

(ii)the estimated revenue for the preceding financial year and the revenue for year n – 2;

(iii)the commitment and payment appropriations for year n;

(iv)the commitment and payment appropriations for the preceding financial year;

(v)the expenditure committed and the expenditure paid in year n – 2, the latter also expressed as a percentage of the budget of year n;

(vi)appropriate remarks on each subdivision, as set out in Article 45(1). The budget remarks shall include the references of the basic act, where one exists as well as all appropriate explanations concerning the nature and purpose of the appropriations;

(b)in each section, the revenue and expenditure in the same structure as in point (a);

(c)with regard to staff:

(i)for each section, an establishment plan setting the number of posts for each grade in each category and in each service and the number of permanent and temporary posts authorised within the limits of the appropriations;

(ii)an establishment plan for staff paid from the research and technological development appropriations for direct action and an establishment plan for staff paid from the same appropriations for indirect action; the establishment plans shall be classified by category and grade and shall distinguish between permanent and temporary posts, authorised within the limits of the appropriations;

(iii)an establishment plan setting the number of posts by grade and by category for each body referred to in Article 69 which receives a contribution charged to the budget. The establishment plans shall show, next to the number of posts authorised for the financial year, the number authorised for the preceding year. The staff of the Euratom Supply Agency shall appear separately in the Commission establishment plan.

(d)with regard to financial assistance and budgetary guarantees::

(i)in the general statement of revenue, the budget lines corresponding to the relevant operations and intended to record any reimbursements received from recipients who initially defaulted. Those lines shall carry a token entry pro memoria and be accompanied by appropriate remarks;

(ii)in the Commission section:

the budget lines containing the Union’s guarantees in respect of the operations concerned.Those lines shall carry a token entry pro memoria, provided that no effective charge which has to be covered by definitive resources has arisen;

remarks giving the reference to the basic act and the volume of the operations envisaged, the duration and the financial guarantee given by the Union in respect of such operations;

(iii)in a document annexed to the Commission section, as an indication, also of the corresponding risks:

ongoing capital operations and debt management;

the capital operations and debt management for year n;

(e)with regard to the funding implemented by entities pursuant to Article 61(1)(c):

(i)a reference to the basic act of the relevant programme;

(ii)corresponding budget lines;

(iii)a general description of the action, including its duration and its impact on the budget;

(f)the total amount of CFSP expenditure entered in a chapter, entitled ‘CFSP’, with specific articles. Those articles shall cover CFSP expenditure and shall contain specific lines identifying at least the single major missions.

2.In addition to the documents referred to in paragraph 1, the European Parliament and the Council may attach any other relevant documents to the budget.

Article 51
Rules on the establishment plans for staff

1.The establishment plans described in point (c) of Article 50(1) shall constitute an absolute limit for each institution or body. No appointment may be made in excess of the limit set.

However, save in the case of grades AD 16, AD 15 and AD 14, each institution or body may modify its establishment plans by up to 10 % of posts authorised, subject to the following conditions:

(a)the volume of staff appropriations corresponding to a full financial year is not affected;

(b)the limit of the total number of posts authorised by each establishment plan is not exceeded;

(c)the institution or body has taken part in a benchmarking exercise with other institutions and bodies of the Union as initiated by the Commission's staff screening exercise.

Three weeks before making the modifications referred to in the second subparagraph, the institution shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified reasons are raised within this period by either the European Parliament or the Council, the institution shall refrain from making the modifications and the procedure referred to in Article 42 shall apply.

2.By way of derogation from the first subparagraph of paragraph 1, the effects of part-time work authorised by the appointing authority in accordance with the Staff Regulations may be offset by other appointments.

CHAPTER 3
Budgetary discipline

Article 52
Compliance with the multiannual financial framework.

The budget shall comply with the multiannual financial framework.

Article 53
Compliance of Union acts with the budget

Where the implementation of a Union act exceeds the appropriations available in the budget, such an act may be implemented in financial terms only after the budget has been amended accordingly.

TITLE IV
IMPLEMENTATION OF THE BUDGET

CHAPTER 1
General provisions

Article 54
Budget implementation in accordance with the principle of sound financial management
and citizens' opinion

1.The Commission shall implement the revenue and expenditure of the budget in accordance with this Regulation, under its own responsibility and within the limits of the appropriations authorised.

2.The Member States shall cooperate with the Commission so that the appropriations are used in accordance with the principle of sound financial management.

3.Citizens may be consulted on the implementation of the Union budget by the Commission, Member States or any other entity implementing the Union budget.

Article 55
Information on transfers of personal data for audit purposes

In any call made in the context of grants, procurement or prizes implemented in direct implementation, potential beneficiaries, candidates, tenderers and participants shall, in accordance with Regulation (EC) No 45/2001 of the European Parliament and of the Council ( 35 ) be informed that, for the purposes of safeguarding the financial interests of the Union, their personal data may be transferred to internal audit services, to the European Court of Auditors or to the European Anti-Fraud Office and between authorising officers of the Commission, and the executive agencies and the Union bodies referred to in Article 70.

Article 56
Basic act and exceptions

1.A basic act shall first be adopted before the appropriations entered in the budget for any action by the Union may be used.

2.By way of derogation from paragraph 1 the following may be implemented without a basic act provided the actions which they are intended to finance fall within the competences of the Union

(a)appropriations for pilot projects of an experimental nature designed to test the feasibility of an action and its usefulness. The relevant commitment appropriations may be entered in the budget for not more than two consecutive financial years;

The total amount of appropriations for the pilot projects shall not exceed EUR 40 000 000 in any financial year.

(b)appropriations for preparatory actions in the field of application of the TFEU and the Euratom Treaty, designed to prepare proposals with a view to the adoption of future actions. The preparatory actions shall follow a coherent approach and may take various forms. The relevant commitment appropriations may be entered in the budget for not more than three consecutive financial years. The procedure for the adoption of the relevant basic act shall be concluded before the end of the third financial year. In the course of that procedure, the commitment of appropriations shall correspond to the particular features of the preparatory action with regard to the activities envisaged, the aims pursued and the recipients. Consequently, the means implemented shall not correspond in volume to those envisaged for financing the definitive action itself;

The total amount of appropriations for new preparatory actions referred to under this point shall not exceed EUR 50 000 000 in any financial year, and the total amount of appropriations actually committed for preparatory actions shall not exceed EUR 100 000 000.

(c)appropriations for preparatory measures in the field of Title V of the TEU. Such measures shall be limited to a short period of time and shall be designed to establish the conditions for Union action in fulfilment of the objectives of the CFSP and for the adoption of the necessary legal instruments;

For the purpose of Union crisis management operations, preparatory measures shall be designed, inter alia, to assess the operational requirements, to provide for a rapid initial deployment of resources, or to establish the conditions on the ground for the launching of the operation.

Preparatory measures shall be agreed by the Council, on a proposal by the High Representative.

In order to ensure the rapid implementation of preparatory measures, the High Representative shall inform the European Parliament and the Commission as early as possible of the Council’s intention to launch a preparatory measure and, in particular, of the estimated resources required for this purpose. The Commission shall take all the measures necessary to ensure a rapid disbursement of the funds.

The financing of measures agreed by the Council for the preparation of Union crisis management operations under Title V of the Treaty on European Union shall cover incremental costs directly arising from a specific field deployment of a mission or team involving inter alia personnel from the Union institutions, including high risk insurance, travel and accommodation costs and per diem payments.

(d)appropriations for one-off actions, or even actions for an indefinite duration, carried out by the Commission by virtue of tasks resulting from its prerogatives at institutional level pursuant to the TFEU and the Euratom Treaty, other than its right of legislative initiative referred to in point (b), and under specific powers directly conferred on it by those Treaties, a list of which is to be given in the delegated acts adopted pursuant to this Regulation;

(e)appropriations for the operation of each institution under its administrative autonomy.

Article 57
Implementation of the budget by institutions other than the Commission

1.The Commission shall confer on the other institutions the requisite powers for the implementation of the sections of the budget relating to them.

2.The Commission may conclude agreements with the other Union institutions in order to facilitate the implementation of appropriations, in particular administrative ones governing the provision of services, supply of products, execution of works or the implementation of building contracts.

3.Such service-level agreements may also be agreed upon between departments of the Union institutions, Union bodies, European offices, bodies or persons entrusted with implementation of specific actions in the CFSP pursuant to Title V of the TEU and the Office of the Secretary General of the Board of Governors of the European schools. Those agreements shall enable the recovery of costs incurred as a result of their implementation.

Article 58
Delegation of budget implementation powers

1.The Commission and each of the other institutions may, within their departments, delegate their powers of budget implementation in accordance with the conditions laid down in this Regulation and by their internal rules and within the limits which they lay down in the instrument of delegation. Those so empowered shall act within the limits of the powers expressly conferred upon them.

2.However, the Commission may delegate its powers of budget implementation concerning the operational appropriations of its own section to the Heads of Union delegations and, in order to ensure business continuity during their absence, to the deputy Heads of Delegations. When Heads of Union delegations act as subdelegated authorising officers of the Commission and their deputies in the absence of the latter, they shall apply the Commission rules for the implementation of the budget and shall be subject to the same duties, obligations and accountability as any other subdelegated authorising officer of the Commission.

The Commission may withdraw the delegation in accordance with its own rules.

For the purposes of the first subparagraph, the High Representative shall take the measures necessary to facilitate cooperation between Union delegations and Commission departments.

3.The EEAS may exceptionally delegate its powers of budget implementation concerning the administrative appropriations of its own section to Commission staff of the delegation where this is necessary in order to ensure the continuity in the administration of Delegations in the absence of the EEAS competent authorising officer. In the exceptional cases where Commission staff of Union Delegations act as sub-delegated authorising officers of the EEAS, they shall apply the EEAS internal rules for the implementation of the budget and shall be subject to the same duties, obligations and accountability as any other sub-delegated authorising officer of the EEAS.

The EEAS may withdraw the delegation in accordance with its own rules.

Article 59
Conflict of interest

1.Financial actors as defined in Chapter 4 of Title IV and other persons involved under direct, indirect and shared implementation in budget implementation and management, including acts preparatory thereto, audit or control shall not take any action which may bring their own interests into conflict with those of the Union. They shall also take appropriate measures to prevent conflict of interest from arising in the functions under their responsibility and to address situations which may objectively be perceived as a conflict of interest.

2.For the purposes of paragraph 1, a conflict of interest exists where the impartial and objective exercise of the functions of a financial actor or other person, as referred to in paragraph 1, is compromised for reasons involving family, emotional life, political or national affinity, economic interest or any other direct or indirect personal interest.

Article 60
Conflict of interest of members of the staff

Where the risk of conflict of interest referred to in Article 59 involves a member of the staff covered by the Staff Regulations, he or she shall refer the matter to the authorising officer by delegation who shall confirm in writing whether a conflict of interest exists. The member of the staff in question shall also inform his or her hierarchical superior. Where a conflict of interest is found to exist, the Appointing Authority shall relieve the official from responsibility in this matter. The authorising officer by delegation shall personally ensure that any further appropriate action is taken.

CHAPTER 2
Methods of implementation

Article 61
Methods of implementation of the budget

1.The Commission shall implement the budget in any of the following ways:

(a)directly (‘direct implementation’), by its departments, including its staff in the Union delegations under the authority of their respective Head of delegation, in accordance with Article 58(2), or through executive agencies as referred to in Article 68;

(b)under shared implementation with Member States (‘shared implementation’);

(c)indirectly (‘indirect implementation'), where this is provided for in the basic act or in the cases referred to in points (a) to (d) of the first subparagraph of Article 56(2), with:

(i)third countries or the bodies they have designated;

(ii)international organisations or their agencies, as defined in Article 151;

(iii)the European Investment Bank or the European Investment Fund ('the EIB group');

(iv)bodies referred to in Articles 69 and 70;

(v)public law bodies;

(vi)bodies governed by private law with a public service mission to the extent that they provide adequate financial guarantees;

(vii)bodies governed by the private law of a Member State that are entrusted with the implementation of a public-private partnership and that provide adequate financial guarantees;

(viii)bodies or persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V TEU, and identified in the relevant basic act.

2.The Commission is responsible for the implementation of the budget in accordance with Article 317 TFEU and shall not delegate implementation of the budget to third parties, where such tasks involve a large measure of discretion implying political choices.

The Commission shall not, through contracts in accordance with Title VII, outsource tasks involving the exercise of public authority and discretionary powers of judgement.

Article 62
Shared implementation with Member States

1.Where the budget is implemented under shared implementation the Commission and the Member States shall respect the principles of sound financial management, transparency and non-discrimination and shall ensure the visibility of Union action. To this end, the Commission and the Member States shall fulfil their respective control and audit obligations and assume the resulting responsibilities laid down in this Regulation. Complementary provisions shall be laid down in sector-specific rules.

2.Member States shall take all the necessary measures, including legislative, regulatory and administrative measures, to protect the Union's financial interests, namely by:

(a)ensuring that actions financed from the budget are implemented correctly and effectively and in accordance with the applicable sector-specific rules and, for that purpose, designating in accordance with paragraph 3, and supervising bodies responsible for the management and control of Union funds;

(b)preventing, detecting and correcting irregularities and fraud.

In order to protect the Union's financial interests, Member States shall, respecting the principle of proportionality, and in compliance with this Article, and the relevant sector-specific rules, carry out ex ante and ex post controls including, where appropriate, on-the-spot checks on representative and/or risk- based samples of transactions. They shall also recover funds unduly paid and bring legal proceedings where necessary in this regard.

Member States shall impose effective, dissuasive and proportionate penalties on recipients where provided for in sector- specific rules and in specific provisions in national legislation.

As part of its risk assessment and in accordance with sector- specific rules, the Commission shall monitor the management and control systems established in the Member States. The Commission shall, in its audit work, respect the principle of proportionality and shall take into account the level of assessed risk in accordance with the sector-specific rules.

3.In accordance with the criteria and procedures laid down in sector-specific rules, Member States shall, at the appropriate level, designate bodies to be responsible for the management and control of Union funds. Such bodies may also carry out tasks not related to the management of Union funds and may entrust certain of their tasks to other bodies, including the bodies indicated in Article 61(1) (c) (ii) and (iii).

When deciding on the designation of bodies, Member States may base their decision on whether the management and control systems are essentially the same as those already in place for the previous period and whether they have functioned effectively.

If audit and control results show that the designated bodies no longer comply with the criteria set out in the sector-specific rules, Member States shall take the measures necessary to ensure that deficiencies in the implementation of the tasks of these bodies are remedied, including by ending the designation in accordance with the sector-specific rules.

The sector-specific rules shall define the role of the Commission in the process set out in this paragraph.

4.Bodies designated pursuant to paragraph 3 shall:

(a)set up and ensure the functioning of an effective and efficient internal control system;

(b)use an accounting system that provides accurate, complete and reliable information in a timely manner;

(c)provide the information required under paragraph 5;

(d)ensure ex post publication in accordance with Article 36(2). Any processing of personal data shall comply with national provisions implementing Directive 95/46/EC.

5.Bodies designated pursuant to paragraph 3 shall, by 15 February of the following financial year, provide the Commission with:

(a)their accounts on the expenditure that was incurred, during the relevant reference period as defined in the sector-specific rules, in the execution of their tasks and that was presented to the Commission for reimbursement. Those accounts shall include pre-financing and sums for which recovery procedures are underway or have been completed. They shall be accompanied by a management declaration confirming that, in the opinion of those in charge of the management of the funds:

(i)the information is properly presented, complete and accurate,

(ii)the expenditure was used for its intended purpose, as defined in the sector-specific rules,

(iii)the control systems put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions;

(b)an annual summary of the final audit reports and of controls carried out, including an analysis of the nature and extent of errors and weaknesses identified in systems, as well as corrective action taken or planned.

The accounts referred to in point (a) of the first subparagraph and the summary referred to in point (b) of the first subparagraph shall be accompanied by an opinion of an independent audit body, drawn up in accordance with internationally accepted audit standards. That opinion shall establish whether the accounts give a true and fair view, whether expenditure for which reimbursement has been requested from the Commission is legal and regular, and whether the control systems put in place function properly. The opinion shall also state whether the audit work puts in doubt the assertions made in the management declaration referred to in point (a) of the first subparagraph.

The deadline of 15 February may exceptionally be extended by the Commission to 1 March, upon communication by the Member State concerned.

Member States may, at the appropriate level, publish the information referred to in this paragraph.

In addition, Member States may provide declarations signed at the appropriate level based on the information referred to in this paragraph.

6.In order to ensure that Union funds are used in accordance with the applicable rules, the Commission shall:

(a)apply procedures for the examination and acceptance of the accounts of the designated bodies, ensuring that the accounts are complete, accurate and true;

(b)exclude from Union financing expenditure for which disbursements have been made in breach of applicable law;

(c)interrupt payment deadlines or suspend payments where provided for in the sector-specific rules.

The Commission shall end all or part of the interruption of payment deadlines or suspension of payments after a Member State has presented its observations and as soon as it has taken any necessary measures. The annual activity report referred to in Article 73(9) shall cover all the obligations under this subparagraph.

7.Sector-specific rules shall take account of the needs of European Territorial Cooperation programmes as regards, in particular, the content of the management declaration, the process set out in paragraph 3 and the audit function.

8.The Commission shall compile a register of bodies responsible for management, certification and audit activities under the sector-specific regulations.

In order to promote best practices in the implementation of the Structural Funds, the Cohesion Fund, the European Agricultural Fund for Rural Development, the EAGF and the European Fisheries Fund, the Commission may, for information purposes, make available a methodological guide setting out its own control strategy and approach, including checklists, and best practice examples to bodies responsible for management and control activities. That guide shall be updated whenever necessary.

9.Resources allocated to Member States under shared implementation may also be used in combination with operations and instruments carried out under Regulation 2015/1017 of the European Parliament and of the Council of 25 June 2015 on the European Fund for Strategic Investments, the European Investment Advisory Hub and the European Investment Project Portal and amending Regulations (EU) No 1291/2013 and (EU) No 1316/2013.

CHAPTER 3
EUROPEAN OFFICES AND UNION BODIES

Section 1
european offices

Article 63
Definition and scope

1."European offices" are administrative structures set up by the Commission or by the Commission with one or more institutions to perform specific cross-cutting tasks, provided that that can be justified by a cost-benefit study and an assessment of the associated risks.

2.Within their scope of their competences, European offices:

(a)shall perform obligatory tasks provided for in their act of establishment or in other Union legislation;

(b)may perform non-obligatory tasks authorised by their Management Committees having considered the costs-benefits and associated risks for the parties involved. For the performance of these tasks the office may receive delegation of authorising officer powers, or may conclude ad hoc service-level agreements with the Union institutions, Union bodies, other European offices or third parties.

3.This Section shall apply to the operation of European Anti-Fraud Office, with the exception of paragraph 4 of this Article, Article 65 and paragraphs 1, 2 and 3 of Article 66.

4.The internal auditor of the Commission shall exercise all responsibilities laid down in Chapter 8 of this Title.

Article 64
Appropriations regarding the European Offices

1.The appropriations authorised to implement obligatory tasks of each European office shall be entered in a specific budget line within the section of the budget relating to the Commission and shall be set out in detail in an Annex to that section.

The Annex referred to in the first subparagraph shall take the form of a statement of revenue and expenditure, subdivided in the same way as the sections of the budget.

The appropriations entered in that Annex:

(a)shall cover all the financial requirements of each European office in the performance of the obligatory tasks provided for in its act of establishment or in other Union legislation;

(b)may cover financial requirements of a European office in the performance of tasks requested by the Union institutions, Union bodies, European offices and agencies established by or under the Treaties and authorised in accordance with the act of establishment of the office;

2.The Commission shall, in respect of the appropriations entered in the Annex for each European office delegate the powers of authorising officer to the Director of the European office concerned, in accordance with Article 72.

3.Each European office's establishment plan shall be annexed to that of the Commission.

4.The Director of each European office shall take decisions on transfers within the Annex referred to in paragraph 1. The Commission shall inform the European Parliament and the Council of such transfers.

Article 65
Non-obligatory tasks

For the non-obligatory tasks referred to in point (b) of Article 63(2), a European office may:

(a)receive delegation to its Director from Union institutions, Union bodies and other European offices, together with a delegation of the authorising officer powers concerning appropriations entered in the section of the budget of the Union institution, Union body or other European office. The Union institutions, Union bodies and other European offices concerned shall set the limits and conditions for this delegation of powers. Such delegation shall be agreed in accordance with the act of establishment of the European office, notably on the conditions and modalities of this delegation;

(b)conclude ad hoc service-level agreements. In such cases, the Director of the European office shall adopt, in accordance with its act of establishment, the specific provisions governing the implementation of those tasks, the recovery of costs incurred, and the keeping of the corresponding accounts. The office shall report to the institutions, Union bodies or other European offices concerned of the results of such accounts.

Article 66
Accounts of the European offices

1.Each European office shall draw up accounting records of its expenditure, enabling the proportion of its services supplied to each of the institutions, Union bodies or other European offices to be determined. The Director of the European office concerned shall adopt, after approval by its Management Committee, the criteria upon which the accounting records shall be based.

2.The remarks concerning the specific budget line in which the total appropriations for each European office to which authorising officer powers have been delegated in accordance with point (a) of Article 65 are entered shall show an estimate of the costs of services supplied by that office to each of the Union institutions, Union bodies and other European offices concerned. This shall be based on the accounting records provided for in paragraph 1 of this Article.

3.Each European office to which authorising officer powers have been delegated in accordance with point (a) of Article 65 shall notify the Union institutions, Union bodies and other European offices concerned of the results of the accounting records provided for in paragraph 1 of this Article.

4.Each European office's accounts shall form an integral part of the Union's accounts in accordance with Article 234.

5.The Commission accounting officer, acting on a proposal from the Management Committee of the European office in question, may delegate to a member of the staff of the office some of his tasks relating to the collection of revenue and the payment of expenditure made directly by the European office in question.

6.To meet the cash requirements of the European office, bank accounts or post office giro accounts may be opened in its name by the Commission, acting on a proposal from the Management Committee. The final cash position for each year shall be reconciled and adjusted between the European office in question and the Commission at the end of the financial year. 

Section 2
Union bodies 

Article 67
Applicability to the Euratom Supply Agency 

This Regulation shall apply to the implementation of the budget for the Euratom Supply Agency.

Article 68
Executive agencies 

1.The Commission may delegate powers to the executive agencies to implement all or part of a Union programme or project, including pilot projects and preparatory actions and the implementation of administrative expenditures, on its behalf and under its responsibility, in accordance with Council Regulation (EC) No 58/2003 ( 36 ). The executive agencies shall be created by means of a Commission Decision and shall be legal persons under Union law. They shall receive an annual contribution.

2.The directors of the executive agencies shall act as authorising officers by delegation as regards the implementation of the operational appropriations relating to the Union programmes which they manage in whole or in part.

3.The steering committee of the executive agencies may agree with the Commission that the accounting officer of the Commission shall also act as accounting officer of the executive agency. The steering committee may also entrust the accounting officer of the Commission with part of the tasks of the accounting officer of the executive agency taking into account cost-benefit considerations. In both cases, necessary arrangements shall be made in order to avoid any conflict of interest.

Article 69
Bodies set up under the TFEU and the Euratom Treaty

1.The Commission is empowered to adopt delegated acts in accordance with Article 261 to supplement the Financial Regulation with a framework financial regulation for bodies which are set up under the TFEU and the Euratom Treaty and which have legal personality and receive contributions charged to the budget.

2.The framework financial regulation shall be based on the principles and rules set out in this Regulation.

3.The financial rules of those bodies shall not depart from the framework financial regulation except where their specific needs so require and with the Commission's prior consent.

4.Discharge for the implementation of the budgets of the bodies referred to in paragraph 1, shall be given by the European Parliament on the recommendation of the Council. The bodies referred to in paragraph 1 shall fully cooperate with the institutions involved in the discharge procedure and provide, as appropriate, any additional necessary information, including through attendance at meetings of the relevant bodies.

5.The Commission's internal auditor shall exercise the same powers over the bodies referred to in paragraph 1 as those exercised in respect of the Commission.

6.An independent external auditor shall verify that the annual accounts of each of the bodies referred to in paragraph 1 of this Article properly present the income, expenditure and financial position of the relevant body prior to the consolidation in the Commission's final accounts. Unless otherwise provided in the basic act referred to in paragraph 1 of this Article, the Court of Auditors shall prepare a Specific Annual Report on each body in line with the requirements of Article 287(1) TFEU. In preparing this report, the Court shall consider the audit work performed by the independent external auditor and the action taken in response to the auditor's findings.

Article 70
Public-private partnership bodies

The bodies having legal personality set up by a basic act and entrusted with the implementation of a public-private partnership shall adopt their financial rules.

Those rules shall include a set of principles necessary to ensure sound financial management of Union funds.

The Commission is empowered to adopt delegated acts in accordance with Article 261 to supplement the Financial Regulation with a model financial regulation laying down the principles necessary to ensure sound financial management of Union funds and which shall be based on Article 149.

The financial rules of those bodies shall not depart from the model financial regulation except where their specific needs so require and with the Commission's prior consent.

Paragraphs 2, 3 and 4 of Article 69 shall apply to public-private partnership bodies.

CHAPTER 4
Financial actors

SECTION 1
PRINCIPLE OF SEGREGATION OF DUTIES

Article 71
Segregation of duties

1.The duties of authorising officer and accounting officer shall be segregated and mutually exclusive.

2.Each institution shall provide each financial actor with the resources required to perform his duties and a charter describing in detail his tasks, rights and obligations.

SECTION 2
AUTHORISING OFFICER

Article 72
Authorising officer

1.Each institution shall perform the duties of authorising officer.

2.For the purposes of this Title, the term ‘staff’ refers to persons covered by the Staff Regulations.

3.Each institution shall delegate, in compliance with the conditions in its rules of procedure, the duties of authorising officer to staff of an appropriate level. It shall indicate, in its internal administrative rules, the staff to whom it delegates those duties, the scope of the powers delegated and whether the persons to whom those powers are delegated may subdelegate them.

4.The powers of authorising officer shall be delegated or subdelegated only to staff.

5.Authorising officers responsible shall act within the limits set by the instrument of delegation or subdelegation. The authorising officer responsible may be assisted by one or more members of staff entrusted, under his or her responsibility, with the carrying out of certain operations necessary for the implementation of the budget and the production of the financial and management information.

6.Each institution or each body referred to in Article 69 shall inform the Court of Auditors, the European Parliament, the Council and the accounting officer of the Commission within two weeks of the appointment and release of authorising officers by delegation, internal auditors and accounting officers, and of any internal rules it adopts in respect of financial matters.

7.Each institution shall inform the Court of Auditors of the appointment of imprest administrators and of delegation decisions under Article 78 and Article 85.

Article 73
Powers and duties of the authorising officer

1.The authorising officer shall be responsible in each institution for implementing revenue and expenditure in accordance with the principle of sound financial management and for ensuring compliance with the requirements of legality and regularity and equal treatment of recipients of a programme.

2.For the purposes of paragraph 1 of this Article, the authorising officer by delegation shall, in accordance with Article 34 and the minimum standards adopted by each institution and having due regard to the risks associated with the management environment and the nature of the actions financed, put in place the organisational structure and the internal control systems suited to the performance of his or her duties. The establishment of such structure and systems shall be supported by a comprehensive risk analysis, which takes into account their cost effectiveness.

3.To implement expenditure, the authorising officer responsible shall make budgetary and legal commitments, shall validate expenditure and authorise payments and shall undertake the preliminary steps for the implementation of appropriations.

4.Implementation of revenue shall comprise drawing up estimates of amounts receivable, establishing entitlements to be recovered and issuing recovery orders. It shall involve waiving established entitlements, where appropriate.

