EUROPEAN COMMISSION

Brussels, 16.5.2022

COM(2022) 223 final

2022/0162(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 (recast)

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The Financial Regulation 1 lays down the principles and general financial rules for establishing and implementing the EU budget and controlling EU finances. The 2018 Financial Regulation is the result of a major revision, incorporating the previous Rules of Application into a single rulebook. The revision increased flexibility, simplified financial rules considerably and paved the way for the proposals under the 2021-2027 multiannual financial framework (MFF). These simpler rules need time to harness their full potential for the implementation of the 2021-2027 programmes and instruments, for example on the single audit approach, cross-reliance on audits and assessments, simplified cost options, reduced administrative burden, and the focus on results. Changing financial rules too often creates uncertainty for recipients of EU funds.

Therefore, the Commission is now proposing a targeted amendment, aiming to strike the right balance by focusing on changes that are really necessary. The main reason for this revision is the need to align the Financial Regulation with the MFF package, to maintain a single rulebook governing the expenditure of the Union, meaning that all general financial rules are included in the Financial Regulation. This will provide greater legal certainty for Union institutions and recipients of Union funds. The proposal also reflects declarations made by the EU institutions in the context of the MFF.

•Consistency with existing policy provisions in the policy area

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

•Subsidiarity (for non-exclusive competence)

•Proportionality

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

•Stakeholder consultations

•Impact assessment

•Regulatory fitness and simplification

The revision of the Financial Regulation does not fall under the regulatory fitness and performance programme (REFIT). However, by responding to the need to simplify, improve and align EU financial rules with the 2021-2027 MFF package, the revision contributes significantly to the better regulation agenda. The proposed approach is fully in line with the better regulation framework and the Commission’s work on simplification.

For example, the proposal includes a reference to digital audits and emerging technologies to encourage their wider use, while keeping flexibility. The proposal also includes lessons learned from COVID-19 on procurement (e.g. joint procurement, procurement on behalf of the Member States, use of a central purchasing body, multiple sourcing for the same type of goods or services, electronic invoicing and better rules on external experts). It also contains simplification measures for grants (e.g. simplified forms of grants, simpler rules for use of volunteers, simpler calculation to show compliance with the no-profit principle, and simpler process for granting humanitarian aid). The ultimate goal of all these measures is to reduce the administrative burden for applicants and recipients of EU funds, without creating additional risks for the sound financial management of the EU budget.

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 general financial rules. The rules for the 2021‑2027 funding period already make it easier for micro-enterprises to participate. For example, the Commission recently used the Financial Regulation’s rules on simplified forms of funding to adopt a decision allowing owners of micro-enterprises to declare their staff costs as predefined unit costs under any funding programme, without need to provide evidence for the rates declared. Moreover, in certain areas, the proposal reduces costs for businesses, which are often micro-, small and medium‑sized enterprises (MSMEs). The proposal aims to strengthen the implementation of the principle of proportionality by inter alia relying on the due diligence of partners implementing the budget under indirect management. This would enable a more flexible approach to MSMEs. More generally, many of the targeted simplification measures should benefit all enterprises and thus also small to medium-sized enterprises.

•Fundamental rights

The proposal complies with the Charter of Fundamental Rights of the European Union.

4.BUDGETARY IMPLICATIONS

The proposal does not have budgetary implications.

5.OTHER ELEMENTS

•Detailed explanation of the specific provisions of the proposal

1.1.Alignment with the MFF and simplification

·Alignment with the MFF (general): some references to the basic acts of 2021-2027 and other legislation are added to the Financial Regulation. In addition, to ensure smooth implementation of the MFF Regulation 3 , certain derogations from the budgetary principles set out in the sectoral basic acts are proposed to be reflected in the Financial Regulation in line with the single rulebook approach (Articles 12, 14, 15 and 18, Article 32(2), Article 41(2), Article 44(1) and (3), Article 48(2), Article 54, Article 96(1) and (2), Article 97(3), Article 106(1), Article 115(3), Article 214(3), Article 250(1)(b) and Article 253(1)(c) of the Financial Regulation). Moreover, to follow up on the joint declaration on the potential inclusion of the content of the General Conditionality Regulation 4 , a reference to this Regulation is added under Title II on the principles from which sectoral legislation cannot derogate (Article 6).

·Borrowing and lending: the proposal aims to enhance reporting in line with the joint declaration 2020/C 444 I/06 5 , in order to increase transparency and facilitate cooperation with the budgetary authority. The proposed amendment streamlines the reporting obligations for borrowing and lending operations. It codifies the current practice by including in the document annexed to the section of the budget relating to the Commission a comprehensive overview of the Commission’s borrowing and lending operations (Article 52(1)).

·Assigned revenue: the proposal aims to increase the transparency and visibility of external assigned revenue in the documents accompanying the budget, in line with the joint declaration (Article 22(1) and Article 41(3) and (8)). It also aims to facilitate the management of additional contributions (including voluntary ones) from Member States (Article 21(2)), thus avoiding the need to request payments from Member States before actual payment needs arise.

·Financial instruments and budgetary guarantees: the proposal aims to enhancing legal clarity by: (i) addressing inconsistencies and redundancies in the current Financial Regulation; (ii) better reflecting the functioning of provisioning and of budgetary guarantees; and (iii) updating relevant rules (Article 2(9), new Article 2(15), new Article 2(33), new Article 212(3), Article 212(5), Article 213(4), Article 221 and Article 223(6), and new Article 213(5)).

·In addition, the proposal streamlines reporting to avoid duplications and inconsistencies. It strengthens reporting obligations in a working document attached to the draft budget and the integrated financial report under Article 253(1). This streamlining also means that current Article 250 must be deleted. Finally, the proposal strengthens Article 218 by moving certain provisions of former Article 41(5) to Article 218. This move makes sure that it is not necessary to prepare two parallel reports on the common provisioning fund with similar content (new Article 41(5)(g), Article 210(3) and Article 218).

·The proposal also clarifies how the provisioning and budgetary guarantees interact with the definitions and rules on budgetary commitments, legal commitments, recipients and publication of information on recipients (Article 2(38) and (58), Article 7(4), Article 10(3), Article 38(3)(c), Article 112(2), Article 113(1)(a), Article 113(4), Article 115(2) and Article 163).

1.2.Crisis management, modernisation and simplification

·Non-financial donations by EU institutions: the proposal includes a new instrument reflecting current practice. It will provide a framework for the EU institutions to donate goods, services, supplies or works. It will also provide a stable legal basis in particular for future emergency situations, more transparency, accountability and legal certainty for recipients (Article 2(1), (2), (3), (38), (50) and (58), Article 133, Article 154(3) and new Article 244).

·Prizes: similar to the introduction of non-financial donations, the EU institutions should also be able to award prizes which are not financial, such as vouchers, tickets and trips. This is also important for example in order to allow contests among young people who do not have a bank account in their Member State, but who can easily receive their reward in a practical form. The introduction of this possibility requires small modifications in Articles 2(52), 210(4) and 211(1).

·Procurement and experts: the proposal adapts the procurement rules that apply in crisis management situations to enable EU institutions or bodies to procure on behalf of Member States or to act as a central purchasing body. This central purchasing body would be able to donate or resell supplies and services to Member States, and launch joint procurement procedures, although the EU institutions would not be acquiring services and supplies for themselves (Article 169(1) and (2), new Article 169(3), and point 11.1(f) and point 12.2(a) of Annex I). The proposal also updates the definition of crisis to include public and animal health, food safety emergency situations and global health threats such as pandemics (Article 2(22)).

Other simplification measures and technical corrections and updates enable multi-sourcing contracts, correct inconsistencies and omissions, and clarify digitisation of procurement procedures (new Article 2(46), Article 2(76), Article 164(5), Article 168(3), Article 171(1), Article 173(1), Article 174(2) and (3), Article 175, and point 1.2, point 6.2, point 6.3, point 6.4, point 6.6, point 9.3, point 9.4, point 9.5, point 11.1(a) and (c), point 11.1(h)(iv), point 11.1(j) and (m), point 11.2, point 16.3(f) and (g), point 18.1, point 18.7, point 19.2, point 20.2, point 21.1, point 24.3, point 27, point 28.1, point 28.2, new point 29.4, point 30.2, point 31.1, new point 34, point 35.1 and point 39.3 of Annex I).

The proposals further align the procurement rules of the Financial Regulation with Directive 2014/24/EU on public procurement and Directive 2014/55/EU on electronic invoicing. For example, the proposal clarifies time limits that apply to dynamic purchasing systems, and includes the possibility to assess – as award criteria – qualifications and experience of staff assigned to perform the contract (Article 117(3), Article 176(2), new Article 176(4) and (5), and Article 179(1)).

The proposal also responds to the need for more flexible rules for Union delegations in third countries, factoring in local market conditions and practices of Member States. Therefore, the threshold for and the rules on market access are aligned with those that currently apply to external action procurement. In addition, Union delegations that award contracts on their own account would be allowed to accept, for example, submission of application documents by hand delivery (Article 153(5)).

It is also proposed to apply the measures taken under the International Procurement Instrument 6 (IPI, not yet adopted) to EU institutions’ procurement. Contracting authorities will have to apply IPI measures (in a form of score adjustment to bids received from or an exclusion of economic operators established in certain third countries) in the same manner as contracting authorities and contracting entities of Member States once the IPI Regulation enters into force and IPI measures are adopted and published in the Official Journal – the EU institutions should lead by example and apply the same rules (Article 179(1), new , and point 14 of Annex I).

The proposal responds to the need for simplification of procurement procedures for buildings. Furthermore, the proposal excludes from the scope of the procurement rules of this Regulation the authentication services provided by notaries, includes the possibility of having negotiated procedures without prior publication for services provided by Member State organisations and extends the scope for the use of a negotiated procedure without prior publication of a contract notice following an unsuccessful competitive procedure with negotiation (Article 164 and point 6 of the Annex I).