5.Each operation shall be subject at least to an ex ante control relating to the operational and financial aspects of the operation, on the basis of a multiannual control strategy which takes risk into account. The purpose of the ex ante controls is to prevent errors and irregularities before the authorisation of operations.

The extent in terms of frequency and intensity of the ex ante controls shall be determined by the authorising officer responsible taking into account the results of prior controls as well as risk-based and cost-effectiveness considerations. In case of doubt, the authorising officer responsible for validating the relevant operations shall request complementary information or perform an on-the-spot control in order to obtain reasonable assurance as part of the ex ante control.

For a given operation, the verification shall be carried out by staff other than those who initiated the operation. The staff who carry out the verification shall not be subordinate to the members of staff who initiated the operation.

6.The authorising officer by delegation may put in place ex post controls to detect and correct errors and irregularities or operations after they have been authorised. Such controls may be organised on a sample basis according to risk and shall take account of the results of prior controls and cost-effectiveness considerations.

The ex post controls shall be carried out by staff other than those responsible for the ex ante controls. The staff responsible for the ex post controls shall not be subordinate to the members of staff responsible for the ex ante controls.

Where the authorising officer by delegation implements financial audits of beneficiaries as ex-post controls, the related audit rules shall be clear, consistent and transparent, and shall respect the rights of both the Commission and the auditees.

7.Authorising officers responsible and staff responsible for budget implementation shall have the necessary professional skills.

In each institution, the authorising officer by delegation shall ensure the following:

(a)that the authorising officers by sub-delegation and their staff receive regularly updated and appropriate information concerning the control standards and the methods and techniques available for that purpose;

(b)that measures are taken, where needed, to ensure the effective and efficient functioning of the control systems in accordance with paragraph 2.

8.If a member of staff, involved in the financial management and control of transactions, considers that a decision he or she is required by his or her superior to apply or to agree to is irregular or contrary to the principle of sound financial management or the professional rules which that member of staff is required to observe, he or she shall inform his or her hierarchical superior accordingly. If the member of staff does so in writing, the hierarchical superior shall reply in writing. If the hierarchical superior fails to take action or confirms the initial decision or instruction and the member of staff believes that such confirmation does not constitute a reasonable response to his or her concern, the member of staff shall inform the authorising officer by delegation in writing. If that officer does not reply within a reasonable time given the circumstances of the case and, in any event, within a month at most, the member of staff shall inform the relevant panel referred to in Article 139.

In the event of any illegal activity, fraud or corruption which may harm the interests of the Union, the member of staff shall inform the authorities and bodies designated in the Staff Regulations and the decisions of the Union institutions concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any other illegal activity detrimental to the Union's interests. Contracts with external auditors carrying out audits of the financial management of the Union shall provide for an obligation of the external auditor to inform the authorising officer by delegation of any suspected illegal activity, fraud or corruption which may harm the interests of the Union.

9.The authorising officer by delegation shall report to his or her institution on the performance of his or her duties in the form of an annual activity report containing financial and management information, including the results of controls, declaring that, except as otherwise specified in any reservations related to defined areas of revenue and expenditure, he or she has reasonable assurance that:

(a)the information contained in the report presents a true and fair view;

(b)the resources assigned to the activities described in the report have been used for their intended purpose and in accordance with the principle of sound financial management;

(c)the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions.

The annual activity report shall include information on the operations carried out, by reference to the objectives set in the strategic plans, the risks associated with those operations, the use made of the resources provided and the efficiency and effectiveness of internal control systems. This includes an overall assessment of the costs and benefits of controls and information on the extent to which the operational expenditure authorised contributes to the achievement of EU strategic objectives and generates EU added value. The Commission shall prepare a summary of the annual activity reports for the preceding year.

10.The authorising officer by delegation shall record, for each financial year, contracts concluded by the negotiated procedures referred to in points (a) to (f) of point 11.1 and point 39 of the Annex to this Regulation. If the proportion of negotiated procedures in relation to the number of contracts awarded by the same authorising officer by delegation increases significantly in relation to earlier years or if that proportion is distinctly higher than the average recorded for the institution, the authorising officer responsible shall report to the institution setting out any measures taken to reverse that trend. Each institution shall send a report on negotiated procedures to the European Parliament and Council. In the case of the Commission, that report shall be annexed to the summary of the annual activity reports referred to in paragraph 9 of this Article.

Article 74
Keeping of supporting documents by authorising officers

The authorising officer shall set up paper-based or electronic systems for the keeping of original supporting documents relating to and subsequent to budget implementation and budget implementation measures. Such documents shall be kept for at least five years from the date on which the European Parliament grants discharge for the budgetary year to which the documents relate.

Documents relating to operations not definitively closed shall be kept until the end of the year following that in which the operations are closed.

Personal data contained in supporting documents shall be deleted where possible when those data are not necessary for budgetary discharge, control and audit purposes. Article 37(2) of Regulation (EC) No 45/2001 shall apply to the conservation of traffic data.

Article 75
Powers and duties of Heads of Union Delegations

1.Where Heads of Union delegations act as authorising officers by subdelegation in accordance with Article 58(2) , they shall be subject to the Commission as the institution responsible for the definition, exercise, monitoring and appraisal of their duties and responsibilities as authorising officers by subdelegation and shall cooperate closely with the Commission with regard to the proper implementation of the funds, in order to ensure, in particular, the legality and regularity of financial transactions, respect for the principle of sound financial management in the management of the funds and the effective protection of the financial interests of the Union. They shall be subject to the Internal Rules of the Commission and to the Commission Charter for the implementation of the financial management tasks subdelegated to them. They may be assisted in their duties by staff of the Commission.

To this effect, they shall take the measures necessary to prevent any situation susceptible to put at stake the responsibility of the Commission for the implementation of the budget subdelegated to them, as well as any conflict of priorities which is likely to have an impact on the implementation of the financial management tasks subdelegated to them.

Where a situation or conflict referred to in the second subparagraph arises, the Heads of Union delegations shall inform the Directors-General responsible of the Commission and of the EEAS thereof without delay. Those Directors-General shall take appropriate steps to remedy the situation.

2.If Heads of Union delegations find themselves in a situation as referred to in Article 73(8), they shall refer the matter to the panel referred to in Article 139. In the event of any illegal activity, fraud or corruption which may harm the interests of the Union, they shall inform the authorities and bodies designated by the applicable legislation.

3.Heads of Union delegations acting as authorising officers by subdelegation in accordance with Article 58(2) shall report to their authorising officer by delegation so that the latter can integrate their reports in his or her annual activity report referred to in Article 73(9). The reports of the Heads of Union delegations shall include information on the efficiency and effectiveness of internal control systems put in place in their delegation, as well as on the management of operations subdelegated to them, and provide the assurance referred to in the third subparagraph of Article 89(5) . Those reports shall be annexed to the annual activity report of the authorising officer by delegation, and shall be made available to the European Parliament and the Council having due regard, where appropriate, to their confidentiality.

The Heads of Union delegations shall fully cooperate with institutions involved in the discharge procedure and provide, as appropriate, any necessary additional information. In this context, they may be requested to attend meetings of the relevant bodies and assist the authorising officer by delegation responsible.

Heads of Union delegations acting as authorising officers by subdelegation in accordance with Article 58 shall reply to any request by the Commission's authorising officer by delegation at the Commission's own request or, in the context of discharge, at the request of the European Parliament.

The Commission shall ensure that subdelegating powers are not detrimental to the discharge procedure under Article 319 TFEU .

4.Paragraphs 1, 2 and 3 shall also apply to the deputy Heads of Union delegations when they act as authorising officers by subdelegation in the absence of the Heads of Union delegations.

SECTION 3
ACCOUNTING OFFICER

Article 76
Powers and duties of the accounting officer

Each institution shall appoint an accounting officer who shall be responsible in each institution for the following:

(a)properly implementing payments, collecting revenue and recovering amounts established as being receivable;

(b)preparing and presenting the accounts in accordance with Title XIII ;

(c)keeping the accounts in accordance with Articles 80 and 81;

(d)laying down the accounting rules, procedures and the chart of accounts, in accordance with Articles 79 to 81;

(e)laying down and validating the accounting systems and where appropriate validating systems laid down by the authorising officer to supply or justify accounting information; in this respect, the accounting officer shall be empowered to verify at any time compliance with validation criteria;

(f)treasury management.

The responsibilities of the accounting officer of the EEAS shall concern only the EEAS section of the budget as implemented by the EEAS. The accounting officer of the Commission shall remain responsible for the entire Commission section of the budget, including accounting operations relating to appropriations subdelegated to Heads of Union delegations.

The accounting officer of the Commission shall also act as the accounting officer of the EEAS in respect of the implementation of the EEAS section of the budget.

Article 77
Appointment and termination of duties of the accounting officer

1.Each institution shall appoint an accounting officer from officials subject to the Staff Regulations of Officials of the European Union.

The accounting officer shall be chosen by the institution on the grounds of his particular competence as evidenced by diplomas or by equivalent professional experience.

2.Two or more institutions or bodies may appoint the same accounting officer.

In such case, they shall make the necessary arrangements in order to avoid any conflict of interest.

3.A trial balance shall be drawn up without delay in the event of termination of the duties of the accounting officer.

4.The trial balance accompanied by a hand-over report shall be transmitted by the accounting officer who is terminating his duties or, if it is not possible, by an official in his department to the new accounting officer.

The new accounting officer shall sign the trial balance in acceptance within one month from the date of transmission and he may make reservations.

The hand-over report shall also contain the result of the trial balance and any reservations made.

Article 78
Powers which may be delegated by the accounting officer

The accounting officer may, in the performance of his or her duties, delegate certain tasks to subordinate staff and to imprest administrators appointed in accordance with Article 86(1).

The instrument of delegation shall set out those tasks.

Article 79
Accounting rules

1.The accounting rules to be applied by all the Union institutions, the European offices referred to in Section 1 of Chapter 3 of this Title and the Union bodies referred to in Article 234 shall be based on internationally accepted accounting standards for the public sector. Those rules shall be adopted by the accounting officer of the Commission following consultation with the accounting officers of other Union institutions, European offices and Union bodies.

2.The accounting officer may diverge from those standards if he or she considers this necessary in order to give a fair presentation of the assets and liabilities, charges, income and cash flow. Where an accounting rule diverges materially from those standards, the notes to the financial statements shall disclose this fact and the reasons for it.

3.The accounting rules referred to in paragraph 1 shall lay down the structure and content of the financial statements, as well as the accounting principles underlying the accounts.

4.The budget accounts referred to in Article 234 shall respect the budgetary principles laid down in this Regulation. They shall provide a detailed record of the implementation of the budget. They shall record all budgetary revenue and expenditure operations provided for in this Title and give a fair presentation thereon.

Article 80
Keeping the accounts

1.The accounting officer of the Commission shall be responsible for laying down the harmonised charts of accounts to be applied by all the Union institutions, the European offices referred to in Section 1 of Chapter 3 of this Title and the Union bodies referred to in Article 234.

2.The accounting officers shall obtain from authorising officers all the information necessary for the production of accounts which give a fair presentation of the institutions' financial situation and of budgetary implementation. The authorising officers shall guarantee the reliability of that information.

3.Before the adoption of the accounts by the institution, or body referred to in Article 69, the accounting officer shall sign them off, thereby certifying that he or she has reasonable assurance that the accounts give a fair presentation of the financial situation of the institution or body referred to in Article 69.

For that purpose, the accounting officer shall verify that the accounts have been prepared in accordance with the accounting rules, referred to in Article 79, and the accounting procedures, referred to in point (d) of the first subparagraph of Article 76, and that all revenue and expenditure is entered in the accounts.

4.The authorising officer by delegation shall send the accounting officer, in accordance with the rules adopted by the latter, any financial and management information required for the performance of the accounting officer’s duties.

The accounting officer shall be informed, regularly and at least for the closure of the accounts, by the authorising officer of the relevant financial data of the fiduciary bank accounts in order to allow the use of Union funds to be reflected in the accounts of the Union.

The authorising officers shall remain fully responsible for the proper use of the funds they manage, the legality and regularity of the expenditure under their control and the completeness and accuracy of the information forwarded to the accounting officer.

5.The responsible authorising officer shall notify the accounting officer of all developments or significant modifications of a financial management system, an inventory system or a system for the valuation of assets and liabilities, if it provides data for the accounts of the institution or is used to substantiate data thereof, so that the accounting officer can verify compliance with the validation criteria

At any time, the accounting officer may reexamine a financial management system already validated and may request that the responsible authorising officer establishes an action plan in order to correct, in due time, possible weaknesses.

The responsible authorising officer shall be responsible for the completeness of information transmitted to the accounting officer.

6.The accounting officer shall be empowered to check the information received as well as to carry out any further checks he or she deems necessary in order to sign off the accounts.

The accounting officer shall make reservations, if necessary, explaining exactly the nature and scope of such reservations.

7.An institution's accounting system shall serve to organise the budgetary and financial information in such a way that figures can be entered, filed and registered.

8.The accounting system shall consist of general accounts and budget accounts. The accounts shall be kept in euro and on the basis of the calendar year.

9.The authorising officer by delegation may also keep detailed management accounts.

10.Supporting documents for the accounting system and for the preparation of the accounts referred to in Article 234  shall be kept for at least five years from the date on which the European Parliament grants discharge for the budgetary year to which the documents relate.

However, documents relating to operations not definitively closed shall be kept until the end of the year following that in which the operations are closed. Article 37(2) of Regulation (EC) No 45/2001 shall apply to the conservation of traffic data.

Article 81
General accounts

1.The general accounts shall record, in chronological order using the double-entry method, all events and operations which affect the economic and financial situation and the assets and liabilities of the institutions and of the bodies referred to in Article 234.

2.Balances and movements in the general accounts shall be entered in the accounting ledgers.

3.All accounting entries, including adjustments to the accounts, shall be based on supporting documents, to which the entries shall refer.

4.The accounting system shall be such as to leave a clear audit trail for all accounting entries.

Article 82
Bank accounts

1.For the requirements of treasury management, the accounting officer may open accounts in the name of the institution with financial institutions or national central banks or cause such accounts to be opened. The accounting officer shall also be responsible for closing those accounts or for ensuring that they are closed.

2.The terms governing the opening, operation and use of bank accounts shall provide, depending on internal control requirements, that cheques, bank credit transfer orders or any other banking operations must be signed by one or more duly authorised members of staff. Manual instructions shall be signed by at least two duly authorised members of staff, or by the accounting officer in person.

3.Within the implementation of a programme or an action, fiduciary accounts may be opened on behalf of the Commission in order to allow for their management by an entity pursuant to points (ii), (iii), (v) or (vi) of Article 61(1)(c) .

Such accounts shall be opened under the responsibility of the authorising officer in charge of the implementation of the programme or action in agreement with the accounting officer of the Commission.

Such accounts shall be managed under the responsibility of the authorising officer.

4.The accounting officer of the Commission shall lay down rules for the opening, management and closure of fiduciary accounts and their use.

Article 83
Treasury management

1.Unless otherwise provided for in this Regulation, only the accounting officer shall be empowered to manage cash and cash equivalents. The accounting officer shall be responsible for their safekeeping.

2.The accounting officer shall ensure that his institution has at its disposal sufficient funds to cover the cash requirements arising from budgetary implementation within the provisions of the applicable regulatory framework and shall set up procedures to ensure that none of the accounts opened in accordance with Article 82(1) and Article 86(2) is in debit.

3.Payments shall be made by bank credit transfer, by cheque or, from imprest accounts, or if specifically authorised by the Accounting Officer, by debit card, direct debit or other means of payment, in accordance with the rules laid down by the accounting officer.

4.The accounting officer may only make payments if the payee’s legal entity and payment details have first been entered in a common file by institution for which he/she is responsible.

Before entering into a commitment towards a third party, the authorising officer shall establish the legal entity and payment details of payees and enter them in the common file by institution for which the accounting officer is responsible in order to ensure transparency, accountability and proper payment implementation.

Authorising officers shall inform the accounting officer of any change in the legal and payment details communicated to them by the payee and shall check that these details are valid before they authorise any payment.

Article 84
The inventory of assets

1.Each Union institution and body referred to in Article 234 shall keep inventories showing the quantity and value of all the Union's tangible, intangible and financial assets in accordance with a model drawn up by the accounting officer of the Commission.

Each Union institution and body referred to in Article 234 shall check that entries in the inventory correspond to the actual situation.

All items acquired with a period of use greater than one year, which are not consumables, and whose purchase price or production cost is higher than that indicated by the accounting procedures referred to in Article 76 shall be entered in the inventory and recorded in the fixed assets accounts.

2.The sale of the Union's tangible assets shall be suitably advertised.

3.Each of the Union institutions and bodies referred to in Article 234 shall adopt provisions on safeguarding the assets included in their respective balance sheets and decide which administrative departments are responsible for the inventory system.

SECTION 4
IMPREST ADMINISTRATOR

Article 85
Imprest accounts

1.Imprest accounts may be set up for the collection of revenue other than own resources and for the payment of expenditure, where owing to the limited amounts involved, it is materially impossible or inefficient to carry out payment operations by budgetary procedures.

However, in the field of crisis management aid and humanitarian aid operations, imprest accounts may be used without any limitation on the amount, while respecting the level of appropriations decided by the European Parliament and the Council on the corresponding budget line for the current financial year and in accordance with the Commission's internal rules.

In Union delegations, imprest accounts may also be used to execute payments, of limited amounts, by budgetary procedures, if such use is efficient and effective due to local requirement.

2.In Union delegations, imprest accounts shall be set up for the payment of expenditure from both the Commission section of the budget and the EEAS section of the budget, ensuring full traceability of expenditure.

Article 86
Creation and administration of
imprest accounts

1.The creation of an imprest account and the appointment of an imprest administrator shall be the subject of a decision by the accounting officer of the institution, on a duly substantiated proposal from the authorising officer responsible. That decision shall set out the respective responsibilities and obligations of the imprest administrator and the authorising officer.

Imprest administrators shall be chosen from officials or, should the need arise and only in duly substantiated cases, from other members of staff or subject to the limits established in the Commission's internal rules from personnel employed by the Commission in the field of crisis management aid and humanitarian aid operations provided that their employment contracts guarantee equivalent level of protection in terms of liability as applicable to the staff pursuant to Article 93. Imprest administrators shall be chosen on the grounds of their knowledge, skills and particular qualifications as evidenced by diplomas or by appropriate professional experience, or after an appropriate training programme.

In deciding to create an imprest account, the accounting officer shall specify the operating terms and the conditions for use of the imprest account.

The amendment of the operating terms for an imprest account shall also be the subject of a decision by the accounting officer on a duly substantiated proposal from the authorising officer responsible.

2.Bank accounts for the imprest shall be opened by the accounting officer, who shall also authorise delegated signatures on them on the basis of a justified proposal from the authorising officer.

3.Imprest accounts shall be endowed by the institution’s accounting officer and shall be placed under the responsibility of imprest administrators.

4.Payments made shall be followed by formal final validation decisions or payment orders signed by the authorising officer responsible.

The imprest transactions shall be settled by the authorising officer by no later than the end of the following month, so that the accounting balance and the bank balance can be reconciled.

5.The accounting officer shall carry out, or have carried out by a staff member in his own department or in the authorising department specially empowered for that purpose, checks, which must as a general rule be effected on the spot and, where appropriate, without warning, to verify the existence of the funds allocated to the imprest administrators and the bookkeeping and to check that imprest transactions are settled within the time-limit set. The accounting officer shall communicate the findings of those checks to the authorising officer responsible.

CHAPTER 5
Liability of financial actors

SECTION 1
GENERAL RULES

Article 87
Withdrawal of delegation and suspension of duties given to financial actors

1.Authorising officers responsible may at any time have their delegation or subdelegation withdrawn temporarily or definitively by the authority which appointed them.

2.The accounting officer or imprest administrators, or both, may at any time be suspended temporarily or definitively from their duties by the authority which appointed them.

3.Paragraphs 1 and 2 shall be without prejudice to any disciplinary action taken in respect of the financial actors referred to in those paragraphs.

Article 88
Liability
of financial actors for illegal activity, fraud or corruption

1.This Chapter is without prejudice to any liability under criminal law which the financial actors referred to in Article 87 may incur as provided for in applicable national law and in the provisions in force concerning the protection of the Union’s financial interests and the fight against corruption involving Union officials or officials of Member States.

2.Without prejudice to Articles 89, 92 and 93 of this Regulation, each authorising officer responsible, accounting officer or imprest administrator shall be liable to disciplinary action and payment of compensation as laid down in the Staff Regulations or for the personnel referred to in Article 86 in their employment contracts. In the event of illegal activity, fraud or corruption which may harm the interests of the Union, the matter shall be submitted to the authorities and bodies designated by the applicable legislation, in particular to the European Anti-Fraud Office.

SECTION 2
RULES APPLICABLE TO AUTHORISING OFFICERS RESPONSIBLE

Article 89
Rules applicable to authorising officers

1.The authorising officer responsible shall be liable for payment of compensation as laid down in the Staff Regulations.

2.The obligation to pay compensation shall apply in particular if the authorising officer responsible, whether intentionally or through gross negligence on his or her part:

(a)determines entitlements to be recovered or issues recovery orders, commits expenditure or signs a payment order without complying with this Regulation;

(b)omits to draw up a document establishing an amount receivable, neglects to issue a recovery order or is late in issuing it or is late in issuing a payment order, thereby rendering the institution liable to civil action by third parties.

3.An authorising officer by delegation or subdelegation who considers that a decision, which is his or her responsibility to take, is irregular or contrary to the principle of sound financial management shall inform the delegating authority in writing. If the delegating authority then gives a reasoned instruction in writing to the authorising officer by delegation or subdelegation to take that decision, that authorising officer shall not be held liable.

4.In the event of subdelegation within his or her service, the authorising officer by delegation shall continue to be responsible for the efficiency and effectiveness of the internal management and control systems put in place and for the choice of the authorising officer by subdelegation.

5.In the event of subdelegation to the Heads of Union delegations and their deputies, the authorising officer by delegation shall be responsible for the definition of the internal management and control systems put in place, as well as their efficiency and effectiveness. The Heads of Union delegations shall be responsible for the adequate setting up and functioning of those systems, in accordance with the instructions of the authorising officer by delegation, and for the management of the funds and the operations they carry out within the Union delegation under their responsibility. Before taking up their duties, they shall complete specific training courses on the tasks and responsibilities of authorising officers and the implementation of the budget.

Heads of Union delegations shall report on their responsibilities pursuant to the first subparagraph of this paragraph in accordance with Article 75(3).

Each year, Heads of Union delegations shall provide to the Commission’s authorising officer by delegation assurance on the internal management and control systems put in place in their delegation, as well as on the management of operations subdelegated to them, and the results thereof, in order to allow the authorising officer to make the statement of assurance provided for in Article 73(9).

This paragraph shall also apply to the deputy Heads of Union delegations when they act as authorising officers by subdelegation in the absence of the Heads of Union delegations.

Article 90
 Treatment of financial irregularities on the part of a member of staff

1.Without prejudice to the powers of the European Anti-Fraud Office, any infringement of a provision of the Financial Regulation or of a provision relating to financial management or the checking of operations resulting from an act or omission of a member of staff shall be referred to the panel referred to in Article 139 of this Regulation for an opinion by any of the following:

(a)the appointing authority in charge of disciplinary matters;

(b)a member of staff in accordance with Article 73(8). In such case, the panel shall transmit the file to the appointing authority and shall inform the member of staff accordingly. The appointing authority may request the panel’s opinion on the case;

(c)the responsible authorising officer, including Heads of Union delegations and their deputies in their absence acting as authorising officers by subdelegation in accordance with Article 58(2) of this Regulation.

2.In the cases referred in paragraph 1, the panel referred to in Article 139 of this Regulation shall be competent to determine whether a financial irregularity has occurred. On the basis of the opinion of the panel referred to in Article 139 for cases referred to in paragraph 1, the institution concerned shall decide whether to initiate proceedings for disciplinary action or payment of compensation. If the panel detects systemic problems, it shall make a recommendation to the authorising officer and to the authorising officer by delegation, unless the latter is the member of staff involved, as well as to the internal auditor.

3.Before adopting any opinion in cases of irregularities referred to in paragraph 1 of this Article, the panel shall give the member of staff involved the opportunity to submit its observations.

4.Where the panel gives the opinion referred to in paragraph 1, it shall have the composition laid down in Article 139(2) and two additional members:

(a)a representative of the appointing authority in charge of disciplinary matters of the institution or body concerned, and

(b)another member appointed by the staff committee of the institution or body concerned. The appointment of those additional members shall take into account the need for avoiding any conflict of interests.

5.Where the panel gives the opinion referred to in Article paragprah 1, it shall be addressed to the disciplinary Board established by each institution or body in accordance to its internal rules.

6.The Member States shall fully support the Union in the enforcement of any liability, under Article 22 of the Staff Regulations of Officials of the European Union, of temporary staff to whom point (e) of Article 2 of the Conditions of Employment of Other Servants of the European Union applies.

Article 91
Confirmation of instructions

1.An authorising officer by delegation or subdelegation who receives a binding instruction which he considers to be irregular or contrary to the principle of sound financial management, in particular because the instruction cannot be carried out with the resources allocated to him, shall, in writing, so inform the authority from which he received the delegation or subdelegation. If the instruction is confirmed in writing and that confirmation is received in good time and is sufficiently clear, in that it refers explicitly to the points which the authorising officer by delegation or subdelegation has challenged, the authorising officer by delegation or subdelegation may not be held liable. He shall carry out the instruction, unless it is manifestly illegal or constitutes a breach of the relevant safety standards.

2.Paragraph 1 shall also apply in cases where an authorising officer learns, in the course of acting on a binding instruction, that the circumstances of the case may give rise to an irregular situation.

Any instructions confirmed in the circumstances described in Article 89(3) shall be recorded by the authorising officer by delegation responsible and mentioned in his annual activity report.

SECTION 3
RULES APPLICABLE TO ACCOUNTING OFFICERS AND IMPREST ADMINISTRATORS

Article 92
Rules applicable to accounting officers

An accounting officer shall be liable to disciplinary action and payment of compensation, as laid down in, and in accordance with, the procedures in the Staff Regulations. An accounting officer may, in particular, become liable as a result of any of the following forms of misconduct on his or her part:

(a)losing or damaging funds, assets or documents in his or her keeping;

(b)wrongly altering bank accounts or postal giro accounts;

(c)recovering or paying amounts which are not in conformity with the corresponding recovery or payment orders;

(d)failing to collect revenue due.

Article 93
Rules applicable to
imprest administrators

Without prejudice to Article 88(2), an imprest administrator may in particular become liable as a result of any of the following forms of misconduct on his or her part:

(a)losing or damaging funds, assets or documents in his or her keeping;

(b)not providing proper supporting documents for the payments he or she has made;

(c)making payments to persons other than those entitled to such payments;

(d)failing to collect revenue due.

CHAPTER 6
Revenue operations

SECTION 1
MAKING OWN RESOURCES AVAILABLE

Article 94
Own resources

1.An estimate of revenue constituted by own resources, as referred to in the Council Decision on the system of own resources of the European Union shall be entered in the budget in euros. It shall be made available in accordance with Regulation (EC, Euratom) No 609/2014.

2.The authorising officer shall draw up a schedule indicating when the own resources defined in the Decision on the system of the own resources of the European Union will be made available to the Commission.

Own resources shall be established and recovered in accordance with the rules adopted pursuant to the Decision referred to in the first paragraph.

For accounting purposes, the authorizing officer shall issue a recovery order for credits and debits to the account for own resources referred to in Regulation (EU, Euratom) No 609/2014.

SECTION 2
ESTIMATE OF AMOUNTS RECEIVABLE

Article 95
Estimate of amounts receivable

1.When the authorising officer responsible has sufficient and reliable information in respect of any measure or situation which may give rise to an amount owing to the Union, the authorising officer responsible shall make an estimate of the amount receivable.