Under current case-law 7 , tenderers have to provide evidence of the selection and exclusion criteria they have used before they take a decision to award a tender. The proposal ensures that the Financial Regulation is aligned with case-law on this (Article 2(51) and point 18.4 of Annex I).

The recitals highlight current rules on green public procurement.

Finally, the proposal makes rules for experts more comprehensive and aligns them with market reality. This would enable Union institutions to compete with remunerations offered by other players on the market when contracting remunerated external experts. New rules would also enable the Commission to use lists of experts for a longer time (Article 242).

·Grants: the proposal includes technical updates, simplification, clarifications and corrections. It clarifies rules on simplified forms of grants (Article 184(3) and Article 187) and lays down that the 50% limit for volunteers’ costs applies to the total financing of an action (Article 194(2)).

Moreover, the proposal clarifies that an adversarial procedure is not systematically required to reject a participant from an award procedure (Article 135).

The proposal also simplifies calculations under the no-profit principle (Article 196(4)) and the provision of financial support to third parties for special cases (Article 208, third subparagraph).

To increase transparency, a definition of NGOs is added, while grant applicants would need to declare their legal status and confirm whether they are NGOs (new Article 2(46) and Article 200(1)(a)).

Finally, the definition and use of ‘public contracts’ under Title VIII are corrected (Article 2(16) and Article 205(1) and (2)).

·Donations to the EU institutions: the proposal allows deciding faster whether to accept or reject donations when a rapid reaction is needed, in exceptional circumstances and with appropriate safeguards, where such donations are made for the purposes of humanitarian aid, emergency support, civil protection or crisis management aid (Article 25(3)).

·Digitalisation: the proposal supports the Commission’s commitment to be digital by default. It increases the efficiency and quality of controls and audits with the help of digitalisation and emerging technologies such as data-mining, machine learning, robotic process automation and artificial intelligence. Giving these aspects more visibility should lead to wider and more consistent use of digital audits and controls. This, in turn, should increase the level of assurance, while decreasing the cost of audits and controls (Article 36, Article 63(4)(a), Article 74(5) and (6), Article 150(1)).

The proposal also aims to improve the quality and interoperability of data on recipients of Union funding for controls and audits, including through the use of a single integrated IT system for data-mining and risk-scoring (further details under point 3 below).

Certain rules and procedures on procurement and experts should be amended to reflect progress on digitalisation.

·Green transition: this proposal also aims to adjust the Financial Regulation to ensure that budget implementation effectively helps achieve the European Green Deal. To this end, an explicit reference to the do-no-significant-harm principle should be inserted in Article 33(2), in line with the Commission’s commitment to sustainable financing and the green transition.

Furthermore, to facilitate the greening of EU buildings, the possibility to use loans to finance building renovation is inserted in Article 271.

Finally, when relevant, calls for tenders in public procurement procedures should include green award or selection criteria to incentivise economic operators to offer more sustainable options.

In line with Article 6(4) of the Climate Law, the Commission considers that the proposals above are consistent with the climate-neutrality objective set out in Article 2(1) of the Climate law, as well as the Union 2030 and 2040 climate targets. These proposals are also consistent with ensuring progress on adaptation, as referred to in Article 5 of the Climate Law, and aligned with the objectives of the Climate law.

1.3.Enhanced protection of the EU’s financial interests and indirect management

·Early-detection and exclusion system: it is proposed to strengthen the system by better targeting its application to funds under both shared management and direct management where funds are disbursed as financial contributions to Member States, for instance under the Recovery and Resilience Facility 8 . The objective is to prevent Member State authorities from selecting fraudulent economic operators to carry out projects, and to better protect the Union budget against serious misconduct without waiting for the final outcome of national procedures. On the cross-territorial dimension of the implementation of projects, it is proposed that exclusion of entities and persons at Union level applies to all Union funding for project implementation across all Member States. Such exclusion would be subject to several limitations and safeguards. Its scope would be limited to an exhaustive list of the most serious forms of misconduct (e.g. corruption, fraud, money laundering and terrorism) found in: (i) a final Union audit, a report of the European Anti-Fraud Office (OLAF) or an investigation by the European Public Prosecutor’s Office (EPPO); or (ii) a national audit, judgment or administrative decision (Article 138(2), Article 139(1) and Article 145(5)).

In addition to the above, autonomous grounds for exclusion are added, based on the refusal to cooperate in investigations, checks or audits carried out by an authorising officer, OLAF, EPPO or the Court of Auditors and on the incitement to hatred or discrimination (new Article 139(1)(i) and 139(1)(c)(vi), respectively). It is also proposed to explicitly mention the breach of conflict of interest as an autonomous ground of exclusion within the notion of grave professional misconduct (Article 139(1)(c)(iv)). An expedited procedure is proposed for cases whosenature or circumstances require it (new Article 139(6)). The proposal also includes the possibility to exclude beneficial owners and affiliated entities if the requirements to attribute liability are considered fulfilled (new Article 138(2)(h) and (i), Article 139(2) and new Article 139(5)). Other amendments address current shortcomings in the system, for example by creating a legal presumption of notification of the content of adversarial letters and administrative decisions (new Article 138(2)(g), Article 139(1), Article 139(1)(d)(i), Article 139(1)(e), Article 139(7), Article 140(1), Article 143, Article 145(5), Article 146(2), new Article 147, new Article 152(3), Article 152(2)(h), Article 153 and new Article 156(6)).

·Single integrated IT system for data-mining and risk-scoring: the proposal aims to improve the quality and interoperability of data on recipients of Union funding and on those ultimately benefitting, directly or indirectly, from Union funding. To effectively prevent, detect, investigate and correct frauds or remedy irregularities, it is necessary to be able to identify the natural persons who are the beneficial owners of the recipients and who ultimately profit from the misuse of Union funding. This is achieved by standardising the electronic recording and storage of data on the recipients of Union funding and their beneficial owners for control and audit purposes. Moreover, there would be an obligation to use a single integrated IT system for data-mining and risk-scoring (provided by the Commission) to access and analyse those data on the recipients of Union funding. This system would considerably facilitate the identification of risks of fraud, corruption, double funding, conflict of interest and other irregularities. The Commission would be responsible for the development, management and supervision of the single integrated IT system for data‑mining and risk-scoring (Articles 36, 159 and 275). The rules on the recording, storage, transfer and processing of data should comply with applicable data protection rules. Finally, the proposal applies Article 36 to cases where Member States receive and implement Union funding under direct management. The above obligations would apply to programmes adopted under and financed from the post-2027 MFF to allow enough time to adapt electronic data systems and to provide guidance and training. During the transition period, voluntary application will remain possible and will be encouraged. This proposal plays a key role in the actions for digitalisation explained in point 2 above.

·Transparency: the proposal aims to improve the information provided to the public on the use of the Union budget and on recipients of Union funding. This is achieved by requiring Member States implementing the Union budget under shared management, entities implementing the Union budget under indirect management, and other Union institutions and bodies to send information to the Commission on their recipients of Union funding at least once a year. The Commission would add to the above information the data it has on direct management and would be responsible for consolidating, centralising and publishing the information in a database on a single website, covering all methods of Union budget implementation, including by other Union institutions and bodies. The resulting single website would be an improved version of the Financial Transparency System currently in use for direct management (Articles 38, 159 and 275). Finally, the proposal applies Article 38 to cases where Member States receive and implement Union funding under direct management. The above obligations would apply to programmes adopted under and financed from the post-2027 MFF, to ensure a smooth transition and adapt electronic data systems.

·Indirect management: indirect management relies on the rules, systems and procedures of Union implementing partners to provide adequate protection of the EU’s financial interests. The proposal aims to strengthen the application of proportionality as a general principle of law, notably when assessing partners and imposing contractual obligations. This would improve cooperation with Union implementing partners. It is also consistent with the rules recently agreed under the Neighbourhood, Development and International Cooperation Instrument. Unnecessary administrative burden should be avoided, in particular for final recipients that are MSMEs or comparable economic operators with equivalent turnover or balance sheet total. Relevant provisions need to be adjusted, and cross-references need to be updated. As a simplification, the proposal provides for the option to exempt managing authorities under shared management from pillar assessment, as their rules are already assessed under shared management. The current possibility for decentralised agencies to be exempted from pillar assessment would become an exemption by default and would be extended to fully self-financed agencies and CFSP missions. Finally, rules on transparency for recipients of EU funding are changed and technical clarifications are added (Article 62(1), Articles 158 and 159, Article 160(3), new Article 212(3) and Article 212(4)).

·Union award procedures concerning security or public order: this proposal aims to lay down specific conditions for the participation of third country entities in Union award procedures that concern security or public order. It also aims to apply these conditions in line with the international obligations of the Union, in particular in the area of public procurement. These rules concern award procedures for all kinds of budget implementation instruments: grants, procurement, prizes, indirect management, etc. (new Article 137).

·Conflict of interest: this proposal includes a clarification of the notion of applicable law, which includes national law on conflict of interest (Article 61).

·Professional conflicting interests that may negatively affect performance of a procurement contract. Following up on the European Ombudsman’s investigation into the award of a contract 9 , it is proposed to add a definition and an explicit ground for rejecting participants from award procedures for such reasons (Article 144). In addition, all tenderers must submit a declaration on honour confirming that they do not have any professional conflicting interests, and provide relevant information when required (point 18.4 of Annex I). Finally, the proposal highlights the contracting authority’s obligation to assess whether there are such interests (point 20.1 of Annex I).

·Member States’ assistance in the recovery of EU claims must be ensured by extending the assistance mechanism already applied between Member States under Directive 2010/24/EU concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures to also cover the Commission. In order to recover EU claims more effectively, the Commission’s accounting officer must be able to rely on Member States’ assistance to effectively notify debtors and identify debtors’ assets (new Article 104).

·Foreign subsidies: the Commission proposal for a regulation on foreign subsidies 10 is currently being negotiated. Depending on how the proposals progress, the Financial Regulation may be aligned to that new regulation in the course of the negotiations.

1.4.Miscellaneous simplifications and technical updates

The following technical changes and updates to the Financial Regulation are proposed:

·addressing omissions and wrong cross-references in Article 49(1), Article 71, Article 114(4), Article 154(3), Article 163(4) and Article 253(1)(d) and (f); 

·completing the list of working documents in Article 41(3)(e) by a document on building policy; 

·amending Article 41(4)(j) to reflect the International Public Sector Accounting Standards; 

·adjusting specific commitment rules for the European Agricultural Guarantee Fund in Article 114 to facilitate better alignment with standard accounting practices.This technical change also affects the specific rules for payments made in advance under Article 270 but has no impact on payments to Member States or to beneficiaries; 

·inserting technical updates in Article 252 on advanced deadlines for consolidated accounts, and changing the dates for document submission in Article 271;

·updating references to repealed Union legislation.

The following other necessary changes to the Financial Regulation are proposed:

·ensuring an appropriate budgetary treatment and avoiding undue financial strain on the expenditure side of the Union budget, making it possible to deduct interests, and any other charge due where a fine, other penalty or sanction has been cancelled or the amount has been reduced, including any negative return related to such fines, other penalties or sanctions from the revenue side of the Union budget (negative revenue), while also ensuring an adequate compensation in the event of the reimbursement of provisionally paid fines (Article 48(1) and new Article 48(2), Article 99(4), Article 108(2), Article 109(1), Article 109(2) and Article 109(4)). These changes integrate those already proposed by the Commission, on account of the urgency of the matter, in the stand-alone Commission proposal on the Financial Regulation amendment concerning the treatment of cancelled or reduced competition fines 11 ;

·simplifying the rules on imprest accounts to address issues encountered by EU delegations (Articles 88 and 89) and on treasury management, notably the use of credit cards and modern payment methods (Article 86).

🡻 2018/1046 (adapted)

2022/0162 (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, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012(recast)

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 point (d) of Article 46, Article 149, point (a) of Article 153(2), Articles 164, 172, 175, 177 and 178, Articles 189(2), 212(2) and 322(1) and Article 349 thereof, in conjunction with the Treaty establishing the European Atomic Energy Community, and in particular Article 106a thereof,

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 Court of Auditors 12 ,

Having regard to the opinion of the European Economic and Social Committee 13 ,

Having regard to the opinion of the Committee of the Regions 14 ,

Acting in accordance with the ordinary legislative procedure,

Whereas:

⇩ new

(1)A number of amendments are to be made to Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council 15 . In the interests of clarity, that Regulation should be recast.

🡻 2018/1046 recital 1

(2)Following three years of implementation, further amendments should be made to the financial rules applicable to the general budget of the Union (the ‘budget’) in order to remove bottlenecks in implementation by increasing flexibility, to simplify delivery for the stakeholders and the services, to focus more on results, and to improve accessibility, transparency and accountability. Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council 16 should therefore be repealed and replaced by this Regulation.

🡻 2018/1046 recital 2

(3)In order to reduce the complexity of the financial rules applicable to the budget and to include the relevant rules in one single regulation, the Commission should repeal Delegated Regulation (EU) No 1268/2012 17 . In the interest of clarity, the main rules from Delegated Regulation (EU) No 1268/2012 should be included in this Regulation, while other rules should be included in guidance for services.

⇩ new

(4)This Regulation should provide for the financial rules applicable to the general budget of the Union within the meaning of Article 322 TFEU and does not regulate or affect the implementation of restrictive measures adopted on the basis of the TFEU and the TEU, including in the framework of implementation of the Union budget.

(5)Taking into account the experience gained with the implementation of the financial rules applicable to the general budget of the Union (the ‘budget’) and following the adoption of Council Regulation (EU, Euratom) 2020/2093 18 which laid down the Multiannual Financial Framework from 2021 to 2027, certain targeted amendments should be made in order to align the general financial rules to the new legal framework, adapt them to the needs of efficient crisis management and enhance the protection of the Union’s financial interests. Furthermore, targeted simplifications, technical updates and corrections should be made.

(6)Following the adoption of the Multiannual Financial Framework for 2021 to 2027, the references to basic acts, to Decision (EU, Euratom) 2020/2053 19 , to Council Regulation (EU, Euratom) 2021/768 and to the Interinstitutional Agreement of 16 December 2020 should be replaced or be added to the references used throughout this Regulation.

(7)In the interest of clarity, all references to the repealed Regulation (EC) 45/2001 20 shall be replaced by references to Regulation (EU) 2018/1725 of the European Parliament and of the Council 21 .

(8)In the interest of legal certainty, a number of cross-references should be corrected.

(9)It is necessary to better reflect the specific nature and functioning of the provisioning of financial liabilities and of the budgetary guarantees. Certain definitions and rules on budgetary guarantees, budgetary commitments, legal commitments, payment appropriations, recipients and publication of information on recipients should therefore be adjusted. A definition of the constitution phase of the provisioning of financial liabilities should be added. Additionally, definitions should be updated to reflect in particular amendments to procurement rules and the introduction of rules on non-financial donations.

(10)In order to enhance transparency on recipients of Union funds which are non-governmental organisations, there should be a definition of non-governmental organisations providing for criteria to identify them and grant applicants should declare their legal status, including whether they are non-governmental organisations.

(11)A reference to the general regime of conditionality for the protection of the Union budget laid down in Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council 22 should be inserted in this Regulation. Regulation (EU, Euratom) 2020/2092 is a cornerstone of the legal framework for the implementation of the Union budget.

🡻 2018/1046 recital 3

(12)The fundamental budgetary principles should be maintained. Existing derogations from those 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.

🡻 2018/1046 recital 4

(13)Rules on the carry-over of appropriations should be presented more clearly and a distinction should be made between automatic and non-automatic carry-overs. The Union institutions concerned should provide information to the European Parliament and to the Council on both automatic and non-automatic carry-overs.

🡻 2018/1046 recital 5

(14)The carrying-over and use of external assigned revenue for the succeeding programme or action should be allowed with a view to using such funds efficiently. It should be possible to carry over internal assigned revenue only to the following financial year, except where this Regulation provides otherwise.

⇩ new

(15)Following the adoption of the Multiannual Financial Framework for 2021 to 2027 and related basic acts thereto, certain rules related to budgetary principles, in particular as regards cancellation and carry-over, decommitments and making appropriations corresponding to decommitments available again, laid down in Regulation 2021/2116 23 of the European Parliament and of the Council, Regulation (EU, Euratom) 2020/2093, Regulation (EU) 2021/836 of the European Parliament and of the Council 24 , Regulation (EU) 2021/947 of the European Parliament and of the Council 25 , Regulation (EU) 2021/1529 of the European Parliament and of the Council 26 , Council Decision (EU) 2021/1764 27 , Council Regulation (Euratom) 2021/948 28 and Regulation (EU) No 2021/1060 of the European Parliament and Council 29 , should be incorporated into this Regulation.

🡻 2018/1046 recital 6

(16)With regard to internal assigned revenue, the financing of new building projects with the revenue from lettings and the sale of buildings should be allowed. To that end, such revenue should be considered as internal assigned revenue which can be carried over until it is fully used.

⇩ new

(17)In the interest of simplification and in order to align better the timing of contributions from Member States with the corresponding payment needs, all additional financial contributions from Member States to Union’s actions and programmes, including voluntary contributions, should be subject to the same treatment and be considered as external assigned revenue.

(18)In order to increase transparency in the presentation of assigned revenue, detailed information on the estimated amount of the external assigned revenue to be received, and the foreseen allocation to the relevant budget lines should be provided in an annex, which forms an integral part of the budget.

(19)The rules on transfers subject to special provisions should be updated to take into account the Solidarity and Emergency Aid Reserve established pursuant to Regulation (EU, Euratom) 2020/2093. In addition, adjustments should be made in order to reflect that draft amending budgets are no longer required for the mobilisation of the Solidarity and Emergency Aid Reserve.

🡻 2018/1046 recital 7

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

⇩ new

(21)In order to allow a rapid reaction in exceptional circumstances, the Commission should be able to accept in-kind donations, irrespective of their value, where such donations are made for the purposes of humanitarian aid, emergency support, civil protection or crisis management aid. In order to ensure appropriate safeguards, the Commission should only accept such donations where acceptance is in accordance with the principles of sound financial management and transparency, does not give rise to conflicts of interest and does not harm the image of the Union. The donor should not be, at the moment of acceptance, in one of the exclusion situations under the early-detection and exclusion system and should not be registered as excluded in the corresponding database.

🡻 2018/1046 recital 8

(22)A provision should be introduced to allow for in-kind sponsorship by a legal person of an event or activity for promotional or corporate social responsibility purposes.

🡻 2018/1046 recital 9

(23)The concept of performance as regards the budget should be clarified. Performance should be linked to the direct application of the principle of sound financial management. The principle of sound financial management should also be defined, and a link should be established between objectives set and performance indicators, results and economy, efficiency and effectiveness in the use of appropriations. For reasons of legal certainty, while avoiding conflicts with existing performance frameworks of the different programmes, performance terminology, in particular output and results, should be defined.

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(24)Considering the importance of addressing climate and environmental challenges and in order to ensure that budget implementation contributes to the achievement of the European Green Deal 30 , the concept of performance as regards the budget should be extended to include the implementation of programmes and activities in a sustainable way, which would not hinder the achievement of the environmental objectives of climate change mitigation, climate change adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control and the protection and restoration of biodiversity and ecosystems.

🡻 2018/1046 recital 10

(25)In accordance with the Interinstitutional Agreement of 13 April 2016 on Better Law-Making 31 , Union legislation should be of high quality and should focus on areas where it has the greatest added value for citizens and is as efficient and effective as possible in delivering the common policy objectives of the Union. Making existing and new spending programmes and activities entailing significant spending subject to evaluation can help achieve those objectives.

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(26)In order to implement the Commission’s commitment to be digital by default and to foster more efficient and qualitative controls and audits by increasing the level of assurance while decreasing the cost, it is appropriate to introduce an explicit reference to the use of digital tools and emerging technologies such as machine learning, robotic process automation, data-mining and artificial intelligence.