2.The estimate of the amount receivable shall be adjusted by the authorising officer responsible as soon as he or she is aware of an event modifying the measure or the situation which gave rise to the estimate being made.

When establishing the recovery order on a measure or situation that had previously given rise to an estimate of amounts receivable, that estimate shall be adjusted accordingly by the authorising officer responsible.

If the recovery order is drawn up for the same amount as the original estimate of amounts receivable, that estimate shall be reduced to zero.

3.By way of derogation from paragraph 1, no estimate of the amount receivable shall be made before Member States make available to the Commission the amounts of own resources defined in the Council Decision on the system of own resources of the European Union, which are paid at fixed intervals by the Member States. The authorising officer responsible shall issue a recovery order in respect of those amounts.

SECTION 3
ESTABLISHMENT OF AMOUNTS RECEIVABLE

Article 96
Establishment of amounts receivable

1.The establishment of an amount receivable is the act by which the authorising officer responsible:

(a)verifies that the debt exists;

(b)determines or verifies the reality and the amount of the debt;

(c)verifies the conditions according to which the debt is due.

It shall constitute recognition of the right of the Union in respect of a debtor and establishment of entitlement to demand that the debtor pay the debt.

2.Any amount receivable that is identified as being certain, of a fixed amount and due shall be established by a recovery order to the accounting officer. It shall be followed by a debit note sent to the debtor, except for the cases where a waiver procedure is immediately carried out. The recovery order and the debit note shall be both drawn up by the authorising officer responsible.

The authorising officer shall send the debit note immediately after establishing the amount receivable and at the latest within a period of five years from the point at which the institution was, in normal circumstances, in a position to claim its debt. Such period shall not apply where the authorising officer responsible establishes that, despite the efforts which the institution has made, the delay in acting was caused by the debtor’s conduct, particularly time-wasting manoeuvres or bad faith.

The recovery order shall be the operation by which the authorising officer responsible instructs the accounting officer to recover the amount established.

3.To establish an amount receivable the authorising officer responsible shall ensure that:

(a)the receivable is certain, meaning that it is not subject to any condition;

(b)the receivable is of fixed amount, expressed precisely in cash terms;

(c)the receivable is due and is not subject to any payment time;

(d)the particulars of the debtor are correct;

(e)the amount to be recovered is booked to the correct budget item;

(f)the supporting documents are in order; and

(g)the principle of sound financial management is complied with, in particular with regard to the criteria referred to in point (a) or (b) of second subparagraph of Article 99(2).

4.The debit note shall be to inform the debtor that

(a)the Union has established the amount receivable;

(b)if payment of the debt is made before the deadline, as specified in the debit note, no default interest will be due;

(c)failing reimbursement by the deadline referred to in point (b) the debt shall bear interest at the rate referred to in Article 97, without any prejudice to any specific regulations applicable;

(d)failing reimbursement by the deadline referred to in point (b) the institution shall effect recovery either by offsetting or by enforcement of any guarantee lodged in advance;

(e)the accounting officer may in exceptional circumstances effect recovery by offsetting before the deadline referred to in point (b), where it is necessary to protect the Union’s financial interests when he has justified grounds to believe that the amount due to the Commission would be lost, after the debtor has been informed of the reasons and date of the recovery by offsetting;

(f)if, after taking all the steps set out in points (a) to (e) of this subparagraph, the amount has not been recovered in full, the institution shall effect recovery by enforcement of a decision secured either in accordance with Article 98(2) or by legal action.

Where following the verification of the particulars of the debtor or on the basis of other relevant information available at the time, it is clear that the debt falls under cases referred to in points (a) or (b) of the second subparagraph of Article 99(2), or that the debit note has not been sent according to paragraph 2 of this Article, the authorising officer may, after establishing the amount receivable, decide to proceed directly to the waiver according to the provisions laid down in Article 99 without sending a debit note, in agreement with the accounting officer.

In all other cases, the authorising officer shall print out the debit note and send it to the debtor. The accounting officer shall be informed of that dispatch through the financial information system.

5.Amounts wrongly paid shall be recovered.

Article 97
Default interest

1.Without prejudice to any specific provisions deriving from the application of specific regulations, any amount receivable not repaid on the deadline referred to in point (b) of the first subparagraph of Article 96(4) shall bear interest in accordance with paragraphs 2 and 3 of this Article.

2.Except in the case referred to in paragraph 4 of this Article, the interest rate for amounts receivable not repaid on the deadline referred to in point (b) of the first subparagraph of Article 96(4) shall be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the Official Journal of the European Union, in force on the first calendar day of the month in which the deadline falls, increased by:

(a)eight percentage points where the obligating event is a public supply and service contract referred to in Title V;

(b)three and a half percentage points in all other cases.

3.Interest shall be calculated from the calendar day following the deadline referred to in point (b) of the first subparagraph of Article 96(4) and specified in the debit note up to the calendar day on which the debt is repaid in full.

The recovery order corresponding to the amount of the default interest shall be issued when this interest is actually received.

4.In the case of fines or other penalties, the interest rate for amounts receivable not paid by the deadline referred to in point (b) of the first subparagraph of Article 96(4) shall be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the Official Journal of the European Union, in force on the first calendar day of the month in which the decision imposing a fine or other penalty has been adopted, increased by:

(a)one and a half percentage points where the debtor provides a financial guarantee which is accepted by the accounting officer instead of payment;

(b)three and a half percentage points in all other cases.

Where the Court of Justice of the European Union, in the exercise of its competence under Article 261 TFEU, increases the amount of a fine or other penalty, interest on the amount of the increase shall run from the date of the judgment of the Court.

In cases where the overall interest rate would be negative it will be set at zero percentage points.

SECTION 4
AUTHORISATION OF RECOVERY

Article 98
Authorisation of recovery

1.The authorisation of recovery is the act by which the authorising officer responsible instructs the accounting officer, by issuing a recovery order, to recover an amount receivable which that authorising officer responsible has established.

2.The institution may formally establish an amount as being receivable from persons other than Member States by means of a decision which shall be enforceable within the meaning of Article 299 TFEU.

If the efficient and timely protection of the Union’s financial interests so requires, the Commission may also, in exceptional circumstances, adopt such an enforceable decision for the benefit of other institutions at their request with respect to claims arising in relation to staff to whom the Staff Regulations apply or in relation to Members or former Members of an Union institution.

The exceptional circumstances are met when the possibility to have a voluntary payment and to recover the debt by offsetting as provided for in Article 99(1) of this Regulation have been exhausted by the institution concerned and the debt represents a significant amount. In such case, the institutions concerned other than those mentioned under Article 299 TFEU may request the Commission to adopt an enforceable decision.

In all cases, the enforceable decision shall specify that the amounts claimed shall be entered in the section of the budget corresponding to the institution concerned, which shall act as authorising officer. The revenue shall be entered as general revenue except if it falls within the specified cases of assigned revenues as provided for in Article 20(3).

The requesting institution shall inform the Commission of any event likely to alter the recovery and shall intervene in support of the Commission in case of appeal against the enforceable decision.

The Commission and the institution concerned shall agree on the practical modalities for the implementation of this Article.

SECTION 5
RECOVERY

Article 99
Rules on recovery

1.The accounting officer shall act on recovery orders for amounts receivable duly established by the authorising officer responsible. The accounting officer shall exercise due diligence to ensure that the Union receives its revenue and shall ensure that the Union’s rights are safeguarded.

Partial reimbursement by a debtor subject to several recovery orders shall first be posted on the oldest entitlement unless otherwise specified by the debtor. Any partial payments shall first cover the interest.

The accounting officer shall recover amounts due to the Union budget by offsetting them against amounts owed to the debtor by the Union or an executive agency executing the Union budget. The claims related to those amounts shall be certain, of a fixed amount and due.

2.Where the authorising officer responsible plans to waive or partially waive recovery of an established amount receivable, he or she shall ensure that the waiver is in order and is in accordance with the principles of sound financial management and proportionality. The waiver decision shall be substantiated. The authorising officer may delegate the waiver decision.

The authorising officer responsible may waive recovery of all or part of an established amount receivable only in the following cases:

(a)where the foreseeable cost of recovery would exceed the amount to be recovered and the waiver would not harm the image of the Union;

(b)where the amount receivable cannot be recovered in view of its age, delay in the dispatch of the debit note in the terms defined in Article 96(2), or the insolvency of the debtor, or as a result of any other insolvency proceedings;

(c)where recovery is inconsistent with the principle of proportionality.

3.In the case referred to in point (c) of paragraph 2, the authorising officer responsible shall act in accordance with predetermined procedures established within each institution and shall apply the following criteria which are compulsory and applicable in all circumstances:

(a)the facts, having regard to the gravity of the irregularity giving rise to the establishment of the amount receivable (fraud, repeated offence, intent, diligence, good faith, manifest error);

(b)the impact that waiving recovery would have on the operation of the Union and its financial interests (amount involved, risk of setting a precedent, undermining of the authority of the law).

4.Depending on the circumstances of the case, the authorising officer responsible may also have to take the following additional criteria into account:

(a)any distortion of competition that would be caused by the waiving of recovery;

(b)the economic and social damage that would be caused were the debt to be recovered in full.

5.Each institution shall send to the European Parliament and Council each year a report on the waivers referred to in this paragraph involving EUR 100 000 or more. In the case of the Commission, that report shall be annexed to the summary of the annual activity reports referred to in Article 73(9).

6.The authorising officer responsible may cancel an established amount receivable in full or in part. The partial cancellation of an established amount receivable does not imply the waiver of the remaining established Union entitlement.

In the event of a mistake, the authorising officer responsible shall cancel totally or partially the established amount receivable and include adequate reasons.

Each institution shall lay down in its internal rules the conditions and procedure for delegating the power to cancel an established amount receivable.

7.The Member States shall in the first instance be responsible for carrying out controls and audits and for recovering amounts unduly spent, as provided for in the sector-specific rules. To the extent that Member States detect and correct irregularities on their own account, they shall be exempt from financial corrections by the Commission concerning those irregularities.

8.The Commission shall make financial corrections on Member States in order to exclude from Union financing expenditure incurred in breach of applicable law. The Commission shall base its financial corrections on the identification of amounts unduly spent, and the financial implications for the budget. Where such amounts cannot be identified precisely, the Commission may apply extrapolated or flat-rate corrections in accordance with the sector-specific rules.

The Commission shall, when deciding on the amount of a financial correction, take account of the nature and gravity of the breach of applicable law and the financial implications for the budget, including the case of deficiencies in management and control systems.

The criteria for establishing financial corrections and the procedure to be applied may be laid down in the sector-specific rules.

9.The methodology for applying extrapolated or flat-rate corrections shall be laid down in accordance with the sectorspecific rules with a view to enabling the Commission to protect the financial interests of the Union.

Article 100
Recovery by offsetting

1.Where the debtor has a claim on the Union or on the executive agency when it implements the Union budget that is certain as defined in point (a) of Article 96(3), of a fixed amount and due relating to a sum established by a payment order, the accounting officer shall, following the deadline referred to in point (b) of first subparagraph of Article 96(4) recover established amounts receivable by offsetting.

In exceptional circumstances, where it is necessary to safeguard the financial interests of the Union and where the accounting officer has justified grounds to believe that the amount due to the Union would be lost, the accounting officer may recover by offsetting before the deadline referred to in point (b) of the first subparagraph of Article 96(4).

The accounting officer shall also recover by offsetting before the deadline referred to in point (b) of first subparagraph of Article 96(4) when the debtor agrees.

2.Before proceeding with any recovery in accordance with paragraph 1, the accounting officer shall consult the authorising officer responsible and inform the debtors concerned, including the means of redress in accordance with Article 129.

Where the debtor is a national authority or one of its administrative entities, the accounting officer shall also inform the Member State concerned at least 10 working days in advance of his intention to resort to recovery by offsetting. However, in agreement with the Member State or administrative entity concerned, the accounting officer may proceed with the recovery by offsetting before the deadline has passed.

3.The offsetting referred to in paragraph 1 shall have the same effect as a payment and discharge the Union for the amount of the debt and, where appropriate of the interest due.

Article 101
Recovery procedure failing voluntary payment

1.Without prejudice to Article 100, if the full amount has not been recovered by the deadline referred to in point (b) of the first subparagraph of Article 96(4) and specified in the debit note, the accounting officer shall inform the authorising officer responsible and shall without delay launch the procedure for effecting recovery by any means offered by the law, including, where appropriate, by enforcement of any guarantee lodged in advance.

2.Without prejudice to Article 100, where the recovery method referred to in paragraph 1 of this Article cannot be used and the debtor has failed to pay in response to the letter of formal notice sent by the accounting officer, the accounting officer shall enforce a recovery decision secured either in accordance with Article 98(2) or by legal action.

Article 102
Additional time for payment

The accounting officer, in collaboration with the authorising officer responsible, may allow additional time for payment only at the written request of the debtor, with due indication of the reasons, and provided that the following two conditions are fulfilled:

(a)the debtor undertakes to pay interest at the rate specified in Article 97 for the entire additional period allowed, starting from the deadline referred to in point (b) of the first subparagraph of Article 96(4);

(b)in order to safeguard the rights of the Union, the debtor lodges a financial guarantee covering the debt outstanding in both the principal sum and the interest, which is accepted by the institution’s accounting officer.

The guarantee referred to in point (b) of the first subparagraph may be replaced by a joint and several guarantee by a third party approved by the institution’s accounting officer.

In exceptional circumstances, following a request by the debtor, the accounting officer may waive the requirement of a guarantee referred to in point (b) of the first subparagraph when, on the basis of his assessment, the debtor is willing and able to make the payment in the additional time period but is not able to lodge such guarantee and is in a distressed situation.

Article 103
Limitation period

1.Without prejudice to the provisions of specific regulations and the application of Council Decision on the system of own resources of the European Union , entitlements of the Union in respect of third parties and entitlements of third parties in respect of the Union shall be subject to a limitation period of five years.

2.The limitation period for entitlements of the Union in respect of third parties shall begin to run on the expiry of the deadline communicated to the debtor in the debit note as specified in point (b) of the first subparagraph of Article 96(4).

The limitation period for entitlements of third parties in respect of the Union shall begin to run on the date on which the payment of the third party’s entitlement is due according to the corresponding legal commitment.

3.The limitation period for entitlements of the Union in respect of third parties shall be interrupted by any act of an institution or Member State acting at the request of an institution, notified to the third party and aiming at recovering the debt.

The limitation period for entitlements of third parties in respect of the Union shall be interrupted by any act notified to the Union by its creditors or on behalf of its creditors aiming at recovering the debt.

4.A new limitation period of five years shall begin to run on the day following the interruptions referred to in paragraph 3.

5.Any legal action relating to an amount receivable as referred to in paragraph 2, including actions brought before a court which later declares itself not to have jurisdiction, shall interrupt the limitation period. The new limitation period of five years shall not begin until a judgment having the force of res judicata is given or there is an extrajudicial settlement between the same parties on the same action.

6.Where the accounting officer allows the debtor additional time for payment in accordance with Article 102, this shall be considered as an interruption of the limitation period. The new limitation period of five years shall begin to run on the day following the expiry of the extended time for payment.

7.Entitlements of the Union shall not be recovered after the expiry of the limitation period, as established in paragraphs 2 to 6.

Article 104
National treatment for Union entitlements

In the event of insolvency proceedings, Union entitlements shall be given the same preferential treatment as entitlements of the same nature due to public bodies in the Member States where the recovery proceedings are being conducted.

Article 105
Fines, penalties
, sanctions and accrued interest imposed by the institutions

1.Amounts received by way of fines, penalties and sanctions, and any accrued interest or other income generated by them shall not be recorded as budgetary revenue as long as the decisions imposing them may be overruled by the Court of Justice of the European Union.

2.The amounts referred to in paragraph 1 shall be recorded as budgetary revenue as soon as possible and at the latest in the year following the exhaustion of all legal remedies. Amounts that are to be returned to the entity that paid them, following a judgment of the Court of Justice of the European Union, shall not be recorded as budgetary revenue.

3.Paragraph 1 shall not apply to decisions on clearance of accounts or financial corrections.

Article 106
Recovery of
fines,other penalties or sanctions imposed by the institutions

1.Where an action is brought before the Court of Justice of the European Union against a decision of an institution imposing a fine or other penalty under the TFEU or Euratom Treaty and until such time as all legal remedies have been exhausted, the debtor shall either provisionally pay the amounts concerned on the bank account designated by the accounting officer of the Commission or provide a financial guarantee acceptable to the accounting officer of the Commission. The guarantee shall be independent of the obligation to pay the fine or penalty payment or other penalties and shall be enforceable upon first demand. It shall cover the claim as to principal and the interest due as specified in Article 97(4).

2.The Commission shall secure the provisionally cashed amounts by having them invested in financial assets thus ensuring the security and liquidity of the monies whilst also aiming at yielding a positive return.

3.After the exhaustion of all legal remedies and where the fine or penalty has been confirmed any of the following measures shall be taken:

(a)the provisionally collected amounts and the return on them shall be entered into the budget in accordance with Article 105 at the latest during the financial year following the year in which all legal remedies have been exhausted;

(b)where a financial guarantee has been lodged, the latter shall be enforced and the corresponding amounts entered in the budget.

Where the amount of the fine or of the penalty has been increased by the Court of Justice of the European Union, points (a) and (b) of the first subparagraph of this paragraph shall apply up to the amounts of the original decision of the institution or, if applicable, to the amount defined in a former judgment by the Court of Justice of the European Union in the same proceedings. The accounting officer of the Commission shall collect the amount corresponding to the increase and the interest due as specified in Article 97(4), which will be entered into the budget.

4.After all legal remedies have been exhausted and where the fine or penalty has been cancelled or reduced any of the following measures shall be taken:

(a)the amounts provisionally cashed, or part thereof, taking into account any return shall be repaid to the third party concerned; 

(b)where a financial guarantee has been lodged, it shall be released accordingly.

Article 107
Compensatory interests

Without prejudice to Article 97(2) and for cases other than those referred to in Article 105, when an amount has to be reimbursed following a Court of Justice of the European Union judgment or within an amicable settlement, the interest rate shall be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the Official Journal of the European Union, in force on the first calendar day of the month, from the date of payment of this amount until the date at which the reimbursement is due increased by zero percentage points.

In cases where the overall interest rate would be negative it will be set at zero percentage points.

CHAPTER 7
Expenditure operations

Article 108
Financing decisions

1.The budgetary commitment shall be preceded by a financing decision adopted by the institution or the authorities to which powers have been delegated by the institution. This shall not apply in the case of appropriations for the operations of each institution under its administrative autonomy that can be implemented without a basic act in accordance with point (e) of the first subparagraph of Article 56(2), of administrative support expenditure and of contributions to the bodies referred to in Articles 69 and 70. The financing decisions shall be annual or multiannual.

2.The financing decision shall also constitute at the same time the annual or multiannual work programme and shall be adopted as soon as possible after the adoption of the draft budget and in principle no later than 31 March of the year of implementation. The part which contains the work programme shall be published on the internet site of the institution concerned immediately after its adoption and prior to its implementation. The financing decision shall indicate the total amount covered by the financing decision and contain a description of the actions to be financed. It shall specify:

(a)the basic act and the budgetary line;

(b)the objectives pursued and, the expected results;

(c)the methods of implementation;

(d)any additional information required by the basic act for the work programme.

In addition, it shall set out the following:

(a)for grants: type of applicants targeted by the call for proposals or direct award; global budgetary envelope reserved for grants;

(b)for procurement: the global budgetary envelope reserved for the procurements;

(c)for contributions to trust funds referred to in Article 227 the appropriations reserved for the trust fund for the year together with the amounts planned over its duration;

(d)for prizes: the type of participants targeted by the contest, the global budgetary envelope reserved for the contest and specific reference to prizes with a unit value of EUR 1 000 000 or more;

(e)for financial instruments: the amount allocated to the financial instrument;

(f)in the case of indirect implementation: the entity or person pursuant to point (c) of Article 61(1) or, the criteria to be used to select the entity or person;

(g)for contributions to blending facilities: the amount allocated to the blending facility and the list of entities participating in the blending facility;

(h)for budgetary guarantees: the amount of annual provisioning and, when applicable, the amount of the budgetary guarantee to be released.

The authorising officer by delegation may add any additional information considered appropriate either in the respective financing decision constituting the work programme or in any other document published on the internet site of the institution.

A multiannual financing decision shall be consistent with the financial programming referred to in Article 39(2) and shall specify that the implementation of the decision is subject to the availability of budget appropriations for the respective financial years after the adoption of the annual budget or as provided for in the system of provisional twelfths, unless it is the basis for budgetary commitments broken down into annual instalments as referred to in Article 110(2).

3.Without prejudice to any specific provision of a basic act, any substantial change in a financing decision already adopted shall follow the same procedure as the initial decision.

Article 109
Expenditure operations

1.Every item of expenditure shall be committed, validated, authorised and paid.

At the end of the periods referred to in Article 112, the unused balance of budgetary commitments shall be subject of a de-commitment.

When executing operations, the authorising officer responsible shall ensure that the expenditure is in compliance with the Treaties, the budget, this Regulation, and other acts and regulations adopted pursuant to the Treaties as well as with the principle of sound financial management.

2.Budgetary commitments and legal commitments shall be adopted by the same authorising officer, except in duly justified cases. In particular, in the field of crisis management aid and humanitarian aid operations, legal commitments may be signed by the Heads of Union delegations, or in their absence by their deputies, on the instruction of the Commission's authorising officer responsible who remains fully responsible, however, for the underlying transaction. The personnel employed by the Commission in the field of crisis management aid and humanitarian aid operations may sign legal commitments linked to the payment executed from the imprest accounts of a value not exceeding EUR 2 500.

The authorising officer responsible shall make a budgetary commitment before entering into a legal commitment with third parties or transferring funds to a trust fund referred to in Article 227.

This obligation shall not be applicable to:

(a)legal commitments concluded following a declaration of a crisis situation in the framework of a business continuity plan, in accordance with the procedures adopted by the Commission or by any other institution under its administrative autonomy;

(b)in the case of humanitarian aid operations, civil protection operations and crisis management aid, if efficient delivery of the Union's intervention requires that the Union enter into a legal commitment with third parties immediately and prior booking of the individual budgetary commitment is not possible. The booking of the budgetary commitment shall be done without delay after entering into a legal commitment with third parties.

3.The validation of expenditure is the act whereby the authorising officer responsible accepts charging an item of expenditure, after checking the supporting documents attesting the creditor's entitlement as per the conditions set in the legal commitment when there is a legal commitment. For this purpose, the authorising officer responsible shall:

(a)verify the existence of the creditor's entitlement;

(b)determine or verify the reality and the amount of the claim through the endorsement "certified correct";

(c)verify the conditions according to which payment is due.

Notwithstanding the above, the validation of expenditure shall not be limited to expenditure that is charged to the budget. It shall also apply to interim or final reports not associated with a request for payment in which case the impact on the accounting system will be limited to the general accounts. The validation decision shall be expressed through electronically secured signature as referred to in Article 141 by the authorising officer or by technically competent member of staff, duly empowered by a formal decision of the authorising officer or, exceptionally, for paper workflow, take the form of a stamp incorporating that signature.

With the endorsement "certified correct" the authorising officer responsible or a technically competent member of staff, duly empowered by the authorising officer responsible shall certify that:

(a)for the pre-financing the conditions required in the legal commitment for the payment of the pre-financing are met;

(b)for interim and balance payments in contracts the services provided for in the contract have been properly provided, the supplies properly delivered or that the work has been properly carried out;

(c)for interim and balance payments in grants the action or work programme carried out by the beneficiary is in all respects in compliance with the grant agreement, including, where applicable that the costs declared by the beneficiary are eligible. The same principle is valid also for interim and final reports not associated to a payment request.

4.The authorisation of expenditure is the act whereby the authorising officer responsible, having verified that the appropriations are available, instructs the accounting officer, by issuing a payment order, to pay an amount of expenditure which has been previously validated.

Where periodic payments are made with regard to services rendered, including rental services, or goods delivered, and subject to the authorising officer's risk analysis, the authorising officer may order the application of a direct debit system from an imprest account, or if specifically authorised by the accounting officer in accordance with Article 83(3).

5.The de-commitment is the operation whereby the responsible authorising officer cancels wholly or partly the reservation of appropriations previously made with a budgetary commitment.

Article 110
Types of budgetary commitments

1.Budgetary commitments shall fall into one of the following categories:

(a)individual: when the recipient and the amount of the expenditure are known;

(b)global: when at least one of the elements necessary to identify the individual commitment is still not known;

(c)provisional: to cover routine management expenditure for the EAGF as referred to in Article 11(2) and routine administrative expenditure where either the amount or the final payees are not definitively known.

Routine administrative expenditure relating to Union delegations and Union Representations may however be covered by provisional commitments also when the amount and final payee are known.

2.Budgetary commitments for actions extending over more than one financial year may be broken down over several years into annual instalments only where the basic act so provides or where they relate to administrative expenditure.

3.A global budgetary commitment shall be made on the basis of a financing decision.

The global budgetary commitment shall be made at the latest before the decision on the recipients and amounts is taken and, where implementation of the appropriations concerned involves the adoption of a work programme, at the earliest after that programme has been adopted.

4.The global budgetary commitment shall be implemented either by the conclusion of a financing agreement, itself providing for the subsequent conclusion of one or more legal commitments, or by the conclusion of one or more legal commitments.

Financing agreements in the field of direct financial assistance to third countries, including budget support, which constitute legal commitments may give rise to payments without the conclusion of other legal commitments.

Where the global commitment is implemented by the conclusion of a financing agreement, the second subparagraph of paragraph 3 shall not apply.

5.Each individual legal commitment adopted following a global budgetary commitment shall, prior to signature, be registered by the authorising officer responsible in the central budgetary accounts and booked to the global budgetary commitment.

6.Provisional budgetary commitments shall be implemented by the conclusion of one or more legal commitments giving rise to an entitlement to subsequent payments. However, in cases relating to expenditure on staff management or relating to communication expenditures engaged in by the institutions for the coverage of Union events or in cases referred to in point 14.5 of the Annex to this Regulation, they may be implemented directly by payments.

Article 111
Commitments for EAGF appropriations

1.For each financial year, the EAGF appropriations shall include non-differentiated appropriations, with the exception of the expenditure related to the measures referred to in Article 4(2) and Article 6 of Regulation (EC) No 1306/2013, with the exception of measures financed under non-operational technical assistance and contributions to executive agencies, which shall be covered by differentiated appropriations.

2.The Commission decisions fixing the amount of reimbursement of such expenditure shall constitute global provisional commitments, which may not exceed the total appropriations entered for the EAGF.

3.Global provisional commitments for the EAGF which have been made for a financial year and which have not given rise to a commitment on specific lines in the budget nomenclature by 1 February of the following financial year shall be cancelled in respect of the financial year concerned.

4.Expenditure effected by the authorities and bodies referred to in the rules relating to the EAGF shall, within two months of receipt of the statements sent in by Member States, be the subject of a commitment by chapter, article and item. Such

5.commitments may be made after the lapse of that two-month period where a procedure for a transfer of appropriations concerning the relevant budget lines is necessary. Except where payment has not yet been made by the Member States or where eligibility is in doubt, the amounts shall be charged as payments within the same two-month period.

The commitments referred to in the first sub-subparagraph shall be deducted from the global provisional commitment referred to paragraph 1.

6.Paragraphs 2 and 3 shall apply subject to the examination and acceptance of accounts.

Article 112
Time limits for commitments

1.Subject to Articles 109(2) and 256(3), legal commitments relating to individual or provisional budgetary commitments shall be concluded by 31 December of year n.

2.Global budgetary commitments shall cover the total cost of the corresponding legal commitments concluded up to 31 December of year n + 1.

Where the global budgetary commitment gives rise to the award of a prize referred to in Title IX, the legal commitment referred to in Article 200(4) shall be concluded by 31 December of year n+3.

In external actions, where the global budgetary commitment gives rise to a financing agreement concluded with a third country, the financing agreements shall be concluded by 31 December of year n+1, year n being the one in which the budgetary commitment was made. In this case, the global budgetary commitment shall cover the costs of legal commitments implementing the financing agreement concluded until the end of the period of implementation of the financing agreement.

3.The individual and provisional budgetary commitments for actions extending over more than one financial year shall, except in the case of staff expenditure, have a final date for implementation set, in accordance with the conditions in the legal commitments to which they refer, and taking into account the principle of sound financial management.

4.Any parts of budgetary commitments which have not been executed by payments six months after the final date for implementation shall be decommitted in accordance with Article 13.

5.The amount of a budgetary commitment for which no payment within the meaning of Article 113 has been made within two years of the signing of the legal commitment shall be decommitted, except where that amount relates to a case under litigation before judicial courts or arbitral bodies, where the legal commitment takes the form of a financing agreement with a third country or where there are special provisions laid down in sector-specific rules.

Article 113
Types of payments

1.Payment of expenditure shall be made by the accounting officer within the limits of the funds available.

2.Payment shall cover one or more of the following operations:

(a)payment of the entire amount due;

(b)payment of the amount due in any of the following ways:

(i)pre-financing providing a float, which may be divided into a number of payments in accordance with sound financial management and paid either on the basis of the contract, the agreement or the basic act, or on the basis of supporting documents which make it possible to check that the terms of the contract or agreement in question are complied with;

(ii)one or more interim payments as a counterpart of a partial execution of the action or performance of the contract. It may clear pre-financing in whole or in part, without prejudice to the provisions of the basic act;

(iii)payment of the balance of the amounts due where the action or contract is completely executed.

(c)payment of a provision into the common provisioning fund established pursuant to Article 205.

The payment of the balance may not be repeated and shall clear all preceding expenditure, a recovery order shall be issued to recover unused amounts.

3.A distinction shall be made in budgetary accounting between the different types of payment referred to in paragraph 2 at the time each payment is made.

4.The accounting rules referred to in Article 79 shall include the rules for clearing the pre-financing in the accounts and for the acknowledgment of the eligibility of costs.

5.Pre-financing payments shall be cleared regularly by the authorising officer responsible, according to the economic nature and at the latest at the end of the project. The clearing will be performed on the basis of information on costs incurred or confirmation of the conditions for payment being achieved in accordance with Article 121 as validated by the authorising officer in accordance with Article 109(3).

For grant agreements, contracts or contribution agreements above EUR 5 000 000, the authorising officer shall obtain at each year-end at least the information needed to calculate a reasonable estimate of those costs. Although this cannot be used for clearing the pre-financing it will enable both the authorising officer and the accounting officer to comply with the obligations set out in Article 80(2).

For the purposes of the second subparagraph, appropriate provisions shall be included in the legal commitments signed.

Article 114
Time limits
for payments

1.Payments shall be made within:

(a)90 calendar days for contribution agreements, contracts and, grant agreements involving technical services or actions which are particularly complex to evaluate and for which payment depends on the approval of a report or a certificate;

(b)60 calendar days for all other contribution agreements, contracts and, grant agreements for which payment depends on the approval of a report or a certificate;

(c)30 calendar days for all other contribution agreements, contracts,and grant agreements.

2.The time allowed for making payments shall be understood to include validation, authorisation and the payment of expenditure.

It shall begin to run from the date on which a payment request is received.

A payment request shall be registered by the authorised department of the authorising officer responsible as soon as possible and is deemed to be received on the date it is registered.

The date of payment is deemed to be the date on which the institution's account is debited.

A payment request shall include the following essential elements:

(a)the creditor's identification;

(b)the amount;

(c)the currency;

(d)the date.

Where at least one essential element is missing, the payment request shall be rejected.

The creditor shall be informed in writing of the rejection and the reasons for it as soon as possible and in any case within 30 calendar days from the date on which the payment request was received.

3.The authorising officer responsible may suspend the time limit for payment where:

(a)the amount of the payment request is not due; or

(b)the appropriate supporting documents have not been produced.

If information comes to the notice of the authorising officer responsible which puts in doubt the eligibility of expenditure in a payment request, he or she may suspend the time limit for payment for the purpose of verifying, including by means of onthespot checks, that the expenditure is indeed eligible. The remaining time allowed for payment shall begin to run again from the date on which the requested information or revised documents are received or the necessary further verification, including on-the-spot checks, is carried out.

The creditors concerned shall be informed in writing of the reasons for that suspension.

4.Except in the case of Member States, the European Investment Bank and the European Investment Fund, on the expiry of the time limits laid down in paragraph 1, the creditor shall be entitled to interest in accordance with the following conditions:

(a)the interest rates shall be those referred to in Article 97(2);

(b)the interest shall be payable for the period elapsing from the calendar day following expiry of the time limit for payment laid down in paragraph 1 up to the day of payment.

However, in the event that the interest calculated in accordance with the first subparagraph is lower than or equal to EUR 200, it shall be paid to the creditor only upon a demand submitted within two months of receiving late payment.

5.Each institution shall submit to the European Parliament and Council a report on the compliance with the time-limits and on the suspension of the time-limits laid down in paragraphs 1 to 4 of this Article. The report of the Commission shall be annexed to the summary of the annual activity reports referred to in Article 73(9).

Chapter 8
Internal auditor

Article 115
Appointment of the internal auditor

1.Each institution shall establish an internal auditing function which shall be performed in compliance with the relevant international standards. The internal auditor appointed by the institution shall be accountable to the latter for verifying the proper operation of budgetary implementation systems and procedures. The internal auditor may be neither authorising officer nor accounting officer.

2.For the purposes of the internal auditing of the EEAS, Heads of Union delegations, acting as authorising officers by subdelegation in accordance with Article 58(2), shall be subject to the verifying powers of the internal auditor of the Commission for the financial management subdelegated to them.

The internal auditor of the Commission shall also act as the internal auditor of the EEAS in respect of the implementation of the EEAS section of the budget.

3.Each institution shall appoint its internal auditor in accordance with arrangements adapted to its specific features and requirements. The institution shall inform the European Parliament and Council of the appointment of the internal auditor.

4.Each institution shall determine, in accordance with its specific features and its requirements, the scope of the mission of the internal auditor and shall lay down in detail the objectives and procedures for the exercise of the internal audit function with due respect for international internal audit standards.

5.The institution may appoint as internal auditor, by virtue of their particular competence, an official or other servant covered by the Staff Regulations chosen from nationals of the Member States.

6.If two or more institutions appoint the same internal auditor they shall make the necessary arrangements for him to be declared liable for his actions as laid down in Article 119.

7.The institution shall inform the European Parliament and Council when the duties of the internal auditor are terminated.

Article 116
Powers and duties of the internal auditor

1.The internal auditor shall advise his or her institution on dealing with risks, by issuing independent opinions on the quality of management and control systems and by issuing recommendations for improving the conditions of implementation of operations and promoting sound financial management.

The internal auditor shall be responsible, in particular, for:

(a)assessing the suitability and effectiveness of internal management systems and the performance of departments in implementing policies, programmes and actions by reference to the risks associated with them;

(b)assessing the efficiency and effectiveness of the internal control and audit systems applicable to each budgetary implementation operation.

2.The internal auditor shall perform his or her duties in relation to all the institution's activities and departments. He or she shall enjoy full and unlimited access to all information required to perform his or her duties, if necessary on the spot access, including in the Member States and in third countries.

The internal auditor shall take note of the annual report of the authorising officers and any other pieces of information identified.

3.The internal auditor shall report to the institution on his or her findings and recommendations. The institution shall ensure that action is taken with regard to recommendations resulting from audits. The internal auditor shall also submit to the institution an annual internal audit report indicating the number and type of internal audits carried out, the recommendations made and the action taken with regard to those recommendations.

Each institution shall consider whether the recommendations made in the reports of its internal auditor are suitable for an exchange of best practices with the other institutions.

4.The internal auditor shall also submit to the institution an annual internal audit report indicating the number and type of internal audits carried out, the principal recommendations made and the action taken with regard to those recommendations.

That annual report shall also mention any systemic problems detected by the panel set up pursuant to Article 139 where it gives the opinion referred to under Article 90.

5.The internal auditor shall, during the elaboration of his report, particularly focus on the overall compliance with the principle of sound financial management and shall ensure that appropriate measures have been taken in order to steadily improve and enhance its application.

6.Each year, the Commission shall, in the context of the discharge procedure and in accordance with Article 319 TFEU, forward on request its annual internal audit report within the meaning of paragraph 3 of this Article with due regard to confidentiality requirements.

7.The institution shall make available the contact details of the internal auditor to any natural or legal person involved in expenditure operations, for the purposes of confidentially contacting the internal auditor.

8.Each year the institution shall draft a report containing a summary of the number and type of internal audits carried out, the recommendations made and the action taken on those recommendations and forward it to the European Parliament and the Council as provided for in Article 239.

9.The reports and findings of the internal auditor, as well as the report of the institution, shall be accessible to the public only after validation by the internal auditor of the action taken for their implementation.

10.The institution shall provide the internal auditor with the resources required for the proper performance of his audit function and a mission charter detailing his tasks, duties and obligations.

Article 117
Work programme of the internal auditor

1.The internal auditor shall adopt his work programme and shall submit it to the institution.

2.The institution may ask the internal auditor to carry out audits not included in the work programme referred to in paragraph 1.

Article 118
Independence of the internal auditor

1.The internal auditor shall enjoy complete independence in the conduct of his audits. Special rules applicable to the internal auditor shall be laid down by the institution and shall be such as to guarantee that the internal auditor is totally independent in the performance of his or her duties, and to establish the internal auditor's responsibility.

2.He may not be given any instructions nor be restricted in any way as regards the performance of the functions which, by virtue of his appointment, are assigned to him under the Financial Regulation.

3.If the internal auditor is a member of staff, he or she shall exercise exclusive audit functions in full independence and assume responsibility as laid down in the Staff Regulations and set out in the delegated acts adopted pursuant to this Regulation.

Article 119
Liability of the internal auditor

The institution alone, proceeding in accordance with this Article, may act to have the internal auditor, as an official or other servant subject to the Staff Regulations, declared liable for his actions.

The institution shall take a reasoned decision to open an investigation. That decision shall be communicated to the interested party. The institution may put in charge of the investigation, under its direct responsibility, one or more officials of a grade equal to or higher than that of the member of staff concerned. In the course of the investigation, the views of the interested party shall be heard.

The investigation report shall be communicated to the interested party, who shall then be heard by the institution on the subject of that report.

On the basis of the report and the hearing, the institution shall adopt either a reasoned decision terminating the proceedings or a reasoned decision in accordance with Articles 22, 86 and Annex IX of the Staff Regulations. Decisions imposing disciplinary measures or financial penalties shall be notified to the interested party and communicated, for information purposes, to the other institutions and the Court of Auditors.

The interested party may bring an action in respect of such decisions before the Court of Justice of the European Union, as provided for in the Staff Regulations.

Article 120
Action before the Court of Justice of the European Union

Without prejudice to the remedies allowed by the Staff Regulations, the internal auditor may bring an action directly before the Court of Justice of the European Union in respect of any act relating to the performance of his duties as internal auditor. Such an action must be lodged within three months running from the calendar day on which the act in question is notified.

Such actions shall be investigated and heard as provided for in Article 91(5) of the Staff Regulations of Officials of the European Union.

TITLE V
COMMON RULES

CHAPTER 1
RULES APPLICABLE TO DIRECT, INDIRECT AND SHARED IMPLEMENTATION

Article 121
Forms of Union contribution

1.Union contributions in direct, shared and indirect implementation shall help achieve a Union policy objective and results specified and may take any of the following forms:

(a)reimbursement of eligible costs actually incurred;

(b)unit costs, which cover all or certain specific categories of eligible costs which are clearly identified in advance by reference to an amount per unit;

(c)lump sums, which cover in global terms all or certain specific categories of eligible costs which are clearly identified in advance;

(d)flat-rate financing, which covers specific categories of eligible costs, which are clearly identified in advance, by applying a percentage;

(e)financing not linked to costs of the relevant operations based on:

i)either the fulfilment of conditions set out in sector specific legislation or Commission Decisions or

ii)the achievement of results measured by reference to the previously set milestones or through performance indicators;

(f) a combination of the forms referred to in points (a) to (e).

Union contributions under points (b), (c) and (d) shall be established in accordance with Article 175 or sector specific legislation. Union contributions under point (e) shall be established in accordance with Article 175, sector specific legislation or a Commission decision.

2.When determining the appropriate form of a contribution, the potential recipients' interests and accounting methods shall be taken into account to the greatest possible extent.

Article 122
Cross
-reliance on assessment

The Commission may rely in full or in part on assessments made by itself or other entities, including donors, insofar as these assessments were made with regard to conditions equivalent to those set out in this Regulation for the applicable method of budget implementation. To this end, the Commission shall promote the recognition of internationally accepted standards or international best practices.

Article 123
Cross-reliance on audits

Where an audit based on internationally accepted standards providing reasonable assurance has been conducted by an independent auditor on the financial statements and reports setting out the use of the Union contribution, that audit shall form the basis of the overall assurance, as futher specified, where appropriate, in sector specific rules.

Article 124
Cooperation for protection of Union's financial interests

1.Any person or entity receiving Union funds shall fully cooperate in the protection of the Union’s financial interests and grant as a condition for receiving the funds the necessary rights and access required for the authorizing officer responsible, the European Anti-Fraud Office (OLAF) and the European Court of Auditors (ECA), and where appropriate the relevant national authorities, to comprehensively exert their respective competences. In the case of OLAF, this shall include the right to carry out investigations, including on-the-spot checks and inspections.

2.Any person or entity receiving Union funds under direct and indirect implementation shall agree in writing to grant the necessary rights as referred to in paragraph 1. This includes the obligation for any third parties involved in the implementation of Union funds to ensure equivalent rights.

Article 125
Transfer of resources
to instruments established under this Regulation or sector specific Regulations

Resources allocated to Member States under shared implementation may, at their request, be transferred to instruments established under this Regulation or under sector specific Regulations. The Commission shall implement these resources in accordance with point (a) or (c) of Article 61(1), where possible for the benefit of the Member State concerned. In addition resources allocated to Member States under shared implementation may at their request be used to enhance the risk-bearing capacity of the EFSI. In such cases, EFSI rules shall apply.

CHAPTER 2
RULES APPLICABLE TO DIRECT AND INDIRECT IMPLEMENTATION

Section 1
RULES ON PROCEDURES AND IMPLEMENTATION

Article 126
Financial framework partnerships

1.The Commission may establish financial framework partnership agreements for a long-term cooperation with persons and entities implementing Union funds pursuant to point (c) of Article 61(1) or beneficiaries. Financial framework partnership agreements shall be reviewed at least once every multiannual financial framework without prejudice to point (c) of paragraph 4. Contribution agreements or grant agreements may be signed under such agreements.

2.The financial framework partnership agreement shall specify the forms of financial cooperation, the common objectives of the cooperation as well as the principles governing such cooperation between the Commission and persons and entities implementing Union funds pursuant to point (c) of Article 61(1) or beneficiaries. These agreements shall also reflect the extent to which the Commission may rely on the systems and the procedures of the persons or entities implementing Union funds pursuant to point (c) of Article 61(1) or beneficiaries, including audit procedures.

3.With a view to optimise costs and benefits of audits and facilitate coordination, audit or verification agreements may be concluded with persons and entities implementing funds pursuant to point (c) of Article 61(1) or beneficiaries of grants. In the case of the European Investment Bank the tripartite agreement concluded with the Commission and the European Court of Auditors shall apply.

4.In case of financial framework partnerships implemented through specific grants:

(a)the agreement shall, in addition to paragraph 2, specify:

(i)the nature of the actions or work programmes foreseen;

(ii)the procedure for awarding specific grants, in compliance with the principles and procedural rules in Title VIII;

(b)the provisions of the financial framework partnership agreement and the specific grant agreement shall together comply with the requirements of Article 194;

(c)the duration of the partnership may not exceed four years save in duly justified cases;

(d)the financial framework partnership shall be used in compliance with the principles of transparency and equal treatment of applicants;

(e)the financial framework partnership shall be treated as a grant with regard to programming, ex ante publication and award;

(f)specific grants based on such a partnership shall be subject to the ex post publication procedures referred to in paragraph 2 of Article 183.

5.The financial framework partnership agreement implemented through specific grants may provide for the reliance on the systems and the procedures of the beneficiary in accordance with paragraph 2, where those systems and procedures have been assessed in accordance with paragraphs 2, 3 and 4 of Article 149. In such a case point (d) of Article 189(1) shall not apply. Where the procedures of the beneficiary for providing financing to third parties referred to in point (d) of Article 149(4) were positively assessed, Article 197 and Article 198 shall not apply.

6.In the case of financial framework partnership agreement implemented through specific grants the verification of the operational and financial capacity referred to in Article 191 shall be performed before signature of the financial framework partnership agreement. The Commission may rely on an equivalent verification of the financial and operational capacity carried out by other donors.

7.In case of financial framework partnerships implemented through contribution agreements the provisions of the financial framework partnership agreement and the contribution agreement shall together comply with the requirements of Article 150(4) and Article 124.

8.The Commission shall endeavour to harmonise its reporting requirements with those of other donors.

Article 127
Suspension, termination and reduction

1.Where the award procedure has been subject to irregularities or fraud, the authorising officer responsible shall suspend the procedure and may take whatever measures are necessary, including the cancellation of the procedure. The authorising officer responsible shall inform European Anti-Fraud Office immediately of suspected cases of fraud.

2.Where, after the award, the award procedure proves to have been subject to irregularities or fraud, the authorising officer responsible may:

(a)refuse to sign the legal commitment or cancel the award of a prize;

(b)suspend payments;

(c)suspend the implementation of the legal commitment;

(d)where appropriate, terminate the legal commitment in whole or with regard to one recipient.

3.The authorising officer responsible may also suspend payments or the implementation of the legal commitment where:

(a)the implementation of the legal commitment proves to have been subject to irregularities, fraud or breach of obligations;

(b)it is necessary to verify whether presumed irregularities, fraud or breach of obligations have actually occurred;

(c)irregularities, fraud or breach of obligations call into question the reliability or effectiveness of the internal control systems of an entity or person implementing Union funds pursuant to point (c) of Article 61(1) or the legality and regularity of the underlying transactions.

Where the presumed irregularities, fraud or breach of obligations referred to in point (b) of the first subparagraph are not confirmed, the implementation or payments shall resume as soon as possible.

The authorising officer responsible may terminate the legal commitment in whole or with regard to one recipient in the cases referred to in points (a) and (c) of the first subparagraph.

4.In addition to measures referred to in pаragraphs 2 or 3, the authorising officer responsible may reduce the grant, the prize, the contribution under the contribution agreement or the price under a contract in proportion to the seriousness of the irregularities, fraud or of the breach of obligations, including where the activities concerned were not implemented or were implemented poorly, partially or late.

In case of financing referred to in point (e) of Article 121(1) the authorising officer responsible may reduce the contribution proportionally if the results have been achieved poorly, partially or late or the conditions have not been fulfilled.

5.Points (b), (c) and (d) of paragraph 2 and paragraph 3 shall not apply to applicants in a contest for prizes.

Article 128
Record-keeping

1.Recipients shall keep records, supporting documents, statistical records and other records pertaining to the funding, including records and documents in an electronic format, for five years following the payment of the balance or, in the absence of such payment, the transaction. This period shall be three years where the funding is of an amount lower than or equal to 60 000 EUR.

2.Records and documents pertaining to audits, appeals, litigation, the pursuit of claims relating to the legal commitment or to European Anti-Fraud Office investigations if notified to the recipient, shall be retained until such audits, appeals, litigation, claims or investigations have been closed.

3.Records and documents shall be kept either in the form of the originals, or certified true copies of the originals, or on commonly accepted data carriers including electronic versions of original documents or documents existing in electronic version only. In the latter case, no originals shall be required where these documents meet the applicable legal requirements in order to be considered conform to originals and to be relied on for audit purposes.

Article 129
Adversarial procedure and means of redress

1.Before adopting any measure adversely affecting the rights of a participant or a recipient the authorising officer responsible shall ensure that the participant or the recipient has been given the opportunity to submit observations.

2.Where a measure of an authorising officer adversely affects the rights of a participant or a recipient, the act establishing that measure shall contain an indication of the available means of administrative and/or judicial redress for challenging it.

Article 130
Interest rate rebates and guarantee fee subsidies

1.Interest rate rebates and guarantee fee subsidies shall be provided in accordance with Title X where they are combined in a single measure with financial instruments.

2.Where interest rate rebates and guarantee fee subsidies are not combined in a single measure with financial instruments they may be provided in accordance with Title VI or Title VIII. 

Section 2
EARLY DETECTION AND EXCLUSION SYSTEM

Article 131
Protection of the Union's financial interests by means of detection of risks and imposition of administrative sanctions

1.In order to protect the Union's financial interests, the Commission shall set up and operate an early detection and exclusion system on participants and recipients.

The purpose of such a system shall be to facilitate:

(a)the early detection of participants and recipients which pose a risk to the Union's financial interests;

(b)the exclusion of participants and recipientswhich are in one of the exclusion situations listed in Article 132(1);

(c) the imposition of a financial penalty on a recipient pursuant to Article 134.

The early detection and exclusion sytem shall also apply to:

(a)entities on whose capacity the candidate or tenderer intends to rely or subcontractors of a contractor;

(b)any person or entity receiving Union funds where the budget is implemented under point (c) of Article 61(1) on the basis of information notified in accordance with paragraph 4 of Article 150. For financial instruments, in the absence of rules and procedures fully equivalent to those referred to in point (d) of Article 149(4), final recipients and intermediaries shall provide the person or entity implementing Union funds pursuant to point (c) Article 61(1) with a signed declaration on honour confirming that they are not in one of the situations referred to in points (a), (b), (c) and (d) of Article 132(1) or points (b) and (c) of Article 137(1) or in a situation deemed equivalent following the assessment carried out in accordance with Article 149(4);

(c)any person or entity receiving Union funds under financial instruments exceptionally implemented in accordance with point (a) of Article 61 (1). Final recipients shall provide financial intermediaries with a signed declaration on honour confirming that they are not in one of the situations referred to in points (a), (b), (c) and (d) of Article 132(1) or points (b) and (c) of Article 137(1);

(d)participants or recipients on which entities implementing the budget in accordance with Article 62 have provided information in accordance with point (d) of Article 138(2).

2.The decision to register an early detection information, to exclude and/or to impose a financial penalty shall be taken by the authorising officer responsible. Information related to such decisions shall be registered in the database referred to in paragraph 1 of Article 138. Where such a decision is taken on the basis of paragraph 4 of Article 132, the information registered in the database shall include the information concerning the persons referred to in paragraph 4 of Article 132.

3.The decision to exclude or impose financial penalties may be based on a final judgment or on a final administrative decision in the situations referred to in Article 132(1) or on a preliminary classification in law by the panel referred to in Article 139 in the situations referred to in Article 132(2) in order to ensure a centralised assessment of those situations. In the cases referred to in Article 137, the authorising officer responsible shall reject a participant from a given procedure.

Article 132
Exclusion criteria and administrative sanctions

1.The authorising officer responsible shall exclude a person or entity referred to in Article 131(1) from participating in award procedures governed by this Regulation or from being selected for implementing Union funds where:

(a)the person or entity is bankrupt, subject to insolvency or winding-up procedures, where its assets are being administered by a liquidator or by a court, where it is in an arrangement with creditors, where its business activities are suspended, or where it is in any analogous situation arising from a similar procedure provided for under EU or national laws or regulations;

(b)it has been established by a final judgment or a final administrative decision that the person or entity is in breach of its obligations relating to the payment of taxes or social security contributions in accordance with the applicable law;

(c)it has been established by a final judgment or a final administrative decision that the person or entity is guilty of grave professional misconduct by having violated applicable laws or regulations or ethical standards of the profession to which the person or entity belongs, or by having engaged in any wrongful conduct which has an impact on its professional credibility where such conduct denotes wrongful intent or gross negligence, including, in particular, any of the following:

(i)fraudulently or negligently misrepresenting information required for the verification of the absence of grounds for exclusion or the fulfilment of eligibility or selection criteria or in the performance of the legal commitment;

(ii)entering into agreement with other persons or entities with the aim of distorting competition;

(iii)violating intellectual property rights;

(iv)attempting to influence the decision-making of the authorising officer responsible during the award procedure;

(v)attempting to obtain confidential information that may confer upon it undue advantages in the award procedure;

(d)it has been established by a final judgment that the person or entity is guilty of any of the following:

(i)fraud, within the meaning of Article 1 of the Convention on the protection of the European Communities' financial interests, drawn up by the Council Act of 26 July 1995 37 ;

(ii)corruption, as defined in Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, drawn up by the Council Act of 26 May 1997 38 , and in Article 2(1) of Council Framework Decision 2003/568/JHA 39 , as well as corruption as defined in the applicable law;

(iii)participation in a criminal organisation, as defined in Article 2 of Council Framework Decision 2008/841/JHA 40 ;

(iv)money laundering or terrorist financing, as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council 41 ;

(v)terrorist-related offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA 42 , respectively, or inciting, aiding, abetting or attempting to commit such offences, as referred to in Article 4 of that Decision;

(vi)child labour or other forms of trafficking in human beings as defined in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council 43 ;

(e)the person or entity has shown significant deficiencies in complying with main obligations in the performance of a legal commitment financed by the budget; 

(f)it has been established by a final judgment or final administrative decision that the person or entity has committed an irregularity within the meaning of Article 1(2) of Council Regulation (EC, Euratom) No 2988/95 44 .

2.In the absence of a final judgment or, where applicable, a final administrative decision in the cases referred to in points (c), (d) and (f) of paragraph 1, or in the case referred to in point (e) of paragraph 1, the authorising officer responsible shall exclude a person or entity referred to in Article 131(1) on the basis of a preliminary classification in law of a conduct referred to in those points, having regard to established facts or other findings contained in the recommendation of the panel referred to in Article 139. 

The preliminary classification referred to in the first subparagraph does not prejudge the assessment of the conduct of the person or entity referred to in Article 131(1) concerned by the competent authorities of the Member States under national law. The authorising officer responsible shall review its decision to exclude the person or entity referred to in Article 131(1) and/or to impose a financial penalty on a recipient without delay following the notification of a final judgment or a final administrative decision. In cases where the final judgment or the final administrative decision does not set the duration of the exclusion, the authorising officer responsible shall set this duration on the basis of established facts and findings and having regard to the recommendation of the panel referred to in Article 139.

Where such final judgment or final administrative decision holds that the person or entity referred to in Article 131(1) is not guilty of the conduct subject to a preliminary classification in law, on the basis of which it has been excluded, the authorising officer responsible shall, without delay, bring an end to that exclusion and/or reimburse, as appropriate, any financial penalty imposed.

The facts and findings referred to in the first subparagraph shall include, in particular:

(a)facts established in the context of audits or investigations carried out by the Court of Auditors, European Anti-Fraud Office or internal audit, or any other check, audit or control performed under the responsibility of the authorising officer;

(b)non-final administrative decisions which may include disciplinary measures taken by the competent supervisory body responsible for the verification of the application of standards of professional ethics;

(c)decisions of entities and persons implementing Union funds pursuant to point (c) of Article 61(1) or of entities implementing the budget pursuant to Article 62;

(d)decisions of the Commission relating to the infringement of the Union's competition rules or of a national competent authority relating to the infringement of Union or national competition law.