(27)In order to enhance the protection of the Union budget against fraud, corruption, conflicts of interest, double funding and other irregularities, standardised measures to collect, compare and aggregate information on the recipients of Union funding should be introduced. In particular, in order to effectively prevent, detect, investigate and correct frauds or remedy irregularities, it is necessary to be able to identify the natural persons that ultimately benefit, directly or indirectly, from Union funding and who ultimately profit from the misuse of EU funding. The electronic recording and storage of data on the recipients of Union funding, including their beneficial owners as defined in Article 3, point (6), of Directive (EU) 2015/849 of the European Parliament and of the Council 32  and the regular making of those data available in a single integrated IT system for data-mining and risk-scoring provided by the Commission, should facilitate risk assessment for the purposes of selection, award, financial management, monitoring, investigation, control and audit and contribute to effective prevention, detection, correction and follow-up of fraud, corruption, conflicts of interest, double funding and other irregularities. The Commission should be responsible for the development, management and supervision of the single integrated IT system for data-mining and risk-scoring. The Commission, the Member States, the persons or entities implementing the budget, the European Anti-Fraud Office (‘OLAF’) and other Union investigative and control bodies should have the necessary access to those data within the exercise of their respective competences. The rules related to the recording, storage, transfer and processing of data should comply with applicable data protection rules.

🡻 2018/1046 recital 11

(28)In accordance with the principle of transparency enshrined in Article 15 of the Treaty on the Functioning of the European Union (TFEU), Union institutions are to conduct their work as openly as possible. With regard to budget implementation, the application of that principle implies that citizens should 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, reinforces institutional control and scrutiny over Union expenditure, and contributes to boosting its credibility. Communication should be more targeted and should aim to increase the visibility of the Union contribution for citizens. Such objectives should be achieved by the publication, preferably using modern communication tools, of relevant information concerning all recipients of funds financed from the budget which takes into account those 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. Union 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.

🡻 2018/1046 recital 12 (adapted)

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(29)Without prejudice to the rules on the protection of personal data, the utmost transparency regarding information on recipients should be sought. The information on recipients of Union funds implemented under direct management should be published on a dedicated website of Union institutions, such as the Financial Transparency System,. and ⇨ Publication requirements should cover all methods of budget implementation, including by other Union institutions and bodies. To that end, Member States, persons and entities implementing the budget and other Union institutions and bodies should transmit to the Commission, at least on a yearly basis, information on their recipients of Union funding. That information ⇦ should include at least the name ⇨ , a unique identifier ⇦ and the locality of the recipient, the amount legally committed and the purpose of the measure. That information should take into account relevant criteria such as the periodicity, the type and the importance of the measure.

🡻 2018/1046 recital 13

(30)It should be possible for the Commission to implement the budget indirectly through Member State organisations. For reasons of legal certainty, it is therefore appropriate to define a Member State organisation as an entity established in a Member State as a public-law body, or as a body governed by private law entrusted with a public-service mission and provided with adequate financial guarantees by that Member State. Financial backing provided to such private-law bodies by a Member State in accordance with existing requirements set out in Union law, in a form decided by that Member State and not necessarily requiring a bank guarantee, should be considered as adequate financial guarantees.

🡻 2018/1046 recital 14

For prizes, grants and contracts awarded following the opening-up of a public procedure to competition, and in particular for contests, calls for proposals and calls for tenders, in order to respect the principles of the TFEU and in particular the principles of transparency, proportionality, equal treatment and non-discrimination, the name and locality of the recipients of Union funds should be published. Such publication should contribute to the control of the award procedures by the unsuccessful applicants in the competition.

🡻 2018/1046 recital 15

(31)Personal data referring to natural persons should not be publicly available for longer than the period 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 whose official name identifies one or more natural persons.

🡻 2018/1046 recital 16

(32)In most of the cases covered by this Regulation, the publication concerns legal persons. Where natural persons are concerned, the publication of personal data should respect the principle of proportionality between the importance of the amount granted and the need to control the best use of the funds. In such cases, the publication of the region on level 2 of the common classification of territorial units for statistics (NUTS) is consistent with the objective of publication of information on recipients and 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.

🡻 2018/1046 recital 17

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(33)For reasons of legal certainty and in accordance with the principle of proportionality, the situations in which publication should not take place should be specified. For example, information should not be published with regard to scholarships or other forms of direct support paid to natural persons most in need, to certain contracts with a very low value or to financial support below a certain threshold provided through financial instruments ⇨ or budgetary guarantees ⇦ , or in cases where disclosure risks threatening the rights and freedoms of the individuals concerned as protected by the Charter of Fundamental Rights of the European Union or causing harm to the commercial interests of the recipients. For grants, however, there should be no special exemption from the obligation to publish information on the basis of a specific threshold, in order to maintain the current practice and to allow for transparency.

🡻 2018/1046 recital 18

(34)Where personal data of recipients is published for the purposes of transparency in relation to the use of Union funds and the control of award procedures, those recipients should be informed of such publication, as well as of their rights and the procedures applicable for exercising those rights, in accordance with Regulations (EU) 2018/1725 (EC) No 45/2001 33 and (EU) 2016/679 34 of the European Parliament and of the Council.

🡻 2018/1046 recital 19

(35)In order to ensure that the principle of equal treatment is respected for all recipients, the information related to natural persons should also be published, in line with the obligation for Member States to establish a large degree of transparency for contracts above the thresholds laid down in Directive 2014/24/EU of the European Parliament and of the Council 35 .

🡻 2018/1046 recital 20

⇨ new

(36)In the case of indirect and shared management, the persons, entities or designated bodies implementing Union funds should make available information on recipients and final recipients. In the case of shared management, the information should be published in accordance with sector-specific rules. ⇨ Member States that receive and implement Union funds under direct management should make available information on their recipients in accordance with this Regulation. ⇦ The Commission should make available information about a single website, including a reference to its address, where the information on recipients and final recipients can be found.

🡻 2018/1046 recital 21

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

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(38)In order to ensure transparency, avoid duplication and align the timing of reporting with the availability of the relevant data, the information on budgetary guarantees, the common provisioning fund and contingent liabilities should be regrouped under these three categories and presented in a comprehensive way in the respective reports.

(39)In order to increase transparency and accuracy in reporting, the information on financial instruments presented in the working document attached to the draft budget should include information on realised losses from assets.

(40)In order to ensure synchronisation with the timeline for the adoption of the statement of estimates, the working document on the building policy of the Commission should be attached to the draft budget.

🡻 2018/1046 recital 22 (adapted)

(41)In order to promote best practices in the implementation of the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime, and Fisheries ⌦ and Aquaculture ⌫ Fund (EMFF ⌦ EMFAF ⌫ ), as well as the European Agricultural Guarantee Fund (EAGF), the Commission should, for information purposes, be able to make available to bodies responsible for management and control activities a non-binding methodological guide setting out its own control strategy and approach, including checklists, and examples of best practice. That guide should be updated whenever necessary.

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(42)It is necessary to allow deducting from the revenue of the general budget of the Union any interest or other charge due, on the amounts of cancelled or reduced fines, other penalties or sanctions, including any negative return related to those amounts. In order to comply with the general principle of restoration to the prior state (restitutio in integrum) applicable to fines, other penalties or sanctions imposed by Union institutions that are later cancelled or reduced by the Court of Justice, it is necessary to provide that any negative return on the provisionally collected amount of such fines, other penalties or sanctions imposed by Union institutions is not deducted from the amount to be repaid. To compensate for the loss of enjoyment of monies from the date the undertaking provisionally paid the fine to the Commission until the date of repayment, the amount to be repaid should be increased by an interest at the rate applied by the European Central Bank to its principal refinancing operations increased by one and a half percentage points as an adequate compensation for the undertaking in such situations, which excludes the need to apply any other interest rate on that amount. Furthermore, that rate corresponds to the interest rate applicable in relation to the debtor when the debtor chooses to defer the payment of a fine, another penalty or a sanction, and provides a financial guarantee instead of payment. In order to secure sufficient cash flow to compensate the concerned third parties for the loss of enjoyment of monies in the cases referred to in Article 109(4), it is necessary to allow for the amounts received by way of fines, other penalties or sanctions and any accrued interest or other income generated by them to be entered in the budget by the end of the following financial year.

(43)In view of the increased volume of borrowing and lending operations carried out by the Commission on behalf of the Union to finance the recovery from the COVID-19 pandemic, transparency regarding those operations should be further enhanced. To address the increased complexity of those operations and in order to ensure better visibility of their content, a comprehensive overview of borrowing and lending operations carried out by the Commission should be added to the document annexed to the section of the budget relating to the Commission.

🡻 2018/1046 recital 23

(44)It is appropriate to provide for the possibility for Union institutions to conclude service-level agreements with each other in order to facilitate the implementation of their appropriations and also for the possibility to conclude such agreements between departments of Union institutions, Union bodies, European offices, bodies or persons entrusted with implementation of specific actions in the common foreign and security policy (CFSP) pursuant to Title V of the Treaty on European Union (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 or execution of works or of building contracts.

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(45)For reasons of legal certainty, it is necessary to clarify that the applicable law, under which any appropriate actions are to be taken with regard to conflict of interests, includes EU and national law relating to conflict of interests.

(46)In order to increase inclusiveness, private or EU-law bodies established in a Member State and eligible to be entrusted, in accordance with sector-specific rules, with the implementation of Union funds or budgetary guarantees, should be added to the list of entities under point (c) of the first subparagraph of article 62 (1) insofar as they are controlled by public law bodies or private law bodies with public service mission eligible under indirect management, and are provided with adequate financial guarantees. Where such private or EU-law bodies do not benefit from financial backing provided by a Member State, adequate financial guarantees should take the form of joint and several liability by the controlling bodies or equivalent financial guarantees.