3.Any decision of the authorising officer responsible taken under Articles 131 to 138 or, where applicable, any recommendation of the panel referred to in Article 139, shall be made in compliance with the principle of proportionality, in particular taking into account:

(a)the seriousness of the situation, including the impact on the Union's financial interests and image;

(b)the time which has elapsed since the relevant conduct;

(c)its duration and its recurrence;

(d)the intention or degree of negligence;

(e)the limited amount at stake for point (b) of paragraph 1 of this Article;

(f)any other mitigating circumstances, such as the degree of collaboration of the person or entity referred to in Article 131(1) concerned with the relevant competent authority and its contribution to the investigation as recognised by the authorising officer responsible, or the disclosure of the exclusion situation by means of the declaration referred to in Article 133(1).

4.The authorising officer responsible shall exclude the person or entity referred to in Article 131(1) where:

(a)a nаtural or legal person who is a member of the administrative, management or supervisory body of the et person or entity referred to in Article 131(1), or who has powers of representation, decision or control with regard to these persons or entities is in one or more of the situations referred to in points (c) to (f) of paragraph 1;

(b)a natural or legal person that assumes unlimited liability for the debts of that person or entity referred to in Article 131(1) is in one or more of the situations referred to in point (a) or (b) of paragraph 1;

(c)a natural person who is essential for the award or for the implementation of the legal commitment and is in one or more of the situations referred to in point (c) to (f) of paragraph 1.

5.In the cases referred to in paragraph 2 of this Article, the authorising officer responsible may exclude a person or entity referred to in Article 131(1) provisionally without the prior recommendation of the panel referred to in Article 139, where their participation in an award procedure or their selection for implementing Union fundswould constitute a serious and imminent threat to the Union's financial interests. In such cases, the authorising officer responsible shall immediately refer the case to the panel and shall take a final decision no later than 14 days after having received the recommendation of the panel.

6.The authorising officer responsible, having regard, where applicable, to the recommendation of the panel referred to in Article 139, shall not exclude a person or entity referred to in Article 131(1) from participating in an award procedure and from being selecting to implementUnion funds where:

(a)the person or entity has taken remedial measures specified in paragraph 7, to an extent that is sufficient to demonstrate its reliability. This point shall not apply in the case referred to in point (d) of paragraph 1 of this Article;

(b)it is indispensable to ensure the continuity of service, for a limited duration and pending the adoption of remedial measures specified in paragraph 7;

(c)such an exclusion would be disproportionate on the basis of the criteria referred to in paragraph 3 of this Article.

In addition, point (a) of paragraph 1 of this Article shall not apply in the case of the purchase of supplies on particularly advantageous terms from either a supplier which is definitively winding up its business activities or the liquidators in an insolvency procedure, an arrangement with creditors, or a similar procedure under EU or national laws or regulations.

In the cases of non-exclusion referred to in the first and second subparagraphs of this paragraph, the authorising officer responsible shall specify the reasons for not excluding the person or entity referred to in Article 131(1) and inform the panel referred to in Article 139 of those reasons.

7.The measures referred to in paragraph 6, which remedy the exclusion situation may include, in particular:

(a)measures to identify the origin of the situations giving rise to exclusion and concrete technical, organisational and personnel measures within the relevant business or activity area of the person or entity referred to in Article 131(1), appropriate to correct the conduct and prevent its further occurrence;

(b)proof that the person or entity referred to in Article 131(1) has undertaken measures to compensate or redress the damage or harm caused to the Union's financial interests by the underlying facts giving rise to the exclusion situation;

(c)proof that the person or entity referred to in Article 131(1) has paid or secured the payment of any fine imposed by the competent authority or of any taxes or social security contributions referred to in point (b) of paragraph 1.

8.The authorising officer responsible, having regard, where applicable, to the revised recommendation of the panel referred to in Article 139, shall, without delay, revise its decision to exclude a person or entity referred to in Article 131(1) ex officio or on request from that person or entity , where the latter has taken remedial measures sufficient to demonstrate its reliability or has provided new elements demonstrating that the exclusion situation referred to in paragraph 1 of this Article no longer exists.

Article 133
Declaration and evidence of absence of situation of exclusion

1.A participant shall declare whether it is in one of the situations referred to Article 132(1) or Article 137(1), and, where applicable, whether it has taken any remedial measures referred to in point (a) of Article 132(6).

The candidate or tenderer shall provide the same declaration signed by a subcontractor or by any other entity on whose capacity it intends to rely, as the case may be. In case where an entity on whose capacity the candidate or tenderer intends to rely or a subcontractor of a contractor is in an exclusion situation, the authorising officer responsible shall require that the candidate or tenderer replaces them.

The authorising officer responsible shall not request such a declaration when this declaration has already been submitted for the purposes of another award procedure, provided that the situation has not changed, and that the time that has elapsed since the issuing date of the declaration does not exceed one year.

The authorising officer responsible may waive the requirements under the first and second subparagraphs for very low value contracts to be defined in the Annex.

2.Whenever requested by the authorising officer responsible and where this is necessary to ensure the proper conduct of the procedure, the participant, the entity on whose capacity a candidate or tenderer intends to rely or a subcontractor of such a candidate or tenderer shall provide:

(a)appropriate evidence that it is not in one of the exclusion situations referred to in Article 132(1);

(b)information on natural or legal persons that are members of the administrative, management or supervisory body of the participant or that have powers of representation, decision or control with regard to that participant and appropriate evidence that one or several of those persons are not in one of the exclusion situations referred to in points (c) to (f) of Article 132(1).

(c)appropriate evidence that natural or legal persons that assume unlimited liability for the debts of that participant are not in an exclusion situation referred to in point (a) or (b) of Article 132(1).

3.The authorising officer responsible shall accept as satisfactory evidence that a participant or an entity referred to in paragraph 2 is not in one of the situations described in points (a), (c), (d) or (f) of Article 132(1), a recent extract from the judicial record or, failing that, an equivalent document recently issued by a judicial or administrative authority in its country of establishment showing that those requirements are satisfied.

The authorising officer responsible shall accept, as satisfactory evidence that a participant or an entity referred to in paragraph 2 is not in the situation described in point (a) or (b) of Article 132(1), a recent certificate issued by the competent authority of the State concerned. Where the certificate is not issued in the country concerned the participant may provide a sworn statement made before a judicial authority or notary or, failing that, a solemn statement made before an administrative authority or a qualified professional body in its country of establishment.

4.The authorising officer responsible shall waive the obligation of a participant or an entity referred to in paragraph 2 to submit the documentary evidence referred to in paragraph 2 and 3:

(a)if it can access it on a national database free of charge;

(b)if such evidence has already been submitted to it for the purposes of another procedure and provided that any submitted documents are still valid and that the time that has elapsed since the issuing date of the documents does not exceed one year;

(c)if there is a material impossibility to provide such evidence recognised by the authorising officer responsible.

5.Paragraphs 1 to 4 shall not apply to persons and entities implementing Union funds pursuant to point (c) of Article 61(1) or to bodies within the meaning of Articles 69 and 70.

Article 134
Financial penalties

1.In order to ensure a deterrent effect, the authorising officer responsible may, having regard, where applicable, to the recommendation of the panel referred to in Article 139, impose a financial penalty on a recipient with whom a legal commitment has been concluded and who is in a situation referred to in points (c), (d), (e) or (f) of Article 132(1).

Regarding the situations referred to in points (c), (d), (e) and (f) of Article 132(1), the financial penalty may be imposed as an alternative to a decision to exclude a recipient, where such an exclusion would be disproportionate on the basis of the criteria referred to in Article 132(3).

Regarding the situations referred to in points (c), (d), (e) and (f) of Article 132(1), the financial penalty may be imposed in addition to an exclusion which is necessary to protect the Union's financial interests, where the recipient has adopted a systemic and recurrent conduct with the intention to unduly obtain Union funds.

2.The amount of the financial penalty shall not exceed 10 % of the total value of the legal commitment. In case of a grant agreement signed with a number of beneficiaries the financial penalty shall not exceed 10 % of the grant amount the beneficiary concerned is entitled to in accordance with the grant agreement.

Article 135
Duration of exclusion and limitation period

1.The duration of exclusion shall not exceed any of the following:

(a)the duration, if any, set by the final judgement or the final administrative decision of a Member State;

(b)five years for the cases referred to in point (d) of of Article 132(1);

(c)three years for the cases referred to in points (c), (e) and (f) of Article 132(1).

A person or entity referred to in Article 131(1) shall be excluded as long as it is in one of the situations referred to in points (a) and (b) of Article 132(1).

2.The limitation period to exclude and/or impose financial penalties on a person or entity referred to Article 131(1) shall be five years calculated from any of the following:

(a)the date of the conduct giving rise to exclusion or, in the case of continued or repeated acts, the date on which the conduct ceases, in the cases referred to in points (b), (c), (d) and (e) of Article 132(1);

(b)the date of the final judgment of a national jurisdiction or of the final administrative decision in the cases referred to in points (b), (c) and (d) of Article 132(1).

The limitation period shall be interrupted by an act of a national authority, of the Commission, European Anti-Fraud Office, the panel referred to in Article 139 or of any entity involved in the implementation of the budget, if such an act is notified to the person or entity referred to in Article 131(1) and is relating to investigations or judicial proceedings. A new limitation period shall begin to run on the day following the interruption.

For the purpose of point (f) of Article 132(1), the limitation period to exclude person or entity referred to in Article 131(1) and/or impose financial penalties on a recipient provided for in Article 3 of Regulation (EC, Euratom) No 2988/95 shall apply.

Where the conduct of the person or entity referred to in Article 131(1) concerned qualifies under several of the grounds listed in Article 132(1), the limitation period of the most serious of those grounds shall apply.

Article 136
Publication of exclusion and financial penalties

1.In order to, where necessary, reinforce the deterrent effect of the exclusion and/or financial penalty, the Commission shall, subject to a decision of the authorising officer responsible, publish on its internet site the following information related to the exclusion and, where applicable, the financial penalty in the cases referred to in points (c), (d), (e) and (f) of Article 132(1):

(a)the name of the person or entity referred to in Article 131(1) concerned;

(b)the exclusion situation ;

(c)the duration of the exclusion and/or the amount of the financial penalty.

Where the decision on the exclusion and/or financial penalty has been taken on the basis of a preliminary classification as referred to in Article 132(2) the publication shall indicate that there is no final judgment or, where applicable, final administrative decision. In those cases, information about any appeals, their status and their outcome, as well as any revised decision of the authorising officer responsible shall be published without delay. Where a financial penalty has been imposed, the publication shall also indicate whether that penalty has been paid.

The decision to publish the information is taken by the authorising officer responsible either following the relevant final judgment or, where applicable, final administrative decision, or following the recommendation of the panel referred to in Article 139, as the case may be. That decision shall take effect three months after its notification to the person or entity referred to in Article 131(1) concerned.

The information published shall be removed as soon as the exclusion has come to an end. In the case of a financial penalty, the publication shall be removed six months after payment of that penalty.

In accordance with Regulation (EC) No 45/2001, where personal data is concerned, the authorising officer responsible shall inform the person or entity referred to in Article 131(1) concerned of its rights under the applicable data protection rules and of the procedures available for exercising those rights.

2.The information referred to in paragraph 1 of this Article shall not be published in any of the following circumstances:

(a)where it is necessary to preserve the confidentiality of an investigation or of national judicial proceedings;

(b)where publication would cause disproportionate damage to the person or entity referred to in Article 131(1) concerned or would otherwise be disproportionate on the basis of the proportionality criteria set out in Article 132(3) and to the amount of the financial penalty;

(c)where a natural person is concerned, unless the publication of personal data is exceptionally justified, inter alia, by the seriousness of the conduct or its impact on the Union's financial interests. In such cases, the decision to publish the information shall duly take into consideration the right to privacy and other rights provided for in Regulation (EC) No 45/2001.

Article 137
Rejection from a given award procedure

1.The authorising officer responsible shall reject from a given award procedure a participant who:

(a)is in an exclusion situation established in accordance with Article 132;

(b)has misrepresented the information required as a condition for participating in the procedure or has failed to supply that information;

(c)was previously involved in the preparation of documents used in the award procedure where this entails a breach of the principle of equality of treatment, including distortion of competition that cannot be remedied otherwise.

The authorising officer responsible shall communicate to the other participants in the award procedure the relevant information exchanged in the context of or resulting from the involvement of the participant in the preparation of the award procedure as referred to in point (c). The authorising officer responsible shall fix adequate time limits for the receipt of tenders or applications. Prior to any such rejection the participant shall be given the opportunity to prove that its involvement in preparing the award procedure does not breach the principle of equality of treatment.

2.Article 129(1) shall apply unless the rejection has been justified in accordance with point (a) of paragraph 1 by an exclusion decision taken with regard to the participant, following an examination of its observations.

Article 138
The early detection and exclusion system

1.Information exchanged within the early detection and exclusion system referred to in Article 131 shall be centralised in a database set up by the Commission (‘the database’) and shall be managed in accordance with the right to privacy and other rights provided for in Regulation (EC) No 45/2001.

Information on early detection, exclusion and/or financial penalty cases shall be entered in the database by the authorising officer responsible after notifying the person or entity referred to in Article 131(1) concerned. Such notification may be exceptionally deferred, where there are compelling legitimate grounds to preserve the confidentiality of an investigation or of national judicial proceedings, until such compelling legitimate grounds to preserve the confidentiality cease to exist.

In accordance with Regulation (EC) No 45/2001, any person or entity referred to in Article 131(1) subject to the early detection and exclusion system shall have the right to be informed of the data stored in the database upon its request to the Commission.

The information contained in the database shall be updated, where appropriate, following a rectification or an erasure or any modification of data. It shall only be published in accordance with Article 136.

2.The early detection and exclusion system, as referred to Article 131(1) of this Regulation, shall be based on information as referred to in the fourth subparagraph of Article 132(2) and on the transmission of information to the Commission, in particular, by:

(a)the European Anti-Fraud Office in accordance with Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council 45 where an European Anti-Fraud Office investigation completed or in progress shows that it might be appropriate to take precautionary measures or actions to protect the Union's financial interests, with due regard to the respect for procedural and fundamental rights, and to the protection of whistle-blowers;

(b)an authorising officer of the Commission, of a European office set up by the Commission or of an executive agency;

(c)an institution, a European office or an agency other than those referred to in point (b) of this paragraph, a body or a person entrusted with implementation of CFSP actions;

(d)entities implementing the budget in accordance with Article 62, in cases of detected fraud and/or irregularity and their follow up, where required by sector-specific rules;

(e)entities or persons implementing Union funds pursuant to point (c) of Article 61(1), in cases of detected fraud and/or irregularity and their follow up.

3.Except where information is to be submitted in accordance with sector-specific rules, the information to be transmitted pursuant to paragraph 2 of this Article shall include:

(a)the identification of the entity or person concerned;

(b)a summary of the risks detected or the facts in question;

(c)information that could assist the authorising officer in carrying out the verification referred to in paragraph 4 of this Article or in taking a decision on exclusion as referred to in Article 132(1) or (2), or a decision to impose a financial penalty as referred to in Article 134;

(d)where applicable, any special measures necessary to ensure the confidentiality of the information transmitted, including measures for the safeguarding of evidence to protect the investigation or the national judicial proceedings.

4.The Commission shall transmit the information referred to in paragraph 3 of this Article without delay to its authorising officers and those of its executive agencies, all other institutions, bodies, European offices and agencies through the database referred to in paragraph 1 in order to allow them to carry out the necessary verification in respect of their ongoing award procedures and existing legal commitments.

In carrying out this verification, the authorising officer responsible shall exercise his or her powers as foreseen under Article 73 and shall not go beyond what is foreseen in the terms and conditions of the award procedure and contractual provisions.

The retention period for the information related to the early detection transmitted in accordance with paragraph 3 shall not exceed one year. If, during this period, the authorising officer responsible requests the panel to issue a recommendation in an exclusion or financial penalty case, the retention period may be extended until such time as the authorising officer responsible has taken a decision.

5.The authorising officer responsible may take a decision to exclude and/or to impose a financial penalty and a decision to publish the related information only after having obtained a recommendation of the panel where such a decision is based on a preliminary classification as referred to in Article 132(2).

6.All entities participating in the implementation of the budget in accordance with Article 61 shall be granted access by the Commission to the information on exclusion decisions pursuant to Article 132 to enable them to verify whether there is an exclusion in the system with a view to taking this information into account, as appropriate and on their own responsibility, when awarding contracts in the implementation of the budget.

7.As part of the annual report of the Commission to the European Parliament and to the Council, as referred to in Article 325(5) TFEU, the Commission shall provide aggregate information on the decisions taken by the authorising officers under Articles 131 to 138. That report shall also provide further information on any decisions taken by the authorising officers pursuant to point (b) of Article 132(6) and Article 136(2) and on any decisions by the authorising officers to deviate from the recommendation of the panel pursuant to the last subparagraph of Article 139(6).

The information referred to in the first subparagraph of this paragraph shall be provided with due regard to confidentiality requirements and shall, in particular, not allow for the identification of the person or entity referred to in Article 131(1) concerned.

Article 139
Panel

1.A panel shall be convened at the request of an authorising officer of any institution , Union bodies, European Offices and bodies and persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU.

2.The panel shall be composed of:

(a)a standing high-level independent chair appointed by the Commission;

(b)two permanent representatives of the Commission as the owner of the system, who shall express a joint position; and

(c)one representative of the requesting authorising officer.

The composition of the panel shall ensure the appropriate legal and technical expertise. The panel shall be assisted by a permanent secretariat, provided by the Commission, which shall ensure the continuous administration of the panel.

3.The Chair shall be chosen from among former members of the Court of Auditors, the Court of Justice or former officials who have had at least the rank of Director-General in an institution of the Union other than the Commission. He or she shall be selected on the basis of his/her personal and professional qualities, extensive experience in legal and financial matters and proven competence, independence and integrity. The term of office shall be five years and shall not be renewable. The Chair shall be appointed as special adviser within the meaning of Article 5 of the Conditions of Employment of Other Servants of the European Union. The Chair of the panel shall preside at all sessions of the panel. He/she shall be independent in the performance of his or her duties. He/she shall not have a conflict of interests between his or her duties as Chair of the panel and any other official duties.

4.The rules of procedure of the panel shall be adopted by the Commission.

5.The panel shall uphold the right of the person or entity referred to in Article 131(1) concerned to submit observations on the facts or findings referred to in Article 132(2), on the preliminary classification in law and before adopting its recommendations. The opportunity to submit observations may exceptionally be deferred where there are compelling legitimate grounds to preserve the confidentiality of an investigation or of national judicial proceedings, until such legitimate grounds cease to exist.

6.The recommendation of the panel to exclude and/or impose a financial penalty shall contain, where applicable, the following elements:

(a)the facts or findings referred to in Article 132(2) and their preliminary classification in law;

(b)an assessment of the need to impose a financial penalty and its amount;

(c)an assessment of the need to exclude the person or entity referred to in Article 131(1) concerned and, in that case, the suggested duration of such an exclusion;

(d)an assessment of the need to publish the information related to the person or entity referred to in Article 131(1) who is excluded and/or subject to a financial penalty;

(e)an assessment of remedial measures taken by the person or entity referred to Article 131(1), if any.

Where the authorising officer responsible envisages taking a more severe decision than what has been recommended by the panel, it shall ensure that such a decision is taken with due respect for the right to be heard and for the rules of personal data protection.

Where the authorising officer responsible decides to deviate from the recommendation of the panel, it shall justify such decision to the panel.

7.The panel shall revise its recommendation during the exclusion period on request from the authorising officer responsible in the cases referred to in Article 132(8) or following the notification of a final judgment or a final administrative decision establishing the grounds for exclusion where such a judgment or decision does not set the duration of the exclusion, as referred to in the second subparagraph of Article 132(2).

8.The panel shall notify the requesting authorising officer without delay of its revised recommendation, following which the authorising officer shall review its decision.

9.The Court of Justice of the European Union shall have unlimited jurisdiction to review a decision whereby the authorising officer excludes a person or entity referred to in Article 131(1) and/or imposes a financial penalty on a recipient, including annulling the exclusion, reducing or increasing its duration and/or annulling, reducing or increasing the financial penalty imposed. Article 22(1) of Council Regulation (EC) No 58/2003 shall not apply when the decision of the authorising officer to exclude or impose a financial penalty is taken on the basis of a recommendation of the Panel.

Article 140
Exceptions applicable to the Joint research centre

Articles 131 to 139 shall not apply to the Joint Research Centre.

Section 3
IT SYSTEMS AND E-GOVERNMENT

Article 141
Electronic management of operations

1.Where revenue and expenditure operations or document exchanges are managed by means of computer systems, documents may be signed by a computerised or electronic procedure providing sufficient authentication of the signatory. Such computer systems shall include a full and up-to-date description of the system defining the content of all data fields, describing how each individual operation is treated and explaining in detail how the computer system guarantees the existence of a complete audit trail for each operation.

2.Subject to the prior agreement of the institutions and Member States concerned, any transmission of documents between them may be done by electronic means.

Article 142
e-Government

1.The institutions, the executive agencies and the bodies referred to in Articles 69 and 70 shall establish and apply uniform standards for the electronic exchange of information with participants. In particular, they shall, to the greatest possible extent, design and implement solutions for the submission, storage and processing of data submitted in award procedures, and to this end, shall put in place a single ‘electronic data interchange area’ for participants.

2.Under shared implementation, all official exchanges of information between the Member States and the Commission shall be carried out by means indicated in the sectorspecific rules. Those rules shall provide for interoperability of data gathered or received, and transmitted in the management of the budget.

Article 143
Electronic exchange systems

1.All exchanges with recipients, including the conclusion of legal commitments and any amendments thereto, may be done through electronic exchange systems.

2.The electronic exchange systems shall meet the following requirements:

(a)only authorised persons may have access to the system and to documents transmitted through it;

(b)only authorised persons may electronically sign or transmit a document through the system;

(c)authorised persons must be identified through the system by established means;

(d)the time and date of the electronic transaction must be determined precisely;

(e)the integrity of documents must be preserved;

(f)the availability of documents must be preserved;

(g)where appropriate, the confidentiality of documents must be preserved;

(h)the protection of personal data in accordance with the requirements of Regulation (EC) No 45/2001 must be ensured.

3.Data sent or received through such a system shall enjoy legal presumption of the integrity of the data and the accuracy of the date and time of sending or receiving the data indicated by the system.

A document sent or notified through such a system shall be considered as equivalent to a paper document, shall be admissible as evidence in legal proceedings, shall be deemed original and shall enjoy legal presumption of its authenticity and integrity, provided it does not contain any dynamic features capable of automatically changing it.

The electronic signatures referred to in point (b) of paragraph 2 shall have the equivalent legal effect of handwritten signatures.

Article 144
Submission of application documents

1.The arrangements for the submission of application documents shall be determined by the authorising officer responsible who may choose an exclusive method of submission.

The means of communication chosen shall be such as to ensure that there is genuine competition and that the following conditions are satisfied:

(a)each submission contains all the information required for its evaluation;

(b)the integrity of data is preserved;

(c)the confidentiality of application documents is preserved;

(d)the protection of personal data in accordance with the requirements of Regulation (EC) No 45/2001 is ensured.

2.The Commission shall ensure by appropriate means and in accordance with paragraph 1 of Article 142 that participants may enter the application documents and any supporting evidence in an electronic format. Any electronic communication system used to support communications and information exchanges shall be non-discriminatory, generally available and interoperable with information and communication technology (ICT) products in general use and shall not restrict participants' access to the award procedure.

3.Devices for the electronic receipt of application documents shall guarantee, through technical means and appropriate procedures, that:

(a)the participant can be authenticated with certainty;

(b)the exact time and date of the receipt of application documents can be determined precisely;

(c)only authorised persons have access to data transmitted under these requirements and may set or change the dates for opening them;

(d)during the different stages of the award procedure only authorised persons may have access to all data submitted and may give access to these data as needed for the procedure;

(e)it may be reasonably ensured that any attempt to infringe any of the conditions set out in points (a) to (e) can be detected.

The first subparagraph shall not apply to contracts below the thresholds laid down in paragraph 1 of Article 169.

4.Where the authorising officer responsible authorises submission of application documents by electronic means, the electronic documents submitted by means of such systems shall be deemed to be the originals.

5.Where submission is by letter, participants may choose to submit application documents:

(a)either by post or by courier service, in which case the evidence shall be constituted by the postmark or the date of the deposit slip;

(b)by hand-delivery to the premises of the authorising officer responsible by the participant in person or by an agent, in which case the evidence shall be constituted by the acknowledgement of receipt.

6.By submitting application documents, participants accept to receive notification of the outcome of the procedure by electronic means.

7.Paragraphs 1 to 6 shall not apply to the selection of persons or entities implementing Union funds pursuant to point (c) of Article 61 (1).

CHAPTER 3
RULES APPLICABLE TO DIRECT IMPLEMENTATION

Article 145
Evaluation committee

1.Application documents shall be evaluated by an evaluation committee.

2.The evaluation committee shall be appointed by the authorising officer responsible.

The committee shall be made up of at least three persons.

3.The members of the committee evaluating grant applications or tenders shall represent at least two organisational entities of the institutions or bodies referred to in Articles 67, 69 and 70 with no hierarchical link between them, at least one of which does not come under the authorising officer responsible. In the representations and local units outside the Union and in the bodies referred to in Articles 67, 69 and 70, if there are no separate entities, the requirement of organisational entities with no hierarchical link between them shall not apply. A local unit shall be, for instance, a Union delegation, office or branch office in a third country.

External experts may assist the committee by decision of the authorising officer responsible.

Members of the committee may be external experts where that possibility is provided for in the basic act.

4.The members of the committee evaluating applications in a contest for prizes may be persons referred to in the first subparagraph of paragraph 3 or external experts.

5.The members of the evaluation committee and the external experts shall comply with the obligations laid down in Article 59.

Article 146
Clarification and correction of application documents

The authorising officer responsible may correct obvious clerical errors in the application documents after confirmation of the intended correction by the participant.

Where a participant fails to submit evidence or to make statements, the evaluation committee or, where appropriate, the authorising officer responsible shall, except in duly justified cases, ask the participant to provide the missing information or clarify supporting documents.

Such information, clarification or confirmation shall not substantially change the application documents.

Article 147
Guarantees

1.Except for low value contracts and low value grants, the authorising officer responsible may, if proportionate and subject to a risk-analysis, require a guarantee to be submitted:

(a)by contractors or beneficiaries in order to limit the financial risks connected with payment of pre-financing ('guarantee on pre-financing');

(b)by contractors to ensure compliance with substantial contractual obligations in the case of works, supplies or complex services ('performance guarantee');

(c)by contractors to ensure full performance of the contract during the contract liability period ('retention money guarantee').

The JRC shall be exempted from lodging guarantees.

As an alternative to requesting a guarantee on pre-financing, for grants, the authorising officer responsible may decide to split the payment into several instalments.

2.The authorising officer responsible shall decide whether the guarantee shall be denominated in euro or in the currency of the contract or of the grant agreement.

3.The guarantee shall be supplied by a bank or by an authorised financial institution accepted by the authorising officer responsible.

At the request of the contractor or the beneficiary and provided it is accepted by the authorising officer responsible:

(a)the guarantee referred to points (a), (b) and (c) of paragraph 1 may be replaced by a joint and several guarantee by a third party;

(b)the guarantee referred to in point (a) of paragraph 1 may be replaced by the irrevocable and unconditional joint guarantee of the beneficiaries who are parties to the same grant agreement.

4.The guarantee shall have the effect of making the bank or financial institution or the third party stand as irrevocable collateral security, or first-call guarantor of the contractor's or beneficiary's obligations.

5.Where in the course of implementation of the contract or the grant agreement the authorising officer responsible discovers that a guarantor is not or no longer authorised to issue guarantees in accordance with the applicable national law, he shall require that the contractor or the beneficiary replaces the guarantee supplied by such a guarantor.

Article 148
Guarantee on pre-financing

1.The guarantee shall be for an amount not exceeding the amount of the pre-financing.

2.The guarantee shall be released as and when the pre-financing is deducted from interim payments or payments of the balance to the contractor or the beneficiary in accordance with the terms of the contract or the conditions of the grant agreement.

Title VI
Indirect
implementation 

Article 149
Indirect
implementation

1.The selection of the entities and persons implementing Union funds or budgetary guarantees pursuant to point (c) of Article 61 (1) shall be transparent, justified by the nature of the action and shall not give rise to a conflict of interests. For entities mentioned in points (ii), (v), (vi) and (vii) of Article 61(1)(c) the selection shall also take due account of their operational and financial capacity.

Where the entity or person is identified in a basic act, the financial statement provided for in Article 33 shall include a reasoned justification for the choice of that particular entity or person.

In cases of implementation by a network, requiring the designation of at least one body or entity by Member State or by country concerned, the body or entity shall be designated by the Member State or the country concerned in accordance with the basic act. In all other cases, the Commission shall designate such bodies or entities in agreement with the Member States or countries concerned.

2.Entities and persons implementing Union funds or budgetary guarantees pursuant to point (c) of Article 61(1) shall respect the principles of sound financial management, transparency, non-discrimination and visibility of Union action. Where the Commission establishes financial partnership agreements in accordance with Article 126 those principles shall be further described in such agreements.

3.Prior to signing contribution agreements, financing agreements or guarantee agreements, the Commission shall ensure a level of protection of the financial interests of the Union equivalent to that when the Commission implements the funds in accordance with point (a) of Article 61(1). It shall do so by carrying out an assessment of the systems and procedures of the entities or persons implementing the Union funds if it intends to rely on them for the implementation of the action or by applying appropriate supervisory measures.

4.The Commission shall assess in accordance with the principle of proportionality and with due consideration for the nature of the action and the financial risks involved, that the entities and persons implementing EU funds pursuant to point (c) of Article 61(1):

(a)set up and ensure the functioning of an effective and efficient internal control system based on international best practices and allowing in particular to prevent, detect and correct irregularities and fraud;

(b)use an accounting system that provides accurate, complete and reliable information in a timely manner;

(c)are subject to an independent external audit, performed in accordance with internationally accepted auditing standards by an audit service functionally independent of the entity or person concerned;

(d)apply appropriate rules and procedures for providing financing to third parties including appropriate review procedures, rules for recovering funds unduly paid and rules for excluding from access to funding;

(e)make public adequate information on their recipients;

(f)ensure equivalent protection of personal data to that referred to under Article 5.



In addition, in agreement with the entities or persons, the Commission may assess other rules and procedures such as the administration cost accounting practices of the entities. On the basis on the results of this assessment the Commission may decide to rely on those rules and procedures.

Entities or persons which have been assessed under these requirements shall inform the Commission without undue delay if any substantive changes are made to the rules, systems or to the procedures of the entity or person which may impact the reliability of the Commission's assessment.

5.Where these entities or persons comply only in part with the requirements referred to in paragraph 4, the Commission shall take appropriate supervisory measures ensuring the protection of the Union's financial interests. These measures shall be specified in the relevant agreements.

6.An ex-ante assessment may not be required:

(a)for the bodies referred to in Articles 69 and 70 and for persons referred to in point (viii) of Article 61(1)(c) which have adopted financial rules with prior consent of the Commission;

(b)for third countries or the bodies they designate, in so far as the Commission retains financial management responsibilities that guarantee a sufficient protection of the financial interests of the Union; or

(c)for those procedures specifically required by the Commission, including its own or those specified in basic acts.

7.Where the systems or procedures of the entities or persons referred to in point (c ) of Article 61(1) are assessed as appropriate, Union contributions to these entities or persons may be implemented in accordance with this Title. Where such entities or persons participate in a call for proposals they shall abide by the rules of the call for proposals in accordance with Title VIII. In such a case the authorising officer may decide to sign a contribution agreement or a financing agreement instead of a grant agreement.

Article 150
Implementation

1.Entities and persons implementing EU funds or budgetary gurantees shall provide the Commission with:

(a)a report on the implementation of the Union funds or the budgetary guarantee, including the fulfilment of the conditions or results referred to in point (e) of Article 121(1);

(b)where the contribution reimburses expenditure, their accounts drawn up for the expenditure incurred;

(c)a management declaration covering the information referred to in point(a) and where appropriate point (b) confirming that:

(i)the information is properly presented, complete and accurate;

(ii)the EU contribution was used for its intended purpose, as defined in the contribution agreements, financing agreements or guarantee agreements, where applicable, in the relevant sector-specific rules;

(iii)the control systems put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions;

(d)a summary of the final audit reports and of controls carried out, including an analysis of the nature and extent of errors and weaknesses identified in systems, as well as corrective action taken or planned.

In case of actions terminating before the end of the financial year concerned, the final report for such action may replace the management declaration referred to in point (c), provided it is submitted before 15 February of the year following the financial year concerned.

The documents referred to in the first subparagraph shall be accompanied by an opinion of an independent audit body, drawn up in accordance with internationally accepted audit standards. That opinion shall establish whether the control systems put in place function properly and are cost-effective, and whether the underlying transactions are legal and regular. The opinion shall also state whether the audit work puts in doubt the assertions made in the management declaration under point (c) of the first subparagraph. Where such an opinion is absent, the authorising officer may seek an equivalent level of assurance through other independent means.

The documents referred to in the first subparagraph shall be provided to the Commission no later than 15 February of the following financial year. The opinion referred to in the third subparagraph shall be provided to the Commission no later than 15 March.

The obligations set out in this paragraph shall be without prejudice to agreements concluded with the EIB group, international organisations and third countries. With regard to the management declaration, such agreements shall include at least the obligation of those entities to provide the Commission annually with a statement that, during the financial year concerned, the Union contribution was used and accounted for in compliance with the requirements set out in paragraphs 3 and 4 of Article 149 and with the obligations laid down in such agreements. Such statement may be incorporated in the final report if the action implemented is limited to 18 months.

2.Entities and persons implementing EU funds or budgetary guarantees shall:

(a)comply with relevant standards and applicable legislation on the prevention of money laundering, and the fight against terrorism, tax fraud and tax evasion;

(b)not make use of or engage in tax avoidance structures, in particular aggressive tax planning schemes, or practices not complying with good governance criteria on taxation, as set out in EU legislation or communications and recommandations or any formal instruction by the Commission;

(c)not be established, and, in relation to the implementation of the financial instruments and budgetary guaranties, not maintain business relations with entities incorporated in jurisdictions that do not co-operate with the Union in relation to the application of the internationally agreed tax standards on transparency and exchange of information.

3.The Commission shall verify that the Union funds or budgetary guarantee has been used in accordance with the conditions laid down in the relevant agreements. Where the costs of the entity or person are reimbursed based on a simplified cost option in accordance with points (b) to (d) of Article 121 the provisions of points (1) to (4) of Article 175 and Articles 176 to 178 shall apply mutatis mutandis. Where the Union funds or budgetary guarantee has been used in breach of the obligations laid down in the relevant agreements, Article 127 shall apply.

4.In multi-donor actions, where the Union contribution reimburses expenditure, the procedure referred to in paragraph 3 shall consist in verifying that an amount corresponding to that paid by the Commission for the action concerned has been used by the entity in accordance with the conditions laid down in the relevant grant, contribution agreement or financing agreement.

5.Contribution agreements, financing agreements or guarantee agreements shall clearly define the responsibilities and obligations of the entity implementing EU funds, including the obligations referred to in Article 124, the conditions for payment of the contribution as well as, where applicable, the remuneration which should, where appropriate, be performance-based. Those agreements shall also include rules on reporting to the Commission on how the tasks are performed, the results expected including indicators on measuring performance and the obligation for entities implementing EU funds to notify the Commission without delay of cases of detected fraud and irregularities and their follow-up.

6.All contribution agreements, financing agreements and guarantee agreements shall be made available to the European Parliament and the Council at their request.

7.Article 150 shall not apply to the contribution of the Union to entities which are subject to a separate discharge procedure under Articles 69 and 70, with the exception of possible ad hoc contribution agreements.

Article 151
Indirect implementation with International Organisations

1.International organisations shall be international public-sector organisations set up by international agreements and specialised agencies set up by such organisations. Those agreements shall be transmitted to the Commission as part of the assessment carried out by the Commission referred to in Article 149 (3).

2.The following organisations shall be assimilated to international organisations:

(a)the International Committee of the Red Cross;

(b)the International Federation of National Red Cross and Red Crescent Societies.

3.The Commission may adopt a duly justified decision assimilating a non-profit organisation to an international organisation providing that it satisfies the following conditions:

(a)it has its own legal personality and autonomous governance bodies;

(b)it has been established to perform specific tasks of general international interest;

(c)at least six Member State are members of the non-profit organisation;

(d)it provides adequate financial guarantees;

(e)it operates on the basis of a permanent structure and in accordance with systems, rules and procedures which may be assessed in accordance with Article 149(3).

4.Where international organisations implement funds under indirect implementation, verification agreements concluded with them shall apply.

Article 152
Indirect implementation with
third countries

1.The Commission may implement the budget in partnership with a third country as referred to point (i) of Article 61 (1) (c) through the signature of a financing agreement describing the Union's intervention in the third country and laying down the implementation method for each part of the action.

2.For the part of the action implemented indirectly by the third country or the bodies it has designated, the financing agreement shall, in addition to the elements referred to in Article 150 (4), clearly define the roles and responsibilities of the third country and of the Commission in the implementation of the funds. The financing agreement shall also determine the rules and procedures applied by the third country when implementing EU funds.

Article 153
Blending operations 

1.Blending operations are operations financed within blending facilities or platforms.

2.Where financial instruments are implemented within a blending facility Title X applies.

3.For financial instruments within blending facilities, point (h) of Article 202(1) shall be deemed to be complied with if an ex ante evaluation is carried out prior to the establishment of the relevant blending facility;

4.Annual reports pursuant to Article 241 shall be established at the level of the blending facility taking into account all financial instruments grouped under it.

TITLE VII
PUBLIC PROCUREMENT AND CONCESSIONS

CHAPTER 1
Common provisions

Article 154
Principles applicable to public contracts and scope

1.All public contracts financed in whole or in part by the budget shall respect the principles of transparency, proportionality, equal treatment and non-discrimination.

2.All contracts shall be put out to competition on the broadest possible basis, except when use is made of the procedure referred to in point (d) of Article 158(1).

The estimated value of a contract may not be determined with a view to circumventing the applicable rules, nor may a contract be split up for that purpose.

The contracting authority shall divide a contract into lots, whenever appropriate, with due regard to broad competition.

3.Contracting authorities shall not use framework contracts improperly or in such a way that their purpose or effect is to prevent, restrict or distort competition.

4.The JRC may receive funding charged to appropriations other than research and technological development appropriations in respect of its participation in procurement award procedures financed in whole or in part from the budget.

5.The rules on procurement as laid down in this Regulation shall not apply to the activities of the JRC on behalf of third parties, with the exception of the principles of transparency and equal treatment.

Article 155
Annex on procurement and exercise of the delegation

Details on procurement procedures shall be provided in Annex to this Regulation. The Commission shall be empowered to adopt delegated acts to amend the Annex in accordance with Article 261.

Article 156
Mixed contracts and common procurement vocabulary

1.A mixed contract covering two or more types of procurement (works, supplies or services) or concessions (works or services) or both, shall be awarded in accordance with the provisions applicable to the type of procurement that characterises the main subject matter of the contract in question.

2.In the case of mixed contracts consisting of supplies and services, the main subject matter shall be determined by a comparison of the values of the respective supplies or services.

A contract covering one type of procurement (works, supplies or services) and concessions (works or services) shall be awarded in accordance with the provisions applicable to the public contract.

3.This Title shall not apply to contracts for technical assistance concluded with the EIB or the European Investment Fund.

4.Any references to nomenclatures in the context of public procurement shall be made using the ‘Common Procurement Vocabulary’ as set out in Regulation (EC) No 2195/2002 of the European Parliament and of the Council 46 .

Article 157
Publicity measures

1.For procedures with a value equal to or greater than the thresholds referred to in Article 169(1) or Article 172, the contracting authority shall publish in the Official Journal of the European Union:

(a)a contract notice to launch a procedure, except in the case of the procedure referred to in point (d) of Article 158(1);

(b)a contract award notice on the results of the procedure.

2.Procedures with a value below the thresholds referred to in Article 169(1) or Article 172 shall be advertised by appropriate means.

3.Publication of certain information on a contract award may be withheld where its release would impede law enforcement, or otherwise be contrary to the public interest, would harm the legitimate commercial interests of economic operators or might prejudice fair competition between them.

Article 158
Procurement procedures

1.Procurement procedures for awarding concession contracts or public contracts, including framework contracts shall take one of the following forms:

(a)open procedure;

(b)restricted procedure, including through a dynamic purchasing system;

(c)design contest;

(d)negotiated procedure, including without prior publication;

(e)competitive dialogue;

(f)competitive procedure with negotiation;

(g)innovation partnership;

(h)procedures involving a call for expression of interest.

2.In open procedures any interested economic operator may submit a tender.

3.In restricted procedures, competitive dialogues, competitive procedures with negotiation and innovation partnerships, any economic operator may submit a request to participate by providing the information that is requested by the contracting authority. The contracting authority shall invite all candidates, that satisfy the selection criteria and that are not in any of the situations set out in Articles 132 and 137, to submit a tender.

Notwithstanding the first subparagraph, the contracting authority may limit the number of candidates to be invited to participate in the procedure on the basis of objective and non-discriminatory selection criteria, which shall be indicated in the contract notice or the call for expression of interest. The number of candidates invited shall be sufficient to ensure genuine competition.

4.In all procedures involving negotiation, the contracting authority shall negotiate with tenderers the initial and any subsequent tenders or parts thereof, except their final tenders, in order to improve their content. The minimum requirements and the criteria specified in the procurement documents shall not be subject to negotiation.

A contracting authority may award a contract on the basis of the initial tender without negotiation where it has indicated in the procurement documents that it reserves the possibility to do so.

5.The contracting authority may use:

(a)the open or restricted procedure for any purchase;

(b)the procedures involving a call for expression of interest for contracts with a value below the thresholds referred to in Article 169(1), to preselect candidates to be invited to submit tenders in response to future restricted invitations to tender, or to collect a list of vendors to be invited to submit requests to participate or submit tenders;

(c)the design contest to acquire a plan or design selected by a jury after being put out to competition;

(d)the innovation partnership to develop an innovative product, service or innovative works and for the subsequent purchase of the resulting supply, services or works;

(e)the competitive procedure with negotiation or the competitive dialogue for concession contracts, for the service contracts referred to in Annex XIV to Directive 2014/24/EU, in cases where only irregular or unacceptable tenders were submitted in response to an open or restricted procedure after the initial procedure has been completed, and for cases where this is justified by the specific circumstances linked, inter alia, to the nature or the complexity of the subject matter of the contract or to the specific type of contract, as further detailed in the Annex to this Regulation;

(f)the negotiated procedure for contracts with a value below the thresholds referred to in Article 169(1) or the negotiated procedure without prior publication, only for specific types of purchases falling outside the scope of Directive 2014/24/EU or under clearly defined exceptional circumstances as set out in the Annex to this Regulation.

6.The dynamic purchasing system shall be open throughout its duration to any economic operator who satisfies the selection criteria.

The contracting authority shall follow the rules of the restricted procedure for procurement through a dynamic purchasing system.

Article 159
Interinstitutional procurement and joint procurement

1.Where a contract or a framework contract is of interest to two or more institutions, executive agencies or bodies referred to in Articles 69 and 70, and whenever there is a possibility for realising efficiency gains, the contracting authorities concerned may carry out the procedure and the management of the subsequent contract or framework contract on an interinstitutional basis under the lead of one of the contracting authorities.

The bodies and persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU as well as the Office of the Secretary of the Board of Governors of the European Schools may also participate in interinstitutional procedures.

The terms of a framework contract may only apply between those contracting authorities that are identified for that purpose in the procurement documents and those economic operators that are party to the framework contract.

2.Where a contract or framework contract is necessary for the implementation of a joint action between an institution and one or more contracting authorities from Member States, the procurement procedure may be carried out jointly by the institution and the contracting authorities.

Joint procurement may be conducted with EFTA states and Union candidate countries if this possibility has been specifically provided for in a bilateral or multilateral treaty.

In the case of a joint procurement procedure, the procedural provisions applicable to the institutions shall apply.

Where the share pertaining to or managed by the contracting authority of a Member State in the total estimated value of the contract is equal to or above 50 %, or in other duly justified cases, the institution may decide that the procedural rules applicable to the contracting authority of a Member State shall apply to joint procurement, provided that those rules may be considered as equivalent to those of the institution.

The institution and the contracting authority from a Member State, an EFTA State or a Union candidate country, concerned by the joint procurement shall agree in particular upon the detailed practical arrangements for the evaluation of the requests for participation or of the tenders, the award of the contract, the law applicable to the contract and the competent court for hearing disputes.

Article 160
Preparation of a procurement procedure

1.Before launching a procurement procedure, the contracting authority may conduct a preliminary market consultation with a view to preparing the procedure.

2.In the procurement documents, the contracting authority shall identify the subject matter of the procurement by providing a description of its needs and the characteristics required of the works, supplies or services to be bought, and shall specify the applicable exclusion, selection and award criteria. The contracting authority shall also indicate which elements define the minimum requirements to be met by all tenders. Minimum requirements shall include compliance with applicable environmental, social and labour law obligations established by Union law, national legislation, collective agreements or the applicable international social and environmental conventions listed in Annex X to Directive 2014/24/EU.

Article 161
Award of contracts

1.Contracts shall be awarded on the basis of award criteria provided that the contracting authority has verified the following:

(a)the tender complies with the minimum requirements specified in the procurement documents;

(b)the candidate or tenderer is not excluded under Article 132 or rejected under Article 137,

(c)the candidate or tenderer meets the selection criteria specified in the procurement documents and is not subject to conflicting interests which may negatively affect the performance of the contract.

2.The contracting authority shall apply the selection criteria to evaluate the capacity of the candidate or tenderer. Selection criteria may only relate to the legal and regulatory capacity to pursue the professional activity, the economic and financial capacity, and the technical and professional capacity. The JRC shall be presumed to meet the requirements relating to financial capacity.

3.The contracting authority shall apply the award criteria to evaluate the tender.

4.The contracting authority shall base the award of contracts on the most economically advantageous tender, which shall consist in one of three award methods: lowest price, lowest cost or best price-quality ratio.

For the lowest cost method, the contracting authority shall use a cost-effectiveness approach including life-cycle costing.

For the best price-quality ratio, the contracting authority shall take into account the price or cost and other quality criteria linked to the subject matter of the contract.

Article 162
Submission, electronic communication and evaluation

1.The contracting authority shall lay down time limits for the receipt of tenders and requests to participate in accordance with point 24 of the Annex and taking into account the complexity of the purchase, leaving an adequate period for economic operators to prepare their tenders.

2.If deemed appropriate and proportionate, the contracting authority may require tenderers to submit a guarantee to make sure that the tenders submitted are not withdrawn before contract signature. The required guarantee shall represent 1 to 2% of the total estimated value of the contract.

3.The contracting authority shall open all requests to participate and tenders. However, it shall reject:

(a)requests to participate and tenders which do not comply with the time limit for receipt, without opening them;

(b)tenders received already open, without examining their content.

4.The contracting authority shall evaluate all requests to participate or tenders not rejected during the opening phase laid down in paragraph 3 on the basis of the criteria specified in the procurement documents with a view to awarding the contract or to proceeding with an electronic auction.

5.The authorising officer may waive the appointment of an evaluation committee as provided for Article 145(2) in the following cases:

(a)the value of the contract is below the thresholds referred to in Article 169(1);

(b)on the basis of a risk analysis for the cases set out in points (c), (e), (f) (i), (f) (iii) and (h) of point 11.1 of the Annex;

(c)on the basis of a risk analysis when reopening competition within a framework contract;

(d)for procedures in the field of external actions having a value of less than or equal to EUR 20 000.

6.Requests to participate and tenders which do not comply with all the minimum requirements set out in the procurement documents shall be rejected.

Article 163
Contacts during the procurement procedure

1.Before the time limit for receipt of requests to participate or tenders, the contracting authority may communicate additional information about the procurement documents if it discovers an error or omission in the text or upon request from candidates or tenderers. Information provided shall be disclosed to all candidates or tenderers.

2.After the time limit for receipt of requests to participate or tenders, in every case where contact has been made, and in the duly justified cases where contact has not been made as provided for in Article 146, a record shall be kept in the procurement file.

Article 164
Award decision and information to candidates or tenderers

1.The authorising officer responsible shall decide to whom the contract is to be awarded, in compliance with the selection and award criteria specified in the procurement documents.

2.The contracting authority shall notify all candidates or tenderers, whose requests to participate or tenders are rejected, of the grounds on which the decision was taken, as well as the duration of the standstill period referred to in Article 169(2).

For the award of specific contracts under a framework contract with reopening of competition, the contracting authority shall inform the tenderers of the result of the evaluation.

3.The contracting authority shall inform each tenderer who is not in an exclusion situation, who is not rejected under Article 137, whose tender is compliant with the procurement documents and who makes a request in writing, of any of the following:

(a)the name of the tenderer, or tenderers in the case of a framework contract, to whom the contract is awarded and, except in the case of a specific contract under a framework contract with reopening of competition, the characteristics and relative advantages of the successful tender, the price paid or contract value, whichever is appropriate;

(b)the progress of negotiation and dialogue with tenderers.

However, the contracting authority may decide to withhold certain information where its release would impede law enforcement, would be contrary to the public interest or would prejudice the legitimate commercial interests of economic operators or might distort fair competition between them.

Article 165
Cancellation of the procurement procedure

The contracting authority may, before the contract is signed, cancel the procurement procedure without the candidates or tenderers being entitled to claim any compensation.

The decision shall be justified and brought to the attention of the candidates or tenderers as soon as possible.

Article 166
Performance and modifications of the contract

1.Performance of the contract shall not start before the contract is signed.

2.The contracting authority may modify a contract or framework contract without a procurement procedure only in the cases provided for in paragraph 3 and provided the modification does not alter the subject matter of the contract or framework contract.

3.A contract, a framework contract or a specific contract under a framework contract may be modified without a new procurement procedure in any of the following cases:

(a)for additional works, supplies or services by the original contractor that have become necessary and that were not included in the initial procurement, where the following conditions are fulfilled:

(i)a change of contractor cannot be made for technical reasons linked to interchangeability or interoperability requirements with existing equipment, services or installations;

(ii)a change of contractor would cause substantial duplication of costs for the contracting authority;

(iii)any increase in price, including the net cumulative value of successive modifications, does not exceed 50 % of the initial contract value;

(b)where all of the following conditions are fulfilled:

(i)the need for modification has been brought about by circumstances which a diligent contracting authority could not foresee;

(ii)any increase in price does not exceed 50 % of the initial contract value;

(c)where the value of the modification is below the following thresholds:

(i)the thresholds referred to in Article 169(1) and in point 38 of the Annex of this Regulation in the field of external actions applicable at the time of the modification;

(ii)10 % of the initial contract value for public service and supply contracts and works or services concession contracts and 15 % of the initial contract value for public works contracts;

(d)where the minimum requirements of the initial procurement procedure are not altered. In that case any ensuing modification of value shall comply with the conditions set under point (c) of this subparagraph, unless such modification of value results from the strict application of the procurement documents or contractual provisions.

The initial contract value shall not take into account price revisions.

The net cumulative value of several successive modifications under point (c) of the first subparagraph of this paragraph shall not exceed any threshold referred to therein.

The contracting authority shall apply the ex post publicity measures set out in Article 157.

Article 167
Performance guarantees and retention money guarantees

1.The performance guarantee shall amount to a maximum of 10 % of the total value of the contract.

It shall be fully released after final acceptance of the works, supplies or complex services, within a period subject to Article 114(1) to be specified in the contract. It may be released partially or fully upon provisional acceptance of the works, supplies or complex services.

2.A retention money guarantee amounting to a maximum of 10 % of the total value of the contract may be constituted by deductions from interim payments as and when they are made or by deduction from the final payment.

The retention money guarantee shall not be used in a contract where a performance guarantee has been requested and not released.

3.Subject to approval by the contracting authority, the contractor may request to replace the retention money guarantee by a guarantee referred to in Article 147.

4.The contracting authority shall release the retention money guarantee after the expiry of the contractual liability period, within a period subject to Article 114(1) to be specified in the contract.

CHAPTER 2
Provisions applicable to contracts awarded by the institutions on their own account

Article 168
The contracting authority

1.The Union institutions, executive agencies and bodies within the meaning of Articles 69 and 70 shall be deemed to be contracting authorities in the case of contracts awarded on their own account, except where they purchase from a central purchasing body. Departments of those institutions shall not be deemed to be contracting authorities where they conclude service-level agreements amongst themselves.

Those institutions shall delegate, in accordance with Article 58, the necessary powers for the exercise of the function of contracting authority.

2.Each authorising officer by delegation or subdelegation within each institution shall assess whether the thresholds laid down in Article 169(1) have been reached.

Article 169
Thresholds applicable and standstill period

1.To award public and concession contracts, the contracting authority shall respect the thresholds laid down in points (a) and (b) of Article 4 of Directive 2014/24/EU when selecting a procedure set out in Article 158(1) of this Regulation. Those thresholds shall determine the publicity measures set out in Article 157(1) and (2) of this Regulation.

2.Subject to exceptions and conditions to be specified in the Annex to this Regulation, in the case of contracts the value of which exceeds the thresholds referred to in paragraph 1, the contracting authority shall not sign the contract or framework contract with the successful tenderer until a standstill period has elapsed.

3.The standstill period shall have a duration of 10 days when using electronic means of communication and 15 days when using other means.

Article 170
Rules on access to procurement

1.Participation in procurement procedures shall be open on equal terms to all natural and legal persons within the scope of the Treaties and to all natural and legal persons established in a third country which has a special agreement with the Union in the field of public procurement under the conditions laid down in that agreement. It shall also be open to international organisations.

2.For the purpose of Article 154(4), the JRC shall be considered as a legal person established in a Member State.

Article 171
Procurement rules of the World Trade Organisation

Where the plurilateral Agreement on Government Procurement concluded within the World Trade Organisation applies, the procurement procedure shall also be open to economic operators established in the states which have ratified that agreement, under the conditions laid down therein.

CHAPTER 3
Provisions applicable for procurement in the field of external actions

Article 172
External action procurement

1.The provisions of Chapter 1 of Title VII relating to the general provisions on procurement shall be applicable to contracts covered by this Chapter subject to the special provisions relating to the arrangements for awarding external contracts laid down in the Annex. Articles 168 to 171 shall not be applicable to the procurement set out in this Chapter.

Article 157 and points (a) and (b) of Article 158(1) shall only apply as from:

(a)EUR 300 000 for service and supply contracts;

(b)EUR 5 000 000 for works contracts.

2.This Chapter shall apply to:

(a)procurement where the Commission does not award contracts for its own account;

(b)procurement by entities or persons pursuant to point (c) of Article 61(1) where provided for in the contribution or financing agreements referred to in Article 149.

3.The procurement procedures shall be laid down in the financing agreements provided for in Article 152.

4.This Chapter shall not apply to actions under sector-specific basic acts relating to humanitarian crisis management aid, civil protection operations and humanitarian aid operations.

Article 173
Rules on access to procurement

1.Participation in procurement procedures shall be open on equal terms to all persons within the scope of the Treaties and to any other natural or legal person in accordance with the specific provisions in the basic instruments governing the cooperation sector concerned. It shall also be open to international organisations.