🡻 2018/1046 recital 24

(47)It is appropriate to lay down the procedure for setting up new European offices and to distinguish between obligatory and non-obligatory tasks of such offices. A possibility for Union institutions, Union bodies and other European offices to delegate the powers of the authorising officer to the director of a 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 or execution of works or of building contracts. It is appropriate to set out specific rules for the drawing-up of accounting records, provisions authorising the accounting officer of the Commission to delegate some of his or her tasks to staff in those offices and operating procedures for bank accounts which the Commission should be able to open in the name of a European office.

🡻 2018/1046 recital 25

(48)In order to improve the cost-effectiveness of executive agencies and in light of the practical experience gained with other Union bodies, it should be possible to entrust the accounting officer of the Commission with all or part of the tasks of the accounting officer of the executive agency concerned.

🡻 2018/1046 recital 26

(49)For reasons of legal certainty, it is necessary to clarify that directors of executive agencies act as authorising officers by delegation when managing operational appropriations of programmes delegated to their agencies. 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 expenditure should be explicitly provided for.

🡻 2018/1046 recital 27

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

🡻 2018/1046 recital 28

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

🡻 2018/1046 recital 29

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

🡻 2018/1046 recital 30

(53)The tasks, responsibilities and principles of the procedures to be observed by the authorising officers should also be laid down. Authorising officers by delegation should ensure that the authorising officers by subdelegation and their staff receive information and training concerning the control standards and the respective methods and techniques and that measures are taken in order to ensure the functioning of the control system. The authorising officer by delegation should report to his or her Union institution on the performance of the duties in the form of an annual report. That report should include the required financial and management information to support that officer’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 for at least five years. The various forms of negotiated procedure for the award of public contracts should be the subject of a special report from the authorising officer by delegation to the Union institution concerned and of a report from that Union institution to the European Parliament and to the Council, since those procedures represent derogations from the usual award procedures.

🡻 2018/1046 recital 31

(54)The double role of Heads of Union delegations, and of their deputies in their absence, as authorising officers by subdelegation for the European External Action Service (EEAS) and, as regards operational appropriations, for the Commission should be taken into account.

🡻 2018/1046 recital 32

(55)The delegation of powers of budget implementation by the Commission concerning the operational appropriations of its own section of the budget to the deputy Heads of Union delegations should be restricted to situations where the performance of those tasks by the deputy Heads of Union delegations is strictly necessary in order to ensure business continuity during the absence of Heads of Union delegations. The deputy Heads of Union delegations should not be allowed to exercise those powers on a systematic basis or for reasons of internal work division.

🡻 2018/1046 recital 33

(56)The accounting officer should be responsible for the proper implementation of payments, the collection of revenue and the recovery of amounts receivable. The accounting officer should manage the treasury, bank accounts and third-party files, keep the accounts and be responsible for drawing up the financial statements of Union institutions. The accounting officer of the Commission should be the only person who is entitled to lay down the accounting rules and the harmonised charts of accounts, while the accounting officers of all other Union institutions should lay down accounting procedures applicable in their institutions.

🡻 2018/1046 recital 34

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

🡻 2018/1046 recital 35

(58)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.

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(59)It is appropriate to align the means of payment authorised for treasury management with modern payment methods, including credit cards and electronic wallets.

(60)Considering that payments by Union delegations through the standard rules for budgetary, treasury and accounting operations (“budgetary procedures”) are increasingly executed through the central treasury and, as a consequence, the number of transactions and the amounts paid through imprest accounts decrease, it is appropriate to simplify the rules on the creation, administration and control of imprest accounts.

🡻 2018/1046 recital 36

(61)The conditions for the use of imprest accounts, a system of management which constitutes an exception to normal budgetary procedures and only concerns limited amounts, should be laid down, and the tasks and responsibilities of the imprest administrators, as well as those of the authorising officer and the accounting officer in connection with the control of imprest accounts, should be set out. The Court of Auditors should be informed of any appointment of an imprest administrator. For reasons of efficiency, imprest accounts should be set up in Union delegations for appropriations from both the sections of the budget relating to the Commission and to the EEAS. 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 should be possible to select them also from personnel employed by the Commission in the field of crisis-management aid and humanitarian aid operations whenever there is no available Commission staff covered by the Staff Regulations of Officials of the European Union and the Conditions of Employment of Other Servants of the Union, laid down in Council Regulation (EEC, Euratom, ECSC) No 259/68 36 (‘Staff Regulations’).

🡻 2018/1046 recital 37

(62)In order to take into account the situation in the field of crisis-management aid and humanitarian aid operations whenever there are no Commission staff covered by the Staff Regulations 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 enter into legal commitments of a very low value up to EUR 2500 which are linked to the payments executed from imprest accounts, and for Heads of Union delegations or their deputies to enter into legal commitments on the instruction of the authorising officer responsible of the Commission.

🡻 2018/1046 recital 38

(63)Once the tasks and responsibilities of financial actors have been defined, it is only possible to hold them liable under the conditions laid down in the Staff Regulations. Specialised financial irregularities panels have been set up in Union institutions pursuant to Regulation (EU, Euratom) No 966/2012. However, due to the limited number of cases submitted to them and for reasons of efficiency, it is appropriate to transfer their functions to an interinstitutional panel established pursuant to this Regulation (‘the panel’). The panel should be set up to assess requests and issue recommendations on the need to take decisions on exclusion and imposition of financial penalties referred to it by the Commission or other Union institutions and bodies, without prejudice to their administrative autonomy in respect of members of their staff. That transfer also aims to avoid duplication and to mitigate the risks of contradictory recommendations or opinions, in cases where both an economic operator and a member of staff of a Union institution or body are involved. It is necessary to maintain the procedure by which it is possible for an authorising officer to 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 the panel should be modified when it fulfils this role. The panel should have no investigative powers.

🡻 2018/1046 recital 39

⇨ new

(64)As regards revenue, it is necessary to address negative adjustments of own resources covered by Council Regulation (EU, Euratom) No 609/2014 37  ⇨ , Council Regulation (EU, Euratom) No 2021/770 38 and Council Regulation (EU, Euratom) [XXX] on the methods and procedure for making available own resources based on the Emissions Trading System, the Carbon Border Adjustment Mechanism and reallocated profits and on the measures to meet cash requirements 39  ⇦ . Except in the case of own resources, it is necessary to maintain the existing 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, issuing of recovery orders, dispatch of the debit note informing the debtor that the amount receivable has been established 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.

🡻 2018/1046 recital 40

(65)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 proceedings as defined in Regulation (EU) 2015/848 of the European Parliament and of the Council 40 , in particular in cases of judicial arrangements, compositions and analogous proceedings.

🡻 2018/1046 recital 41

(66)Specific provisions on procedures for the adjustment or the reduction to zero of an estimate of the amount receivable should be laid down.

🡻 2018/1046 recital 42

(67)It is necessary to clarify the timing of the entry in the budget of amounts received by way of fines, other penalties and sanctions, and of any accrued interest or other income generated by them.

🡻 2018/1046 recital 43

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

🡻 2018/1046 recital 44

(69)To reflect the specific nature of amounts receivable consisting in fines or other penalties imposed by Union institutions under the TFEU or the Treaty establishing the European Atomic Energy Community (the Euratom Treaty), it is necessary to introduce specific provisions on the interest rates applicable to amounts due but not yet paid, in the event that such amounts are increased by the Court of Justice of the European Union.

🡻 2018/1046 recital 45

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

🡻 2018/1046 recital 46

(71)In order to guarantee legal certainty and transparency, rules regarding the deadlines within which a debit note is to be sent should be laid down.

⇩ new

(72)In order to ensure sound financial management and to guarantee the efficient recovery of Union claims, it is necessary for the accounting officer of the Commission to be able to rely on the assistance from Member States for the notification and recovery of Union claims. Such assistance should be conducted in a similar way to the one between Member States for the notification and recovery of their claims pursuant to Council Directive 2010/24/EU 41 . The purpose of the assistance should not only be to allow to recover whenever the debtor has sizeable assets, but also to provide sufficient and reliable information to the accounting officer in cases of insolvency of the debtor so that a waiver decision to waive a recovery, can be adopted in cases where the debtor is insolvent or cannot be located. The assistance regarding notification to the debtor by the Member State should be done in accordance with the applicable national procedures. It should include not only the enforceable decisions pursuant to Article 299 of the Treaty on the Functioning of the European Union (TFEU) but also the preparatory acts prior to the adoption of such a decision, including the notification of debit notes, reminders and letters of formal notice and precautionary measures to safeguard the rights of the Union in cases where enforceable decisions have been adopted but either have not yet been notified or are waiting for the order for its enforcement to be appended pursuant to Article 299 TFEU. The details of such assistance should be laid down in an agreement between the Commission and Member States either bilaterally or multilaterally. Nevertheless, the obligation to provide such assistance shall exist even if no such agreement is signed.

🡻 2018/1046 recital 47

(73)In order to secure the management of assets whilst also aiming at yielding a positive return, it is necessary to have amounts relating to fines, other penalties or sanctions imposed under the TFEU or the Euratom Treaty, such as competition fines which are being contested, provisionally collected and invested in financial assets, and to determine the assignment of the return on them. Since the Commission is not the only Union institution which is entitled to impose fines, other penalties or sanctions, it is necessary to lay down provisions concerning such fines, other penalties or sanctions imposed by other Union institutions and to lay down rules for their recovery which should be equivalent to those applicable to the Commission.

🡻 2018/1046 recital 48

(74)In order to ensure that the Commission has all the necessary information for the adoption of financing decisions, it is necessary to lay down the minimum requirements for the contents of financing decisions on grants, procurement, Union trust funds for external actions (‘Union trust funds’), prizes, financial instruments, blending facilities or platforms and budgetary guarantees. At the same time, in order to give a longer-term perspective to the potential recipients, it is necessary to allow for financing decisions to be adopted for more than one financial year while specifying that the implementation is subject to the availability of budget appropriations for the respective financial years. Furthermore, it is necessary to reduce the number of the elements required for the financing decision. In line with the aim of simplification, the financing decision should at the same time constitute an annual or multiannual work programme. Since contributions to the Union bodies referred to in Articles 70 and 71 are already established in the budget, there should be no requirement to adopt a specific financing decision in that respect.

🡻 2018/1046 recital 49

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

🡻 2018/1046 recital 50

(76)In order to take into account in particular the number of legal commitments entered into by Union delegations and Union representations and the exchange-rate fluctuations experienced by them, provisional budgetary commitments should be possible also in cases where the final payee and the amount are known.

⇩ new

(77)In order to align the European Agricultural Guarantee Fund (EAGF) with the general accounting and budgetary procedures as soon as it is technically possible, it should be allowed to proceed with individual budgetary commitments to make the payments, without the need to first make a global provisional commitment to make the payments followed by individual commitments within a period of up to two months, or, under certain conditions, a longer period. Furthermore, to be able to proceed with individual budgetary commitments and payments for the first month of the financial year in December, routine management expenditure for the EAGF should be added to the types of expenditure for which payments made in advance are authorised.

🡻 2018/1046 recital 51

(78)As regards the typology of payments which it is possible for authorising officers to make, clarification of the various types of payments should be provided, in accordance with the principle of sound financial management. The rules for clearing of pre-financing payments should further be clarified, in particular for situations where no interim clearing is possible. To that effect, appropriate provisions should be included in legal commitments entered into.

🡻 2018/1046 recital 52

(79)This Regulation should stipulate that payments are to be made within specified time limits and that, in the event of failure to respect such time limits, creditors will be entitled to default interests to be charged to the budget, except in the case of Member States, the European Investment Bank (EIB) and the European Investment Fund (EIF).

⇩ new

(80)The core elements of electronic invoices in public procurement should be based on the rules set out in Directive 2014/55/EU.

(81)For the sake of clarity, the definition of unsuitable tenders in public procurement should be revised to include tenders where the economic operator does not have access to procurement referred to in Articles 180,181 and 183.

(82)It is necessary to clarify that specific contracts under framework contracts concluded with a single economic operator may be awarded and modified within the limits of the terms foreseen in the framework contract.

(83)In order to take account of the specific characteristics of the real estate market and to simplify procurement procedures for buildings, the requirement of having a minimum number of candidates participating in the procedures should be removed.

(84)Considering that the ex ante publicity measures are the same for open, restricted and competitive procedures with negotiation, the use of a negotiated procedure without prior publication of a contract notice following an unsuccessful competitive procedure with negotiation should be allowed under certain conditions.

(85)It is necessary to exclude from the scope of the procurement rules of this Regulation the document certification and authentication services provided by notaries, provided that the procedures governing these services in the Member State concerned are not open to competition.

(86)It is appropriate to provide for the possibility of having negotiated procedures without prior publication for services provided by Member State organisations which cannot participate in competitive procedures.

(87)In order to ensure compliance with the case law of the Court of Justice (judgment of the General Court in Case T-661/18, Securitec v Commission), the authorising officer should request the evidence for exclusion and selection criteria to be submitted before the award decision.

🡻 2018/1046 recital 53

(88)It is appropriate to integrate the provisions concerning validation and authorisation of expenditure in one article and to introduce a definition of ‘decommitments’. Since the transactions are carried out in computerised systems, the signing of a ‘passed for payment’ voucher in order to express the validation decision should be replaced by an 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, including, as is the case for the clearing of pre-financing, costs which are not associated with a payment request.

🡻 2018/1046 recital 54

(89)In order to reduce complexity, streamline existing rules and improve the readability of this Regulation, rules common to more than one budget implementation instrument 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.

🡻 2018/1046 recital 55

(90)Each Union institution should establish an internal audit progress committee tasked with ensuring the independence of the internal auditor, monitoring the quality of the internal audit work and ensuring that internal and external audit recommendations are properly taken into account and followed up by its services. The composition of that internal audit progress committee should be decided by each Union institution, taking into account its organisational autonomy and the importance of independent expert advice.

🡻 2018/1046 recital 56

(91)More emphasis should be put on performance and results of projects financed from the budget. 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). The additional form of financing should be based on the fulfilment of certain conditions ex ante or on the achievement of results measured by reference to previously set milestones or through performance indicators.

🡻 2018/1046 recital 57

(92)Where the Commission carries out assessments of the operational and financial capacity of recipients of Union funds or of their systems and procedures, it should be able to rely on the assessments already conducted by itself, other entities or donors such as national agencies and international organisations, in order to avoid duplicating assessments of the same recipients. The possibility for cross-reliance on assessments conducted by other entities should be used where such assessments were made in compliance with 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.

🡻 2018/1046 recital 58

(93)It is also important to avoid situations in which recipients of Union funds are audited several times by different entities on the use of those funds. It should therefore be possible to rely on audits already carried out by independent auditors provided that there is sufficient evidence of their competence and independence and provided that the audit work is based on internationally accepted audit standards providing 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 Union funds. To that end, it is important to ensure that the report of the independent auditor and the related audit documentation is made available on request to the European Parliament, the Commission, the Court of Auditors and the audit authorities of Member States.

🡻 2018/1046 recital 59

(94)For the purpose of relying on assessments and audits and in order to reduce the administrative burden on persons and entities receiving Union funds, it is important to ensure that any information already available at Union institutions, managing authorities or other bodies and entities implementing Union funds, is reused to avoid multiple requests to recipients or beneficiaries.

🡻 2018/1046 recital 60

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

🡻 2018/1046 recital 61

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

🡻 2018/1046 recital 62

(97)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 Court of Auditors and the European Anti-Fraud Office (OLAF) with sufficient time to obtain access to such data and documents and perform the ex post checks and audits. In addition, any person or entity receiving Union funds should be obliged to cooperate in the protection of the financial interests of the Union.

🡻 2018/1046 recital 63

(98)In order to provide adequate information to participants and recipients and to ensure that they have the possibility to exercise their right of defence, participants and recipients should be allowed to submit their observations before adoption of any measure adversely affecting their rights and they should be informed of the means of redress available to them for challenging such a measure.

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(99)In the context of an award procedure, it is not necessary for the authorising officer responsible to provide an opportunity to a participant to submit observations where that participant has been rejected from an award procedure. In order to ensure legal certainty, this should also be specified in the provision on adversarial procedures and means of redress.

(100)Considering the increasingly challenging geopolitical environment with rapidly evolving hybrid and cyber threats, as well as the need for a digital transformation with its inherent exposure to technical vulnerabilities, the Union needs to ensure the protection of the security and the public order of the Union or its Member States, as reflected in public policy and law. This concerns the preservation of fundamental interests of society such as ensuring the security of energy supply, combating organized crime and fraud. Whilst respecting any international agreements of the Union, the award of Union funds in relation to strategic assets and interests, such as digital or space infrastructure, communication and information systems and services, may require the application of specific conditions to ensure such protection including for the integrity of communication and information systems, and related supply chains. The types of conditions and requirements for applying them should be clarified.

🡻 2018/1046 recital 64

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

🡻 2018/1046 recital 65

(102)The early-detection and exclusion system should apply to participants, recipients, entities on whose capacity the candidate or tenderer intends to rely, subcontractors of a contractor, any person or entity receiving Union funds where the budget is implemented under indirect management, any person or entity receiving Union funds under financial instruments implemented under direct management, participants or recipients on which entities implementing the budget under shared management have provided information, and sponsors.

⇩ new

(103)In order to enhance the protection of the Union financial interests the early-detection and exclusion system should be reinforced. It is important to avoid that a person or entity in an exclusion situation is able to apply to, or to be selected for implementing funds, or to receive such funds under a programme in shared management. Where there is a final judgment or a final administrative decision, the authorising officer responsible should be able to exclude a person or entity, provided that the latter is in an exclusion situation and deemed as not reliable by having engaged in certain serious misconducts referred to in Article 139(1). In the absence of a final judgment or a final administrative decision, the authorising officer responsible should be able to exclude, on the basis of a preliminary classification in law made by the panel referred to in Article 146, having regard to facts and findings established in the context of audits or investigations carried out by European Anti-fraud Office (OLAF), European Public Prosecutor Office (EPPO), the European Court of Auditors (ECA) or any other check, audit or control performed under the responsibility of the authorising officer. Such exclusion should be registered in the early-detection and exclusion system database established under Article 138(1). Member States’ authorities should take it into account by rejecting such persons or entities from being selected to implement Union funds or from receiving such funds. Payment applications from Member States under shared management, including expenditure related to a person or entity that has been excluded, should not be reimbursed. Where funds are disbursed to Member States under performance-based frameworks, specific rules shall apply, as set out in sector-specific legislation.

(104)It is important to underline that the EDES system should only apply in respect of Union funds disbursed to the Member States under direct management, such as those under Regulation (EU) 2021/241 of the European Parliament and of the Council 42 , where Member States have the responsibility to take all the appropriate measures to protect the financial interests of the Union, to the extent that the Commission has relevant responsibilities under the respective legal framework and with due regard to the sui generis nature of the funds. Therefore, the responsibilities of the Commission should be limited to the obligation to refer a case to the panel for the purpose of excluding a person or entity if the authorising officer becomes aware of serious misconducts through final judgments and administrative decisions or facts and findings established in the context of audits or investigations carried out concerning those funds by the European Anti-fraud Office (OLAF), the European Public Prosecutor Office (EPPO), the European Court of Auditors (ECA) or any other check, audit, or control performed under the responsibility of the authorising officer. Without prejudice to these responsibilities of the Commission, the Member States remain responsible to verify the information on decisions of exclusion registered in the EDES database, to enforce such decisions and to ensure that no payment application is submitted related to a person or entity that is in such an exclusion situation.

🡻 2018/1046 recital 66

(105)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 an exclusion situation relating to a natural or legal person that is a member of the administrative, management or supervisory body of that person or entity, or that has powers of representation, decision or control with regard to that person or entity, or to a natural or legal person that assumes unlimited liability for the debts of that person or entity or to a natural person who is essential for the award or for the implementation of the legal commitment, the information registered in the database is to include the information concerning those persons.