2.In the cases referred to in Article 56(2), it may be decided, under exceptional circumstances duly justified by the authorising officer responsible, to allow third-country nationals, other than those referred to in paragraph 1 of this Article, to tender for contracts.

3.Where an agreement on widening the market for procurement of goods or services to which the Union is party applies, the procurement procedures for contracts financed by the budget shall also be open to natural and legal persons established in a third country other than those referred to in paragraphs 1 and 2, under the conditions laid down in that agreement.

TITLE VIII
GRANTS

CHAPTER 1
Scope and form of grants
 

Article 174
Scope and form of grants

1.This Title applies to grants awarded under direct implementation.

2.Grants are direct financial contributions, by way of donation, from the budget in order to finance any of the following:

(a)an action intended to help achieve a Union policy objective ('action grants');

(b)the functioning of a body which has an objective forming part of, and supporting, a Union policy ('operating grants').

In the case of an operating grant, the grant shall take the form of a financial contribution to the work programme of the body.

3.Grants may take any of the forms provided for in paragraph 1 of Article 121. Where the grant takes the form referred to in point (e) of Article 121(1) the application of the provisions related to eligibility and verification of costs laid down in this Title shall not apply.

4.Each institution may award grants for communication activities where this is justified by the nature of those activities.

5.The Joint Research Centre (JRC) may receive funding charged to appropriations other than research and technological development appropriations in respect of its participation in grant award procedures financed in whole or in part from the budget. In such cases paragraph 4 of Article 191, as far as financial capacity is concerned, and points (a) to (d) of Article 189(1) shall not apply.

Article 175
Lump sums, unit costs and flat-rate financing

1.This Article shall apply to grants which take the form of lump sums, unit costs or flat rate financing referred to in points (b), (c) or (d) of Article 121(1).

2.Where possible and appropriate, lump sums, unit costs or flat rates shall be determined in such a way as to allow their payment upon achievement of concrete outputs.

3.Unless provided otherwise in the basic act, the use of lump sums, unit costs or flat-rate financing shall be authorised by the authorising officer responsible, who shall act in accordance with a predetermined procedure established within each institution.

4.The authorisation shall contain at least the following:

(a)justification concerning the appropriateness of such forms of financing with regard to the nature of the supported actions or work programmes, as well as to the risks of irregularities and fraud and costs of control;

(b)identification of the costs or categories of costs covered by lump sums, unit costs or flat-rate financing, which shall exclude ineligible costs under the applicable Union rules;

(c)description of the methods for determining lump sums, unit costs or flat-rate financing. Those methods shall be based on one of the following:

(i)statistical data, similar objective means or an expert judgement; or

(ii)beneficiary-by-beneficiary approach, by reference to certified or auditable historical data of the beneficiary or to its usual cost accounting practices;

(d)where possible, the essential conditions triggering the payment, including, where applicable, the achievement of outputs;

(e)description of the conditions for ensuring that the principle of sound financial management is respected and the co-financing principle is reasonably complied with;

(f)where lump sums, unit costs and flat rates are not output based, a justification on why an output based approach is not possible or appropriate.

5.The authorisation shall apply for the duration of the programme or programmes unless otherwise provided in the authorising decision.

The authorisation may cover the use of lump sums, unit costs or flat rates applicable beyond a specific funding programme where the nature of the activities or of the expenditure allow for a common approach. The authorising decision may be adopted by the following:

(a)the authorising officers responsible where all concerned activities fall under their responsibility;

(b)the Commission where this is appropriate in view of the nature of the activities or of the expenditure or in view of the number of authorising officers concerned.

6.The authorising officer responsible may authorise or impose, in the form of flat-rates, funding of the beneficiary's indirect costs up to a maximum of 7 % of total eligible direct costs for the action. A higher flat rate may be authorised by a reasoned Commission decision.

7.SME owners and other natural persons who do not receive a salary may declare eligible personnel costs for the work carried out by themselves under an action or work programme, on the basis of unit costs authorised in accordance with paragraphs 1 to 6.

8.Beneficiaries may declare personnel costs for the work carried out by volunteers under an action or work programme, on the basis of unit costs authorised in accordance with paragraphs 1 to 6.

Article 176
Single lump sums

1.A lump sum may cover the entire eligible costs of an action or a work programme ('single lump sum').

2.Single lump sums may be determined on the basis of the estimated budget. The budget shall comply with the principles of economy, efficiency and effectiveness. The compliance with those principles shall be verified ex-ante at the time of evaluation of the grant application.

3.When authorising single lump sums the authorising officer responsible shall comply with Article 175.

Article 177
Checks and controls on beneficiaries related to lump sums, unit costs and flat rates

1.The authorising officer responsible shall check, at the latest before the payment of the balance, the fulfilment of the conditions triggering the payment of lump sums, unit costs or flat-rates, including, where required, the achievement of outputs. In addition, the fulfilment of those conditions may be subject to ex post controls.

The amounts of lump sums, unit costs or flat-rate financing determined ex ante by application of the method authorised by the authorising officer responsible or the Commission in accordance with Article 175 shall not be challenged by ex-post controls without prejudice to the right of the authorising officer responsible to reduce the grant in accordance with paragraph 4 of Article 127. Where lump sums, unit costs or flat rates are established on the basis of the usual cost accounting practices of the beneficiary paragraph 2 of Article 179 shall apply.

2.The conditions triggering the payment of lump sums, unit costs or flat-rates shall not require reporting on the costs actually incurred by the beneficiary.

3.Payment of the grant on the basis of lump sums, unit costs or flat-rate financing shall not affect the right of access to the statutory records of the beneficiaries for the purposes referred to in Articles 178 and 124.

Article 178
Periodic assessment of lump sums, unit costs or flat-rates

The method for determining lump sums, unit costs or flat rates, the underlying data and the resulting amounts shall be assessed periodically, and, where appropriate, adjusted in accordance with Article 175.

Article 179
Usual cost accounting practices of the beneficiary

1.Where recourse to the usual cost accounting practices of the beneficiary is authorised, the authorising officer responsible may assess compliance of those practices ex ante with the conditions set out in paragraph 4 of Article 175 or through an appropriate strategy for ex post controls.

2.If the compliance of the beneficiary's usual cost accounting practices with the conditions referred to in paragraph 4 of Article 175 has been established ex ante, the amounts of lump sums, unit costs or flat-rate financing determined by application of those practices shall not be challenged by ex post controls. This does not affect the right of the authorising officer responsible to reduce the grant in accordance with paragraph 4 of Article 127.

3.The authorising officer responsible may consider that the usual cost accounting practices of the beneficiary are compliant with the conditions referred to in paragraph 4 of Article 175 if they are accepted by national authorities under comparable funding schemes.

Article 180
Eligible costs

1.Grants shall not exceed an overall ceiling expressed in terms of an absolute value which shall be established, where possible, on the basis of estimated eligible costs. Without prejudice to the basic act, grants may in addition be expressed as a percentage of the estimated eligible costs.

Where, due to specificities of an action, grants can only be expressed in terms of an absolute value, the verification of the eligible costs shall be done in accordance with paragraph 3 of Article 150.

2.Without prejudice to the maximum co-financing rate specified in the basic act:

(a)the grant shall not exceed the eligible costs;

(b)where the estimated eligible costs include costs for volunteers' work referred to in paragraph 8 of Article 175, the grant shall not exceed the estimated eligible costs other than the costs for volunteers' work.

3.Eligible costs are costs actually incurred by the beneficiary of a grant which shall meet all of the following criteria:

(a)they are incurred during the duration of the action or of the work programme, with the exception of costs relating to final reports and audit certificates;

(b)they are indicated in the estimated overall budget of the action or work programme;

(c)they are necessary for the implementation of the action or of the work programme which is the subject of the grant;

(d)they are identifiable and verifiable, in particular being recorded in the accounting records of the beneficiary and determined according to the applicable accounting standards of the country where the beneficiary is established and according to the usual cost accounting practices of the beneficiary;

(e)they comply with the requirements of applicable tax and social legislation;

(f)they are reasonable, justified, and comply with the principle of sound financial management, in particular regarding economy and efficiency.

4.Calls for proposals shall specify the categories of costs considered as eligible for Union funding.

Unless provided otherwise in the basic act and in addition to paragraph 3, the following categories of costs shall be eligible where the authorising officer responsible has declared them as such under the call for proposals:

(a)costs relating to a pre-financing guarantee lodged by the beneficiary of the grant, where that guarantee is required by the authorising officer responsible pursuant to paragraph 1 of Article 147;

(b)costs relating to certificates on the financial statements and operational verification reports where such certificates or reports are required by the authorising officer responsible;

(c)VAT where it is not recoverable under the applicable national VAT legislation and is paid by a beneficiary other than a non-taxable person as defined in the first subparagraph of Article 13(1) of Council Directive 2006/112/EC 47 ;

VAT shall be considered as not recoverable if according to national law it is attributable to any of the following activities:

(i)exempt activities without right of deduction;

(ii)activities which fall outside the scope of VAT;

(iii)activities, as referred to in points (i) or (ii), in respect of which VAT is not deductible but refunded by means of specific refund schemes or compensation funds not foreseen by Directive 2006/112/EC, even if that scheme or fund is established by national VAT legislation.

VAT relating to the activities listed in Article 13(2) of Directive 2006/112/EC shall be regarded as paid by a beneficiary other than a non-taxable person as defined in the first subparagraph of Article 13(1) of that Directive, regardless of whether those activities are regarded by the Member State concerned as activities engaged in by bodies governed by public law acting as public authorities.

(d)depreciation costs, provided they are actually incurred by the beneficiary;

(e)salary costs of the personnel of national administrations to the extent that they relate to the cost of activities which the relevant public authority would not carry out if the project concerned were not undertaken.

5.Costs incurred by entities affiliated to a beneficiary referred to in Article 181 may be accepted as eligible, unless the authorising officer responsible declares them as ineligible under the call for proposals. The following conditions shall apply cumulatively:

(a)the entities concerned are identified in the grant agreement;

(b)the entities concerned abide by the rules applicable to the beneficiary under the grant agreement with regard to eligibility of costs and rights of checks and audits by the Commission, European Anti-Fraud Office and the Court of Auditors.

Article 181
Affiliated entities and sole beneficiary

1.For the purpose of this Title, the following entities shall be considered as entities affiliated to the beneficiary:

(a)entities forming the beneficiary in accordance with paragraph 2;

(b)entities that satisfy the eligibility criteria and that do not fall within one of the situations referred to in paragraph 1 of Article 132 and in paragraph 1 of Article 137 and that have a link with the beneficiary, in particular a legal or capital link, which is neither limited to the action nor established for the sole purpose of its implementation.

Section 2 of Chapter 2 of Title V shall apply also to affiliated entities.

2.Where several entities satisfy the criteria for being awarded a grant and together form one entity, that entity may be treated as the sole beneficiary, including where the entity is specifically established for the purpose of implementing the action to be financed by the grant.

CHAPTER 2
Principles
 

Article 182
General principles applicable to grants

Grants shall be subject to the principles of:

(a)equal treatment; 

(b)transparency;

(c)co-financing;

(d)non cumulative award and no double financing;

(e)non retroactivity.

Article 183
Transparency

1.Grants shall be awarded following a publication of calls for proposals, except in the cases referred to in Article 188.

2.All grants awarded in the course of a financial year shall be published in accordance with paragraphs 1 to 4 of Article 36.

3.Following the publication referred to in paragraphs 1 and 2, when requested by the European Parliament and the Council, the Commission shall forward a report to them on:

(a)the number of applicants in the past year;

(b)the number and percentage of successful applications per call for proposals;

(c)the average duration of the procedure from date of closure of the call for proposals to the award of a grant;

(d)the number and amount of grants where the ex post publication obligation was waived in the past year in accordance with paragraph 4 of Article 36.

Article 184
Co-financing

1.Grants shall involve co-financing. This means that the resources necessary to carry out the action or the work programme shall not be provided entirely by the grant.

Co-financing may take the form of the beneficiary’s own resources, income generated by the action or work programme or financial or in-kind contributions from third parties.

2.Contributions in kind from third parties in the form of volunteers' work referred to in paragraph 8 of Article 175 shall be presented as eligible costs in the estimated budget. They shall be presented separately from the other eligible costs.

Other contributions in kind from third parties shall be presented separately from the contributions to the eligible costs in the estimated budget. Their approximate value shall be indicated in the estimated budget and shall not be subject to subsequent changes.

3.As an exception to paragraph 1 an external action may be financed in full by the grant where this is essential for it to be carried out. In such a case grounds shall be provided in the award decision.

4.Paragraphs 1, 2 and 3 shall not apply to interest rate rebates and guarantee fee subsidies.

Article 185
Principle of non-cumulative award and no double funding

1.Each action may give rise to the award of only one grant from the budget to any one beneficiary, except where otherwise authorised in the relevant basic acts.

A beneficiary may be awarded only one operating grant from the budget per financial year.

An action may be financed jointly from separate budget lines by different authorising officers responsible.

2.The applicant shall immediately inform the authorising officers of any multiple applications and multiple grants relating to the same action or to the same work programme.

3.In no circumstances shall the same costs be financed twice by the budget.

4.Paragraphs 1, 2 and 3 shall not apply to:

(a)study, research, training or education support paid to natural persons;

(b)direct support paid to natural persons most in need, such as unemployed persons and refugees.

Article 186
Principle of non-retroactivity

1.Unless provided otherwise in this Article grants shall not be awarded retroactively.

2.A grant may be awarded for an action which has already begun provided that the applicant can demonstrate the need for starting the action prior to signature of the grant agreement. 

In such cases, costs incurred prior to the date of submission of the grant application shall not be eligible, except:

(a)in duly justified exceptional cases as provided for in the basic act, or

(b)in the event of extreme urgency for measures referred to in points (a) or (b) of Article 188 whereby an early engagement by the Union would be of major importance. In these cases the costs incurred by a beneficiary before the date of submission of the application shall be eligible for Union financing under the following conditions:

(i)the reasons for such derogation have been properly substantiated by the authorising officer responsible;

(ii)the grant agreement sets explicitly the eligibility date earlier than the date for submission of applications.

3.No grant may be awarded retroactively for actions already completed.

4.In the case of operating grants, the grant agreement shall be signed within six months of the start of the beneficiary's financial year. Costs eligible for financing may neither have been incurred before the grant application was submitted nor before the start of the beneficiary's financial year.

CHAPTER 3
Grant award procedure and grant agreement

Article 187
Content and publication of calls for proposals

1.Calls for proposals shall specify:

(a)the objectives pursued;

(b)the eligibility, exclusion, selection and award criteria and the relevant supporting documents;

(c)the arrangements for Union financing, in particular the forms of grant;

(d)the arrangements and final date for the submission of proposals; 

(e)the planned date by which all applicants are to be informed of the outcome of the evaluation of their application and the indicative date for the signature of grant agreements.

2.The dates referred to in point (e) of paragraph 1 shall be fixed on the basis of the following periods:

(a)for informing all applicants of the outcome of the evaluation of their application, a maximum of six months from the final date for submission of complete proposals;

(b)for signing grant agreements with applicants a maximum of three months from the date of informing applicants that they have been successful.

Those periods may be adjusted in order to take into account any time needed to comply with specific procedures that may be required by the basic act in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council 48 and may be exceeded in exceptional, duly justified cases, in particular for complex actions, where there is a large number of proposals or delays attributable to the applicants.

The authorising officer by delegation shall report in his or her annual activity report on the average time taken to inform applicants and to sign grant agreements. In the event of the periods referred to in the first subparagraph being exceeded, the authorising officer by delegation shall give reasons and, where not duly justified in accordance with the second subparagraph, shall propose remedial action.

3.Calls for proposals shall be published on the internet site of the Union institutions and in addition to publication on the internet site by any other appropriate means, including the Official Journal of the European Union, where it is necessary to provide additional publicity among potential beneficiaries. They may be published subject to the adoption of the financing decision referred to in Article 108, including during the year preceding budget implementation. Any modification of the content of the calls for proposals shall be published under the same conditions.

Article 188
Exceptions to calls for proposals

Grants may be awarded without a call for proposals only in the following cases:

(a)for the purposes of humanitarian aid, emergency support operations, civil protection operations or for crisis management aid;

(b)in other exceptional and duly substantiated emergencies;

(c)to bodies with a de jure or de facto monopoly or to bodies designated by the Member States, under their responsibility, where those Member States are in a de jure or de facto monopoly situation;

(d)to bodies identified by a basic act, within the meaning of Article 56, as beneficiaries of a grant or to bodies designated by the Member States, under their responsibility, where those Member States are identified by a basic act as beneficiaries of a grant;

(e)in the case of research and technological development, to bodies identified in the work programme referred to in Article 108, where the basic act expressly provides for that possibility, and on condition that the project does not fall under the scope of a call for proposals;

(f)for activities with specific characteristics that require a particular type of body on account of its technical competence, its high degree of specialisation or its administrative power, on condition that the activities concerned do not fall within the scope of a call for proposals. Where this particular type of body is a Member State, the grant may also be awarded without a call for proposals to the body designated by the Member State, under its responsibility, for the purpose of implementing the action.

(g)to the EIB or the European Investment Fund for actions of technical assistance. In such cases points (a) to (d) of Article 189(1) shall not apply.

The cases referred to in points (c) and (f) of the first subparagraph shall be duly substantiated in the award decision.

Article 189
Content of grant applications

1.The grant application shall contain the following:

(a)information on the legal status of the applicant;

(b)a declaration on the applicant's honour in accordance with paragraph 1 of Article 133 and on compliance with the eligibility and selection criteria;

(c)information necessary to demonstrate the applicant's financial and operational capacity to carry out the proposed action or work programme and, if decided by the authorising officer responsible on the basis of a risk assessment, supporting documents confirming this information, such as the profit and loss account and the balance sheet for the last financial year for which the accounts were closed.

Such information and supporting documents shall not be requested from applicants to which the verification of the financial or operational capacity does not apply in accordance with paragraph 5 of Article 191. In addition, supporting documents shall not be requested for low value grants;

(d)where the application concerns a grant for an action for which the amount exceeds EUR 750 000 or an operating grant which exceeds EUR 100 000, an audit report produced by an approved external auditor shall be submitted where it is available, and always in cases where a statutory audit is required by EU or national law. That report shall certify the accounts for the last financial year available. In all other cases, the applicant shall provide a self-declaration signed by its authorised representative certifying the validity of its accounts for the last financial year available.

The first subparagraph shall apply only to the first application made by a beneficiary to an authorising officer responsible in any one financial year.

In the case of agreements between the Commission and a number of beneficiaries, the thresholds set in the first subparagraph shall apply to each beneficiary.

In case of partnerships referred to in paragraph 4 of Article 126, the audit report referred to in the first subparagraph, covering the last two financial years available must be produced before signature of the financial framework partnership agreement.

The authorising officer responsible may, depending on a risk assessment, waive the obligation referred to in the first subparagraph for education and training establishments and, in case of agreements with a number of beneficiaries, beneficiaries who have accepted joint and several liabilities or who do not bear any financial responsibility.

The first subparagraph shall not apply to public bodies and the international organisations referred to in Article 151.

(e)a description of the action or work programme and an estimated budget which, where possible:

(i)shall have revenue and expenditure in balance, and

(ii)shall indicate the estimated eligible costs of the action or work programme. 

As an exception to point (i), in duly justified cases, the estimated budget may include provisions for contingencies or possible variations in exchange rates.

(f)indication of the sources and amounts of Union funding received or applied for the same action or part of the action or for its functioning during the same financial year as well as any other funding received or applied for the same action.

2.The application may be divided in several parts that may be submitted at different stages in accordance with paragraph 2 of Article 193.

Article 190
Eligibility criteria

1.The eligibility criteria shall determine the conditions for participating in a call for proposals.

2.Any of the following applicants shall be eligible for participating in a call for proposal:

(a)legal persons;

(b)natural persons, in so far as this is required by the nature or characteristics of the action or the objective pursued by the applicant;

(c)entities which do not have legal personality under the applicable national law, provided that their representatives have the capacity to undertake legal obligations on behalf of the entity and offer guarantees for the protection of the Union's financial interests equivalent to those offered by legal persons. In particular the applicant shall have a financial and operational capacity equivalent to that of a legal person. The representatives of the applicant shall prove that those conditions are satisfied.

3.The call for proposals may lay down additional eligibility criteria which shall be established with due regard for the objectives of the action and shall comply with the principles of transparency and non-discrimination.

4.For the purposes of paragraph 4 of Article 174 and this Article, the JRC shall be considered as a legal person established in a Member State.

Article 191
Selection criteria

1.The selection criteria shall be such as to make it possible to assess the applicant's ability to complete the proposed action or work programme.

2.The applicant must have stable and sufficient sources of funding to maintain his activity throughout the period for which the grant is awarded and to participate in its funding ('financial capacity').

3.The applicant must have the professional competencies and qualifications required to complete the proposed action or work programme unless specifically provided otherwise in the basic act ('operational capacity').

4.Financial and operational capacity shall be verified in particular on the basis of an analysis of any information or supporting documents referred to in Article 189.

If no supporting documents were requested in the call for proposals and if the authorising officer responsible has doubts about the financial or operational capacity of an applicant, he shall request it to provide any appropriate documents.

In case of partnerships the verification shall be performed in accordance with paragraph 6 of Article 126.

5.The verification of financial capacity shall not apply to:

(a)natural persons in receipt of education support; 

(b)natural persons most in need and in receipt of direct support; 

(c)public bodies;

(d)international organisations;

(e)persons or entities applying for interest rate rebates and guarantee fee subsidies where the objective of those rebates and subsidies is to reinforce the financial capacity of a beneficiary or to generate an income.

6.The authorising officer responsible may, depending on a risk assessment, waive the obligation to verify the operational capacity of public bodies or international organisations.

Article 192
Award criteria

The award criteria shall be such as to make it possible:

(a)to assess the quality of the proposals submitted in the light of the objectives and priorities set;

(b)to award grants to the actions or to the work programmes which maximise the overall effectiveness of the Union funding.

Article 193
Evaluation procedure

1.Proposals shall be evaluated, on the basis of the pre-announced selection and award criteria, with a view to determining which proposals may be financed.

2.The authorising officer responsible shall, where appropriate, divide the process into several procedural stages. The rules governing the process shall be announced in the call for proposals.

The applicants whose proposals are rejected at any stage shall be informed in accordance with paragraph 7.

The same documents and information shall not be required more than once during the same procedure.

3.The evaluation committee referred to in Article 145 or, where appropriate, the authorising officer responsible may ask an applicant to provide additional information or to clarify the supporting documents submitted in accordance with Article 146. The authorising officer shall keep appropriate records of contacts with applicants during the procedure.

4.Upon completion of its work, the members of the evaluation committee shall sign a record of all the proposals examined, containing an assessment of their quality and identifying those which may receive funding.

Where necessary that record shall rank the proposals examined, provide recommendations on the maximum amount to award and possible non-substantial adjustments to the grant application.

The record shall be kept for future reference.

5.The authorising officer responsible may invite an applicant to adjust its proposal in the light of the recommendations of the evaluation committee. The authorising officer responsible shall keep appropriate records of contacts with applicants during the procedure.

6.The authorising officer responsible shall, on the basis of the evaluation, take his decision giving at least:

(a)the subject and the overall amount of the decision;

(b)the name of the successful applicants, the title of the actions, the amounts accepted and the reasons for that choice, including where it is inconsistent with the opinion of the evaluation committee;

(c)the names of any applicants rejected and the reasons for that rejection.

7.The authorising officer responsible shall inform applicants in writing of the decision on their application. If the grant requested is not awarded, the institution concerned shall give the reasons for the rejection of the application. Rejected applicants shall be informed as soon as possible of the outcome of the evaluation of their application and in any case within 15 calendar days after information has been sent to the successful applicants.

8.For grants pursuant to Article 188 the following shall apply: 

(a)paragraphs 2 and 4 of this Article and Article 145 are not compulsory, 

(b)the authorising officer responsible may merge the content of the evaluation report and award decision into a single document and sign it.

Article 194
Grant agreement

1.Grants shall be covered by a written agreement.

2.The grant agreement shall at least include the following:

(a)a description of the action or, for an operating grant, of the work programme together with a description of the results expected;

(b)the maximum amount of Union funding expressed in euro, the estimated budget of the action or work programme and the form of the grant;

(c)the rules regarding reporting and payments and the procurement rules provided for in Article 198;

(d)the acceptance by the beneficiary of the obligations referred to in Article 124;

(e)provisions governing the visibility of the Union financial support, except in duly justified cases, where public display is not possible or appropriate;

(f)the applicable law which shall be the Union law, complemented, where necessary, by national law as specified in the grant agreement. Derogation may be made in the agreements concluded with international organisations;

(g)the competent court or arbitration tribunal to hear disputes.

3.Pecuniary obligations of entities or persons other than States arising from the implementation of a grant agreement shall be enforceable in accordance with paragraph 2 of Article 98.

4.Amendments to grant agreements, shall not have the purpose or the effect of making such changes that would call into question the grant award decision or be contrary to the equal treatment of applicants.

CHAPTER 4
Implementation of the grants
 

Article 195
Amount of the grant and extension of audit findings

1.The amount of the grant shall not become final until after the authorising officer responsible has approved the final reports and, where applicable, the accounts, without prejudice to subsequent audits, checks and investigations by the institution concerned, European Anti-Fraud Office or the European Court of Auditors. Paragraph 4 of Article 127 shall apply even after the amount of the grant has become final.

2.Where controls or audits demonstrate systemic or recurrent irregularities, fraud or breach of obligations attributable to the beneficiary and having a material impact on a number of grants awarded to that beneficiary under similar conditions, the authorising officer responsible may suspend the implementation of the grant agreement or payments under all the grants concerned or, where appropriate, terminate the concerned grant agreements with that beneficiary, in proportion to the seriousness of the findings.

The authorising officer responsible may, in addition, reduce the grants, reject ineligible costs and recover, if necessary, amounts unduly paid in respect of all the grants affected by the systemic or recurrent irregularities, fraud or breach of obligations referred to in the first subparagraph that may be subject to audits, checks and investigations in accordance with the grant agreements affected.

3.The authorising officer responsible shall determine the amounts to be reduced or recovered, wherever possible and practicable, on the basis of costs unduly declared as eligible for each grant concerned, following acceptance of the revised reports and financial statements submitted by the beneficiary.

4.Where it is not possible or practicable to quantify precisely the amount of ineligible costs for each grant concerned, the amounts to be reduced or recovered may be determined by extrapolating the reduction or recovery rate applied to the grants for which the systemic or recurrent irregularities, fraud or breach of obligations have been demonstrated, or, where ineligible costs cannot serve as a basis for determining the amounts to be reduced or recovered, by applying a flat rate, having regard to the principle of proportionality. The beneficiary shall be given the opportunity to propose a duly substantiated alternative method or rate before the reduction or recovery is made.

Article 196
Supporting documents for payment requests

1.The authorising officer responsible shall specify the supporting documents required to accompany payment requests.

2.For each grant, prefinancing may be split into several instalments in accordance with sound financial management. The request for a further pre-financing instalment shall be accompanied by a beneficiary's statement on the consumption of previous pre-financing. The instalment shall be paid in full if at least 70 % of the total amount of any earlier prefinancing has been consumed. Otherwise, the instalment shall be reduced by the amounts still to be consumed until that threshold is reached.

3.The beneficiary shall, without prejudice to the obligation to provide supporting documents, certify on its honour that information contained in payment requests is full, reliable and true. The beneficiary shall also certify that the costs incurred are eligible in accordance with the grant agreement and that payment requests are substantiated by adequate supporting documents that may be checked.

4.A certificate on the financial statements of the action or the work programme and underlying accounts may be demanded by the authorising officer responsible in support of interim payments or payments of balances of any amount. Such a certificate shall be requested on the basis of a risk assessment taking into account, in particular, the amount of the grant, the amount of the payment, the nature of the beneficiary and the nature of the supported activities.

The certificate shall be produced by an approved external auditor or in case of public bodies, by a competent and independent public officer.

The certificate shall certify, in accordance with a methodology approved by the authorising officer responsible and on the basis of agreed-upon procedures compliant with international standards, that the costs declared by the beneficiary in the financial statements on which the payment request is based are real, accurately recorded and eligible in accordance with the grant agreement. In specific and duly justified cases, the authorising officer responsible may request the certificate in the form of an opinion or other format in accordance with international standards.

5.An operational verification report, produced by an independent third party approved by the authorising officer responsible, may be requested by the authorising officer responsible in support of any payment, on the basis of a risk assessment. The verification report shall state that the operational verification was done in accordance with a methodology approved by the authorising officer responsible and whether the action or work programme was actually implemented in accordance with the conditions set out in the grant agreement.

Article 197
Financial support to third parties

Where implementation of an action or a work programme requires financial support to be given to third parties, the beneficiary may give such financial support provided that the conditions for the giving of such support are strictly defined in the grant agreement between the beneficiary and the Commission, in order to avoid the exercise of discretion by the beneficiary.

The discretion is considered exhausted if the grant agreement specifies the following:

(a)the maximum amount of financial support that can be paid to a third party which shall not exceed EUR 60 000 and the criteria for determining the exact amount. This threshold can be exceeded where achieving the objectives of the actions would otherwise be impossible or overly difficult;

(b)the different types of activities that may receive such financial support, on the basis of a fixed list;

(c)the definition of the persons or categories of persons which may receive such financial support and the criteria to give it.

Article 198
Implementation contracts

1.Without prejudice to the application of the Directives 2014/24/EU and 2014/25/EU 49 , where implementation of the action or work programme requires the award of a procurement contract, the beneficiary may award the contract in accordance with its usual purchasing practices provided that the contract is awarded to the tender offering best value for money or, as appropriate, to the tender offering the lowest price, while avoiding any conflict of interests.

2.Where implementation of the action or work programme requires the award of a procurement contract with a value of more than EUR 60 000, the authorising officer responsible may, if duly justified, require the beneficiary to abide by special rules in addition to those referred to in paragraph 1.

Those special rules shall be based on rules contained in this Regulation and shall be proportionate to the value of the contracts concerned, the relative size of the Union contribution in relation to the total cost of the action and the risk. Such special rules shall be included in the grant agreement.

TITLE IX
PRIZES

Article 199
General rules

1.Prizes shall respect the principles of transparency and equal treatment and shall promote the achievement of policy objectives of the Union.

2.Prizes may not be awarded directly without a contest.

Contests for prizes with a unit value of EUR 1 000 000 or more may only be published where those prizes are mentioned in the financing decision referred to in Article 108 and after information on such prizes has been submitted to the European Parliament.

3.The amount of the prize shall not be linked to costs incurred by the winner.

4.Where implementation of an action or work programme requires prizes to be given to third parties by a beneficiary of a Union grant, that beneficiary may give such prizes provided that the eligibility and award criteria, the amount of the prizes and the payment arrangements are defined in the grant agreement between the beneficiary and the Commission, with no margin for discretion.

Article 200
Rules of contest, award and publication

1.Rules of contests shall:

(a)specify the eligibility criteria;

(b)specify the arrangements and final date for the registration of applicants, if required, and for the submission of applications;

(c)specify the exclusion criteria;

(d)provide for the sole liability of applicant in case of claim relating to the activities carried out in the framework of the contest;

(e)provide for acceptance by the winners of obligations referred to in Article 124 and of the publicity obligations as specified in the rules of the contest;

(f)state that Union law is the law which applies to the contest, complemented, where necessary, by national law as specified in the rules of contest;

(g)specify the competent court or arbitration tribunal to hear disputes;

(h)the award criteria, which shall be such as to make possible to assess the quality of the applications with regard to the objectives pursued and the expected results and to determine objectively whether applications qualify as the winners;

(i)the amount of the prize or prizes;

(j)the arrangements for the payment of prizes to the winners after their award.

For the purposes of point (a) of the first subparagraph, beneficiaries of Union grants shall be eligible, unless stated otherwise in the rules of contest.

For the purposes of point (f) of the first subparagraph, derogation may be made in the case of participation of international organisations.

Paragraph 3 of Article 187 shall apply mutatis mutandis to the publication of contests.

2.Rules of contests may set the conditions for cancelling the contest, in particular where its objectives cannot be fulfilled.

3.Prizes shall be awarded by the authorising officer responsible following an evaluation by the evaluation committee referred to in Article 145.

Paragraph 6 of Article 193 shall apply mutatis mutandis to the award decision.

4.Applicants shall be informed as soon as possible of the outcome of the evaluation of their application and in any case within 15 calendar days after the award decision has been taken by the authorising officer.

The decision to award the prize shall be notified to the winning applicant and shall serve as the legal commitment..

5.All prizes awarded in a course of a financial year shall be published in accordance with paragraph 1 to 4 of Article 36.

Following the publication when requested by the European Parliament and the Council, the Commission shall forward them a report on:

(a)the number of applicants in the past year;

(b)the number of applicants and the percentage of successful applications per contest;

(c)a list of the experts having taken part in evaluation committees in the past year, together with a reference to the procedure for their selection.

TITLE X
FINANCIAL INSTRUMENTS, BUDGETARY GUARANTEES AND FINANCIAL ASSISTANCE

CHAPTER 1
Common provisions

Article 201
Scope and implementation

1.The Union may establish financial instruments or provide budgetary guarantees or financial assistance backed by the general budget by means of a basic act.

2.Member States may contribute to the Union's financial instruments, budgetary guarantees or financial assistance. If authorized by the basic act, other third parties may also contribute.

3.Where financial instruments are implemented under shared implementation with Member States, sector specific rules apply,without prejudice to subparagraph 2 of Article 208(2).

4.Where financial instruments or budgetary guarantees are indirectly implemented, the Commission shall conclude agreements with entities pursuant to points (ii), (iii), (v) and (vi) of Article 61(1)(c). These entities may, under their responsibility, conclude agreements with financial intermediaries, selected following procedures equivalent to those of the Commission. They shall transpose the requirements pursuant to Article 150(2) in those agreements.

Where third countries contribute to financial instruments or budgetary guarantees pursuant to paragraph 2, the basic act may allow for the designation of eligible implementing entities or counterparts from the countries concerned.

Article 202
Principles and conditions applicable to financial
instruments and budgetary guarantees

1.Financial instruments or budgetary guarantees shall:

(a)address market failures or sub-optimal investment situations and provide support, in a proportionate manner, only to final recipients that are deemed potentially economically viable at the time of the Union financial support;

(b)achieve additionality by avoiding replacing potential support from other public or market sources;

(c)ensure non-distortion of competition in the internal market and consistency with State aid rules;

(d)achieve a leverage or a multiplier effect, by mobilising a global investment exceeding the size of the Union contribution or guarantee. The target range of values for the leverage and multiplier effect shall be based on an ex-ante evaluation for the corresponding financial instrument or budgetary guarantee;

(e)ensure that there is a common interest of the implementing entities or counterparts involved in the implementation in achieving the policy objectives defined in the relevant basic act, with provisions such as coinvestment, risk sharing requirements or financial incentives, while preventing a conflict of interests with other activities of the entities or counterparts;

(f)ensure that the remuneration of the Union is consistent with the sharing of risk among financial participants and the policy objectives of the financial instrument or budgetary guarantee;

(g)provide for any remuneration of the implementing entities or counterparts involved in the implementation to be performance based. Performance based fees shall comprise administrative fees to remunerate the entity or counterpart for the work carried out in the implementation of a financial instrument or budgetary guarantee and, where appropriate, policy related incentives to promote the achievement of the policy objectives or incentivise the financial performance of the financial instrument or budgetary guarantee. Exceptional expenses may be reimbursed;

(h)be based on ex-ante evaluations, individually or as part of a programme, in line with Article 32. The ex-ante evaluation shall contain explanations concerning the choice of the type of financial operation taking into account the policy objectives pursued and the associated financial risks and savings for the budget of the Union.

2.Unless otherwise specified in a basic act, internal assigned revenue pursuant to point (i) of Article 20(3) shall comply with the following principles:

(a)they shall be used for the same financial instrument or budgetary guarantee during the entire period of its implementation of the operation, without prejudice to Article 208(5);

(b)after the end of the period of implementation of a financial instrument or budgetary guarantee, any outstanding amount originating in the Union budget shall be returned to the budget;

(c)without prejudice to point (b), the outstanding amount of assigned revenue authorised under a basic act that is to be repealed or terminates may be taken into account when setting the amount of resources for a another financial instrument in its basic act;

(d)they shall be taken into account when determining the allocation of appropriations to a financial instrument or budgetary guarantee in the annual budget.

Revenue assigned to a financial instrument or budgetary guarantee may be transferred to another financial instrument or budgetary guarantee by means of a basic act.

3.The authorising officer responsible for a financial instrument, a budgetary guarantee or a financial assistance shall establish a financial statement covering the period 1 January to 31 December, in accordance with Article 232 and in compliance with the accounting rules referred to in Title XIII and the International Public Sector Accounting Standards (IPSAS).

For financial instruments and budgetary guarantees indirectly implemented, the authorising officer responsible shall ensure that unaudited financial statements covering the period 1 January to 31 December prepared in compliance with the accounting rules referred to in Article 79 and IPSAS, as well as any information necessary to produce financial statements in accordance with Article 80(2), be provided by the entities pursuant to points (ii), (iii), (v) and (vi) of Article 61(1)(c) by 15 February of the following year and audited financial statements by 15 May of the following year.

Article 203
Financial liability of the Union

1.The financial liability of the Union shall not exceed at any time:

(a)for financial instruments: the amount of the relevant budgetary commitment made for it;

(b)for budgetary guarantees: the amount of the budgetary guarantee authorised by the basic act;

(c)for financial assistance: the maximum amount of borrowing and the relevant interest that the Commission is empowered to conclude for funding the loan authorised by the basic act.

2.Budgetary guarantees and financial assistance may generate a contingent liability for the Union exceeding the financial assets provided to cover the financial liability of the Union.

3.The annual assessment provided for by point (j) of Article 39(5) of the sustainability of the contingent liabilities arising from budgetary guarantees or financial assistance borne by the budget of the Union shall be carried out within the limits set by the multiannual financial framework regulation provided for by Article 312(2) TFEU and the ceiling on annual payments appropriations defined in Article 3(1) of the Council Decision on the system of own resources of the European Union .

Article 204
Provisioning of financial liabilities

1.For budgetary guarantees and financial assistance to third countries, a basic act shall set out a provisioning rate as a percentage of the amount of the financial liability authorised.

The basic act shall provide for the review of the provisioning rate at least every three years.

2.The setting of a provisioning rate shall be guided by a qualitative and quantitative assessment by the Commission of the financial risks stemming from a budgetary guarantee or a financial assistance to a third country in accordance with the principle of prudence, whereby assets and profits shall not be overestimated and liabilities and losses shall not be underestimated.

3.For financial instruments provision shall be made, where appropriate, to respond to future payments related to a budgetary commitment of that financial instrument.

4.The following resources shall contribute to the provisioning:

(a)contributions from the general budget of the Union;

(b)returns on resources invested;

(c)amounts recovered from defaulting debtors in accordance with the recovery procedure laid down in the guarantee or the loan agreement;

(d)revenues and any other payments received by the Union in accordance with the guarantee or the loan agreement;

(e)where applicable, contributions in cash by Member States and third parties pursuant to Article 201(2).

5.Provisions shall be used for the payment of:

(a)calls on the budgetary guarantee;

(b)payment obligations related to a budgetary commitment for a financial instrument;

(c)financial obligations arising from the borrowing of funds pursuant to Article 213(1);

(d)where applicable, other expenses associated to the implementation of financial instruments, budgetary guarantees and financial assistance to third countries.

6.Aggregate contributions provided for in point (a) of paragraph 3 shall not exceed the amount indicated in point (a) of Article 211(1).

7.Where the provisions for a budgetary guarantee exceed the amount of provisioning referred to in paragraph 1, resources referred to in points (b), (c) and (d) of paragraph 3 related to that guarantee shall be used, within the limits of the eligible period provided for in the basic act and without prejudice to Article 206(3), to restore the budgetary guarantee up to its initial amount.

8.The Commission shall immediately inform the European Parliament and the Council and may propose adequate replenishment measures or an increase of the provisioning rate where:

(a)as a result of calls on a budgetary guarantee, the level of provisions for that budgetary guarantee falls below 30% of the provisioning rate provided for in paragraph 1, or it may fall below that rate within a year according to a risk assessment by the Commission;

(b)a country benefitting from financial assistance by the Union fails to pay on a maturity.

Article 205
Common provisioning fund

1.The provisions made to cover the financial liabilities arising from financial instruments, budgetary guarantees or financial assistance shall be held in a common provisioning fund directly implemented by the Commission.

2.Global profits or losses from the investment of the resources shall be allocated proportionately among the respective financial instruments, budgetary guarantees or financial assistance.

The Commission shall keep a minimum amount of resources of the fund in cash or cash equivalents in accordance with prudential rules and the forecasts for payments provided by the authorising officers of the financial instruments, budgetary guarantees or financial assistance.

The Commission may enter into repurchase agreements, with the assets of the common provisioning fund as collateral, to make payments out of the fund when this procedure is reasonably expected to be more beneficial for the budget of the Union than the divestment of assets within the timeframe of the payment request. The duration or roll-over period of repurchase agreements related to a payment shall be limited to the minimum necessary to minimise a loss for the budget.

3.Pursuant to point (d) of the first paragraph ofArticle 76 and paragraphs 1 and 2 of Article 83, the accounting officer shall set up the procedures to be applied to the revenue and expenditure operations and the assets and liabilities related to the common provisioning fund.

Article 206
Effective provisioning rate

1.The provisioning of budgetary guarantees and financial assistance to third countries in the common provisioning fund shall be based on an effective provisioning rate. This rate provides a level of protection against the financial liabilities of the Union equivalent to the level that would be provided by the respective provisioning rates if the resources where held and managed separately.

For the purposes of paragraphs 2 and 3, the respective provisioning rates shall be adjusted proportionately following the effective provisioning rate.

2.The effective provisioning rate shall be calculated annually by the Commission, taking into account, where applicable, the initial phase of constitution of a provision pursuant to Article 204(1). It shall be the reference for the calculation of the contributions from the general budget of the Union pursuant to point (a) of Article 204(4).

3.Following the calculation of the annual effective provisioning rate in accordance with point (h) of Article 39(5), the following transfers in the context of the annual budgetary procedure shall be made:

(a)any surplus of provisions for a budgetary guarantee or a financial assistance to a third country shall be transferred to other budgetary guarantees or financial assistance to third countries with insufficient provisions;

(b)any surplus in the general balance of the fund shall be transferred to the general budget of the Union;

(c)any replenishment of the fund shall be carried out in annual tranches during a maximum period of three years, without prejudice to Article 204(7).

4.The Commission shall define, after consulting the accounting officer, the guidelines applicable to the establishment of the effective provisioning rate and to asset management in accordance with appropriate prudential rules and excluding derivative operations for speculative purposes.

An independent evaluation of the adequacy of the guidelines shall be carried out every three years.

Article 207
Annual reporting

The Commission shall report annually on financial instruments, budgetary guarantees, financial assistance, contingent liabilities and the common provisioning fund in accordance with Article 242.

CHAPTER 2
Specific provisions

Section 1
Financial instruments

Article 208
Rules and implementation

1.Notwithstanding Article 201(1), financial instruments may be established, in duly justified cases, without being authorised by means of a basic act, provided that such instruments are included in the budget in accordance with point (e) of Article 50(1).

2.Where financial instruments are combined within a single agreement with complementary support from the Union budget, including grants, this Title shall apply to the whole measure. The reporting shall be carried out in accordance with Article 242.

Where a financial instrument is established for the purpose of implementing Article 39 of Regulation (EU) No 1303/2013with a contribution from a budgetary guarantee of the Union, this Title shall apply with the exception of Article 201(1). It shall be implemented in accordance with Article 61(1)(c).

3.The Commission shall ensure a harmonised management of financial instruments in particular in the area of accounting, reporting, monitoring and financial risk management.

4.Where the Union participates in a financial instrument as a minority stakeholder, the Commission shall ensure compliance with this Title in accordance with the principle of proportionality, on the basis of the size and value of the participation of the Union in the instrument. Notwithstanding the foregoing, the Commission shall ensure compliance with Article 124.

5.Where the European Parliament or the Council consider that a financial instrument has not achieved its objectives effectively, they may request that the Commission submit a proposal for a revised basic act with a view to winding down the instrument. In the event of the winding down of the financial instrument, any new amount paid back to that instrument pursuant to Article 202(2) shall be considered as general revenue and recovered to the budget.

6.The purpose of the financial instruments or a grouping of financial instruments on a facility level and, where applicable, their specific legal form and place of registration shall be published on the Commission website.

7.Entities implementing financial instruments may open fiduciary accounts within the meaning of Article 82(3) on behalf of the Union. Those entities shall send the corresponding account statements to the Commission’s responsible service. Payments to fiduciary accounts shall be made by the Commission on the basis of payment requests that are duly substantiated with disbursement forecasts, taking into account the balances available on the fiduciary accounts and the need to avoid excessive balances on such accounts.

Article 209
Financial instruments directly implemented by the Commission

1.Financial instruments may be in directly implemented pursuant to Article 61(1)(a) through any of the following:

(a)a dedicated investment vehicle in which the Commission participates together with other public or private investors with a view to increasing the leverage effect of the Union contribution;

(b)loans, guarantees, equity participations and other risk-sharing instruments other than investments in dedicated investment vehicles, provided directly to final recipients or through financial intermediaries.

2.Dedicated investment vehicles pursuant to point (a) shall be established pursuant to the laws of a Member State. In the area of external action, they may also be established pursuant to the laws of a country other than a Member State. The managers of such vehicles shall be obliged by law or contract to act with the diligence of a professional manager and in good faith.

3.The managers of the dedicated investment vehicles referred to in paragraph 2 and financial intermediaries or final recipients of the financial instruments shall be selected with due account of the nature of the financial instrument to be implemented, the experience and the operational and financial capacity of the entities concerned, and the economic viability of projects of final recipients. The choice shall be transparent, justified on objective grounds and shall not give rise to a conflict of interests.

Article 210
Treatment of contributions under shared implementation

1.Separate records shall be kept for contributions to financial instruments established under this Section from funds under shared implementation.

2.Contributions from funds implemented under shared implementation shall be placed in separate accounts and used in accordance with the objectives of the respective funds to actions and final recipients consistent with the programme or programmes from which contributions are made.

3.As regards contributions from funds under shared implementation to financial instruments established under this Section, the sector specific rules shall apply. Notwithstanding the foregoing, Managing Authorities may rely on an existing ex-ante evaluation, carried out in accordance with point (h) of Article 202(1), prior to contributing to an existing financial instrument.

Section 2
Budgetary guarantees

Article 211
Rules for budgetary guarantees

1.The basic act shall define:

(a)the amount of the budgetary guarantee that shall not be exceeded at any time, without prejudice to Article 201(2);

(b)the types of operations covered by the budgetary guarantee.

2.Contributions from Member States to budgetary guarantees pursuant to Article 201(2) may be provided in the form of guarantees or cash.

An amount exceeding the amount indicated in point (a) of paragraph 1 shall be granted on behalf of the Union. Payments for guarantee calls shall be made, where necessary, by the contributing Member States or third parties on a pari passu basis. The Commission shall sign an agreement with the contributors that shall contain, in particular, provisions concerning the payment conditions.

Article 212
Implementation of budgetary guarantees

1.Budgetary guarantees shall be irrevocable, unconditional and on demand for the types of operations covered.

2.Budgetary guarantees shall be implemented pursuant to Article 61(1)(c) or, in exceptional cases, pursuant to point (a) of Article 61(1).

3.A budgetary guarantee may only cover financing and investment operations which comply with the conditions set out in points (a) to (d) of Article 202(1).

4.Counterparts shall contribute with their own resources to the operations covered by the budgetary guarantee.

5.The Commission shall conclude a guarantee agreement with the counterpart. The granting of the budgetary guarantee is subject to the entry into force of the guarantee agreement.

6.Counterparts shall provide the Commission annually with:

(a)the risk assessment and grading information concerning the operations covered by the budgetary guarantee as well as expected defaults;

(b)the outstanding financial obligation arising for the Union from the budgetary guarantee, broken down by individual operations, measured in compliance with the Union accounting rules as referred to in article 79 or in compliance with the internationally accepted standards for the public sector;

(c)the total profits or losses deriving from the operations covered by the budgetary guarantee.

Section 3
Financial assistance

Article 213
Rules and implementation

1.Financial assistance by the Union to Member States or third countries shall take the form of a loan or a credit line or any other instrument deemed appropriate to ensure the effectiveness of the support. To this end, the Commission shall be empowered, in the relevant basic act, to borrow the necessary funds on behalf of the Union on the capital markets or from financial institutions.

2.The borrowing and lending shall not involve the Union in the transformation of maturities, or expose it to any interest risk or to any other commercial risk.

3.The financial assistance shall be carried out in euro, except in duly justified cases.

4.The financial assistance shall be directly implemented by the Commission.

5.The Commission shall conclude an agreement with the beneficiary country that shall contain provisions:

(a)ensuring that the beneficiary country regularly checks that the financing provided has been properly used, takes appropriate measures to prevent irregularities and fraud, and, if necessary, takes legal action to recover any funds provided under the Union financial assistance that have been misappropriated;

(b)ensuring the protection of the Union's financial interests;

(c)expressly authorising the Commission, the OLAF and the Court of Auditors, to exert their rights as foreseen by Article 124;

(d)ensuring that the Union is entitled to early repayment of the loan where it has been established that, in relation to the management of the Union's financial assistance, the beneficiary country has engaged in any act of fraud or corruption or any other illegal activity detrimental to the financial interests of the Union;

(e)ensuring that all costs incurred by the Union that relate to a financial assistance shall be borne by the beneficiary country.

6.Where possible, the Commission shall release the loans in instalments subject to the fulfilment of the conditions attached to the financial assistance. Where those conditions are not met, the Commission shall temporarily suspend or cancel the disbursement of the financial assistance.

7.Funds raised but not yet disbursed cannot be used for any other goal than to provide financial assistance to the corresponding beneficiary country. Pursuant to paragraphs 1 and 2 of Article 83, the accounting officer shall set up the procedures for the safekeeping of the funds.

TITLE XI
CONTRIBUTIONS TO EUROPEAN POLITICAL PARTIES

Article 214
General provisions

1.For the purposes of this Regulation, European political parties shall mean the entities registered as such in accordance with Regulation (EU, Euratom) No 1141/2014 of the European Parliament and of the Council 50 .

2.Direct financial contributions from the budget may be awarded to European political parties in view of their contribution to forming European political awareness and to expressing the political will of the citizens of the Union in accordance with Regulation (EU, Euratom) No 1141/2014.

Article 215
Principles

1.Contributions shall only be used to reimburse the percentage set out in Article 17(4) of Regulation (EU, Euratom) No 1141/2014 of the operating costs of European political parties directly linked to objectives of those parties, as specified in Article 17(5) and Article 21 of that Regulation.

2.Contributions may be used to reimburse expenditure relating to contracts concluded by European political parties, provided that there were no conflicts of interest when they were awarded.

3.Contributions shall not be used to directly or indirectly grant any personal advantage, in cash or in kind, to any individual member or member of staff of a European political party. Contributions shall not be used to directly or indirectly finance activities of third parties, in particular national political parties or political foundations at European or national level, whether in the form of grants, donations, loans or any other similar agreements. Contributions shall not be used for any of the purposes excluded by Article 22 of Regulation (EU, Euratom) No 1141/2014.

4.Contributions shall be subject to the principles of transparency and equal treatment, in accordance with the criteria laid down in Regulation (EU, Euratom) No 1141/2014.

5.Contributions shall be awarded by the European Parliament on an annual basis and shall be published in accordance with Article 36(2) of this Regulation and with Article 32(1) of Regulation (EU, Euratom) No 1141/2014.

6.European political parties receiving a contribution shall not directly or indirectly receive other funding from the budget. In particular, donations from the budgets of political groups in the European Parliament shall be prohibited. In no circumstances may the same expenditure be financed twice by the budget.

7.If a European political foundation within the meaning of Regulation (EU, Euratom) No 1141/2014 realises a surplus of income over expenditure at the end of a financial year in which it received an operating grant, the part of that surplus corresponding to up to 25 % of the total income for that year may be carried over to the following year provided that it is used before the end of the first quarter of that following year.

Article 216
Budgetary aspects

Contributions shall be paid from the European Parliament section of the budget. The appropriations set aside for independent external audit bodies or experts referred to in Article 23 of Regulation (EU, Euratom) No 1141/2014 shall be charged directly to the budget of the European Parliament.

Article 217
Call for contributions

1.Contributions shall be awarded through a call for contributions published each year, at least on the website of the European Parliament.

2.A European political party may be awarded only one contribution per year.

3.A European political party may receive a contribution only if it applies for funding on the terms and conditions laid down in the call for contributions.

4.The call for contributions shall determine the conditions under which the applicant may receive a contribution in accordance with the rules laid down in Regulation (EU, Euratom) No 1141/2014, as well as exclusion criteria.

5.The call for contributions shall determine, at least, the nature of the expenditure that may be reimbursed by the contribution.

6.The call for contributions shall require an estimated budget.

Article 218
Award procedure

1.Applications for contributions shall be duly submitted within the time limit, in writing, including, where appropriate, in a secure electronic format.

2.Contributions shall not be awarded to applicants who are, at the time of the award procedure, in one of the situations referred to in Articles 132(1) and 137 and those who are registered as excluded in the early detection and exclusion database referred to in Article 138.

3.Applicants shall be required to certify that they are not in one of the situations referred to in paragraph 2.

4.The authorising officer responsible may be assisted by a committee to evaluate the applications for contributions. The authorising officer responsible shall specify, the rules regarding the composition, appointment and functioning of such committee, and the rules to prevent any conflict of interests.

5.Applications that comply with the eligibility and exclusion criteria shall be selected on the basis of the award criteria set out in Article 19 of Regulation (EU, Euratom) No 1141/2014.

6.The decision of the authorising officer responsible on the applications shall state at least:

(a)the subject and the overall amount of the contributions;

(b)the name of the selected applicants and the amounts accepted for each of them;

(c)the names of any applicants rejected and the reasons for that rejection.

7.The authorising officer responsible shall inform applicants in writing of the decision on their applications. If the application for funding is rejected or the amounts requested are not awarded in part or in full, the authorising officer responsible shall give the reasons for either the rejection of the application or the non-award of the amounts requested, with reference in particular to the eligibility and award criteria referred to in paragraph 1 and Article 217(4). If the application is rejected, the authorising officer responsible shall inform the applicant of the available means of administrative and/or judicial redress as provided for by Article 129(2) of this Regulation.

8.Contributions shall be covered by a written agreement.

Article 219
Form of contributions

1.Contributions may take any of the following forms:

(a)reimbursement of a percentage of the reimbursable expenditure actually incurred;

(b)reimbursement on the basis of unit costs;

(c)lump sums;

(d)flat-rate financing;

(e)financing not linked to costs of the relevant operations based on either of the following:

i) the fulfilment of certain conditions ex ante;

ii) the achievement of results measured by reference to the previously set milestones or through performance indicators.

(f) a combination of the forms referred to in points (a) to (e).

2.Only expenditure which meets the criteria established in the calls for contributions and which has not been incurred prior to the date of submission of t