🡻 2018/1046 recital 67

(106)The decision on the exclusion of a person or entity from participation in award procedures or the imposition of a financial penalty on a person or entity and the decision on the publication of the related information should be taken by the authorising officers 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 on the basis of a preliminary classification in law, having regard to the recommendation of the panel. 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.

🡻 2018/1046 recital 68

(107)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, two representatives of the Commission and a representative of the requesting authorising officer.

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(108)In order to align the early-detection and exclusion system to public procurement rules and to enhance its effectiveness, attempting to influence the award of Union funds or unduly obtaining Union funds including in relation to conflicts of interests should be explicitly included as a specific situation of exclusion under the ground of grave professional misconduct with a proportionate penalty, consistent with the seriousness of the misconduct.

(109)Having due regard to the principle of proportionality, the authorising officer responsible should exclude a person or entity when it has shown lack of integrity by having engaged in any wrongful conduct that is incompatible with the values enshrined in Article 2 of the Treaty on European Union and the Charter of fundamental rights of the European Union, such as incitement to discrimination, hatred or violence against a group of persons or a member of a group, where the conduct may negatively affect the performance of the contract.

(110)An autonomous ground of exclusion with a proportionate penalty, consistent with the seriousness of the misconduct, should be added in the case of unjustified lack of cooperation in the context of investigations, checks or audits carried out by an authorising officer, OLAF, EPPO or the European Court of Auditors as this may have severe implications on the protection of the Union’s financial interests.

🡻 2018/1046 recital 69

(111)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.

🡻 2018/1046 recital 70

⇨ new

(112)A person or entity should be excluded by the authorising officer responsible where it has been established by a final judgment or a final administrative decision that the person or entity is guilty of grave professional misconduct, of non-compliance, whether intentional or not, with the obligations relating to the payment of social security contributions or taxes, of the creation of an entity in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations, of fraud affecting the budget, of corruption, of conduct related to a criminal organisation, of money laundering or terrorist financing, of terrorist offences or offences linked to terrorist activities, of child labour or other offences concerning trafficking in human beings or of the commitment of an irregularity. A person or entity should also be excluded in the event of a serious breach of a legal commitment or of bankruptcy ⇨ or in cases of refusal to co-operate in inverstigations, checks or audits. In assessing these grounds for exclusion, unreasonably injurious acts condemned in international trade law could be considered a relevant factor, where they involve grave professional misconduct. ⇦ 

🡻 2018/1046 recital 71

(113)When taking a decision on the exclusion of a person or entity, or the imposition of a financial penalty on a person or entity, and on the publication of the related information, the authorising officer responsible should ensure compliance with the principle of proportionality, in particular by taking into account the seriousness of the situation, its budgetary impact, the time which has elapsed since the relevant conduct, the duration of the conduct and its recurrence, whether the conduct was intentional or the degree of negligence shown and the degree of collaboration of the person or entity with the relevant competent authority and the contribution of that person or entity to the investigation.

🡻 2018/1046 recital 72

(114)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 the 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 have an impact on the financial situation of that economic operator.

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(115)In order to further enhance the protection of the Union’s financial interests, it should be possible for the authorising officer to exclude or impose a financial penalty on beneficial owners and affiliated entities of the excluded entity that were involved in the misconduct of the excluded entity. The possibility to exclude beneficial owners and affiliated entities is intended to prevent that a person or entity that has been excluded from being selected to implement Union’s funds could continue to participate in procurement and award procedures, through a new company or existing affiliated entities.

(116)In order to increase its effectiveness, the early-detection and exclusion system should also apply to natural persons who are deemed responsible for the misconduct of an entity, so that they are unable to participate in award procedures or selected to implement Union funds either in a personal capacity or through a new corporate identity, without prejudice to the right to be heard.

(117)At the request of the authorising officer, the panel of the early-detection and exclusion system should have the ability to issue its recommendations by means of an expedited procedure, without prejudice to the right to be heard. Such procedure should be used when the circumstances or the nature of the case requires so, for instance where a final judgment or a final administrative decision has been issued by a Member State’s authority but the duration of the exclusion is not set; or a final judgment or a final administrative decision has been issued by a third country; or a sanction equivalent to an exclusion has been already imposed on the person or entity by virtue of a decision of international organisations.

🡻 2018/1046 recital 73

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

🡻 2018/1046 recital 74

(119)In light of the principle of proportionality, a distinction should be made between cases where it is possible to impose a financial penalty as an alternative to exclusion, on the one hand, 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, on the other. The maximum amount of the financial penalty which can be imposed by the contracting authority should also be defined.

🡻 2018/1046 recital 75

(120)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.

🡻 2018/1046 recital 76

(121)The possibility to take decisions on exclusion or to impose financial penalties is independent from the possibility to apply contractual penalties, such as liquidated damages.

🡻 2018/1046 recital 77

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

🡻 2018/1046 recital 78

(123)It is necessary to determine the commencement date and the duration of the limitation period for taking decisions on exclusion or imposing financial penalties.

🡻 2018/1046 recital 79

(124)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 in a manner that satisfies the data-protection requirements set out in Regulations (EU) 2018/1725 (EC) No 45/2001 and (EU) No 2016/679. Such publication 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 circumstances justified by the seriousness of the conduct or its impact on the financial interests of the Union.

🡻 2018/1046 recital 80

(125)Information related to an exclusion or to a financial penalty should only be published in certain cases such as grave professional misconduct, fraud, a significant deficiency in complying with the main obligations of a legal commitment financed by the budget, or an irregularity, or where an entity is created in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations.

🡻 2018/1046 recital 81

(126)The criteria for exclusion should be clearly separated from the criteria leading to a possible rejection from an award procedure.

🡻 2018/1046 recital 82

(127)The information on the early detection of risks and on decisions on exclusion and the imposition of financial penalties on a person or 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 compliance with the right to privacy and the protection of personal data.

🡻 2018/1046 recital 83

(128)While the setting-up and the operation of the early-detection and exclusion system should be the responsibility of the Commission, other Union institutions and bodies, as well as all persons and entities implementing Union funds under direct, shared and indirect management, 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 the person or entity. The same right should be given to a person or entity, in the context of an early detection, where an act envisaged by an authorising officer could adversely affect the rights of the person or entity concerned. In cases of fraud, corruption or any other illegal activity affecting the financial interests of the Union which are not yet subject to a final judgment, it should be possible for the authorising officer responsible to defer the notification of the person or entity and for the panel to defer the right of the person or entity to submit its observations. Such deferral should only be justified where there are compelling legitimate grounds to preserve the confidentiality of the investigation or of national judicial proceedings.

🡻 2018/1046 recital 84

(129)The Court of Justice of the European Union should be given unlimited jurisdiction with regard to decisions on exclusion and financial penalties imposed pursuant to this Regulation, in accordance with Article 261 TFEU.

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(130)In order to address attempts by entities to elude possible adverse consequences of their misconduct, rules of notification should be established under precise conditions in the context of early detection and exclusion procedures. Furthermore, the use of electronic exchanges system should apply to such procedures.

🡻 2018/1046 recital 85

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

🡻 2018/1046 recital 86

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

🡻 2018/1046 recital 87

(133)Progress towards the electronic exchange of information and the electronic submission of documents, including e-procurement, where appropriate, 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 officers as provided for in this Regulation.

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(134)In order to improve governance and quality of interoperable digital public services, the Union institutions, the executive agencies and the Union bodies, such as those referred to in Articles 70 and 71 should follow and apply to the greatest possible extent the European Interoperability Framework.

🡻 2018/1046 recital 88

(135)Rules on the composition and tasks of the committee in charge of evaluating application documents in procurement procedures, grant award procedures and in contests for prizes should be laid down. It should be possible for the committee to include external experts where that possibility is provided for in the basic act.

🡻 2018/1046 recital 89

(136)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 should have the possibility to 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.

🡻 2018/1046 recital 90

(137)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, in the course of implementation, the authorising officer discovers that a guarantor is not or 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.

🡻 2018/1046 recital 91

(138)The different sets of rules for direct and indirect management, in particular as regards the concept of ‘budget implementation tasks’, have created confusion and entailed risks of errors of qualification both for the Commission and for its partners and should thus be simplified and harmonised.

🡻 2018/1046 recital 92

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(139)The provisions on the ex ante pillar assessment of persons and entities implementing Union funds under indirect management should be revised to enable the Commission to rely as much as possible on the systems, rules and procedures ⇨ , including due diligence, ⇦ of those persons and entities which have been deemed equivalent to the ones used by the Commission. In addition, it is important to clarify that, where the assessment reveals areas in which the procedures in place are not sufficient to protect the financial interests of the Union, the Commission should be able to sign contribution agreements while taking appropriate supervisory measures. It is also important to clarify in which cases it is possible for the Commission to decide not to require an ex ante pillar assessment in order to sign contribution agreements.

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(140)In order to ensure efficient implementation of the Union budget, it is appropriate to further clarify the application of the principle of proportionality to indirect management. While the principle of proportionality cannot affect the nature of the obligations imposed by the relevant applicable legal framework, it should be systematically used in the cooperation with Union implementing partners, in order to strike the right balance between protection of the Union’s financial interests and preserving the Union’s ability to implement its policies. Certain adjustments and restructuring of the relevant provisions should be made. This should not be interpreted as limiting in practice the necessary rights and access required for the authorising officer responsible, for EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, for OLAF, for the Court of Auditors, and, where appropriate, for the relevant national authorities, to comprehensively exert their respective competences.

(141)In line with the principle of proportionality, it is necessary to provide for an application of the obligations provided for by this Regulation to the final recipients receiving support from the Union budget under financial instruments or budgetary guarantees. This application should take into due consideration and be commensurate to the nature of the final recipients and of the action, and the financial risks involved. Unnecessary administrative burden should be avoided in particular where final recipients are Micro, Small and Medium Enterprises and comparable economic operators with equivalent turnover or balance sheet total. 

(142)The proportionality principle also needs to be applied to the assessment of rules, systems and procedures of entities that have already been successfully assessed, such as entities using rules established by the Commission, which shall be exempted from ex ante assessment. It should also be possible to exempt from ex ante assessment Member States organisations entrusted with the implementation of Union funds under shared management.

(143)It is necessary to clarify that when entities are selected to work under indirect management as a result of a call for expression of interest, the principles of equal treatment and non-discrimination apply.

🡻 2018/1046 recital 93

(144)Remuneration of persons and entities implementing the budget should, where relevant and possible, be performance-based.

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(145)To ensure the integrity of the Union budget when implemented under indirect management, it is appropriate to request from implementing partners that they inform the Commission of suspected cases of fraud, corruption or any other illegal activity and to include such obligation in agreements that they concluded with third parties under indirect management.

🡻 2018/1046 recital 94

(146)The Commission enters into partnerships with third countries by means of financing agreements. It is important to clarify the content of such financing agreements, in particular for those parts of an action that are implemented by the third country under indirect management.

🡻 2018/1046 recital 95

(147)It is important to recognise the specific nature of blending facilities or platforms where the Commission blends its contribution with that of finance institutions and to clarify the application of the provisions on financial instruments and budgetary guarantees.

🡻 2018/1046 recital 96

(148)Procurement rules and principles applicable to public contracts awarded by Union institutions on their own account should be based on the rules set out in Directive 2014/23/EU of the European Parliament and of the Council 43 and Directive 2014/24/EU.

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(149)Experience has shown that the application of the rules on procurement under this Regulation is not appropriate for the award of public contracts for financial services directly related to the issue, sale, purchase or transfer of securities or other financial instruments within the meaning of Directive 2014/65/EU of the European Parliament and of the Council, used by the Commission in the context of its borrowing and lending, asset management and treasury operations. This includes services provided by central banks, the European Stability Mechanism, the European Investment Bank and other international financial institutions, and national entities entrusted with the issuance and management of sovereign debt. For that reason and in accordance with Article 10 of Directive 2014/24/EU the rules on procurement laid down in this Regulation should not apply to those services.

(150)In light of the Covid-19 pandemic, it is appropriate to modify the definition of crisis, which applies in particular to the common provisions and to procurement in the field of external actions and covers public and animal health, food safety emergencies and global health threats. In order to allow the flexibility needed to ensure a rapid response to unforeseen circumstances of extreme urgency resulting from a crisis, the contracting authority should be allowed to apply simplified procurement rules, such as use of negotiated procedure without prior publication of a contract notice applicable to crisis situations and acceptance of evidence on exclusion and selection criteria from the presumed successful tenderer after the award decision but in any case before the signature of the contract. The contracting authority should also have flexibility to exceptionally modify a contract or a framework contract, beyond the thresholds referred to in Article 176(3), without a procurement procedure in order to respond to a crisis. A declaration of crisis should be required in line with the relevant internal rules prior to having recourse to such simplified rules, except for procurement in the field of external action where such declaration is not required. In addition, the authorising officers responsible should justify case-by-case the extreme urgency resulting from the declared crisis.

🡻 2018/1046 recital 97

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

🡻 2018/1046 recital 98

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

🡻 2018/1046 recital 99

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

🡻 2018/1046 recital 100

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

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(155)Where necessary, it should be possible to carry out a joint procurement between, on the one hand, one or more contracting authorities from Member States and, on the other hand, Union institutions and bodies referred to in Articles 70 and 71 or executive agencies referred to in Article 69, without those institutions, bodies or agencies being bound to acquire works, supplies or services. In order to allow contracting authorities to fully benefit from the potential of the internal market in terms of economies of scale and risk‐benefit sharing, the possibilities for Union institutions, Union bodies or executive agencies to purchase supplies or services on behalf of Member States should be extended. A Union institution, Union body or an executive agency should be able to conduct the relevant procurement procedure on behalf or in the name of Member States based on an agreement between the parties, or act as a wholesaler, by buying, stocking and reselling or donating supplies and services, including rentals, to Member States or partner organisations it has selected.

🡻 2018/1046 recital 101

(156)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 an innovation partnership is used only when the desired works, supplies and services do not exist on the market or as a near-to-market development activity, an obligation to carry out such preliminary market consultation before using an innovation partnership should be laid down in this Regulation.

🡻 2018/1046 recital 102

(157)The contribution of contracting authorities to the protection of the environment and the promotion of sustainable development, while ensuring that they 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.

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(158)In line with the objectives of the Communication on the European Green Deal, progress towards implementation of greening aspects should be ensured by including, when relevant, for the calls for tenders, green selection or award criteria, which will incentivise the economic operators to offer more sustainable options.

🡻 2018/1046 recital 103

(159)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 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.

🡻 2018/1046 recital 104

(160)It is appropriate that different cases usually referred to as situations of conflict of interests be identified and treated distinctly. The notion of a ‘conflict of interests’ should be solely used for cases where a person or entity with responsibilities for budget implementation, audit or control, or an official or an agent of a Union institution or national authorities at any level, is in such a situation. Attempts to unduly influence an award procedure or obtain confidential information should be treated as grave professional misconduct which can lead to the rejection from the award procedure and/or exclusion from Union funds. In addition, economic operators might 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.

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(161)In order to ensure the absence of professional conflicting interests that may affect or risk affecting the capacity to perform the contract in an independent, impartial and objective manner, it is necessary to clarify the obligations of the contracting authority and of the candidates or tenderers. On the one hand, the candidates, tenderers, and, where appropriate, entities on whose capacity they rely as well as envisaged subcontractors should declare the absence of such conflicting interests, and to provide related information where requested. On the other hand, the contracting authority should assess the existence of such professional conflicting interests when declared or on the basis of additional information. Where such professional conflicting interests are established, this should lead to rejection from the award.

🡻 2018/1046 recital 105

(162)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 of the corresponding tenderer with regard to exclusion or selection criteria.

🡻 2018/1046 recital 106

(163)Contracts should be awarded on the basis of the most economically advantageous tender in line with Article 67 of Directive 2014/24/EU.

🡻 2018/1046 recital 107

⇨ new

(164)In the interests of legal certainty, it is necessary to clarify that the selection criteria are strictly linked to the evaluation of candidates or tenderers and that the award criteria are strictly linked to the evaluation of the tenders. ⇨ In order to align Union procurement rules with Directive 2014/24/EU of the European Parliament and of the Council, contracting authorities should also be allowed to use as an award criterion the organisation, qualification and experience of the staff assigned to perform the contract, where they can significantly affect the quality of contract performance and, as a result, the economic value of the tender. Contracting authorities which make use of any of those award criteria should ensure, by appropriate contractual means, that the staff assigned to contract performance effectively fulfil the specified quality standards. The contracting authorities should give their consent to any replacement of such staff and should verify whether replacing staff affords an equivalent level of quality as the replaced staff. Furthermore, it should be ensured that there is no overlap and double evaluation of the same element under the selection and award criteria. ⇦ In particular, the qualifications and experience of staff assigned to perform the contract should only be used as a selection criterion and not as an award criterion, as this would introduce a risk of overlap and double evaluation of the same element. Furthermore, if such qualifications and experience were used as an award criterion, any change in the staff assigned to perform the contract, even where justified through illness or a change in position, would call into question the conditions under which the contract was awarded and thereby create legal uncertainty.

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(165)It is necessary to simplify the rules governing dynamic purchasing systems to enable contracting authorities to take full advantage of the possibilities afforded by that purchasing method. In particular, the systems should be operated in the form of a restricted procedure, thus allowing for any economic operator that submits a request to participate and meets the exclusion and selection criteria to take part in procurement procedures carried out through the dynamic purchasing system over its period of validity, which should not be limited to four years. Tenders may also be presented in the form of an electronic catalogue particularly for off-the-shelf products or services generally available on the market. Moreover, in order to reduce the administrative burden given the dynamic nature of the systems, the requirement to appoint an opening and evaluation committee should be waived for specific procurements under a dynamic purchasing system. Considering the progress in digitalisation of procurement procedures, it should be clarified that public openings for open procedures may be organised remotely via video conferences.

(166)In order to simplify and align with the rules applicable to procurement by Union institutions on their own account, the obligation to publish the list of selected candidates to be invited to submit a tender on the Commission’s website should be removed in the field of external actions.

🡻 2018/1046 recital 108

(167)Union procurement should ensure that Union funds are used in an effective, transparent and appropriate way, while reducing administrative burden on recipients of Union funds. In that regard, e-procurement should contribute to the better use of Union funds and enhance access to contracts for all economic operators. All Union institutions conducting procurement should publish clear rules on their websites regarding acquisition, expenditure and monitoring, as well as all contracts awarded, including the value thereof.

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(168)In electronic procurement, the electronic exchange of information with participants should rely to the largest extent possible on existing standards, such as the European Single Procurement Document and e-Invoicing standards mandated respectively by Commission Implementing Regulation (EU) 2016/7 and by Directive 2014/55/EU of the European Parliament and of the Council on electronic invoicing in public procurement.

🡻 2018/1046 recital 109

(169)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.

🡻 2018/1046 recital 110

(170)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.

🡻 2018/1046 recital 111 (adapted)

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(171)Given that criteria are applied in no particular order, ⌦ It is appropriate to specify that, upon request, unsuccessful ⌫ rejected tenderers who ⌦ which ⌫ submitted compliant tenders should receive information on the characteristics and the relative advantages of the successful tender if they so request. ⇨ Unsuccessful tenderers should, upon request, receive additional information even where the compliance of their tender has not been checked due to the selected order of criteria. ⇦

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(172)It should also be clarified that tenderers rejected on the basis of Article 144 or any other grounds for rejection should not have access to such information.

🡻 2018/1046 recital 112

(173)For framework contracts with reopening of competition, there should be no obligation to provide information on the characteristics and the relative advantages of the successful tender to an unsuccessful contractor, 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.

🡻 2018/1046 recital 113

(174)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 is possible to hold it liable for damages in accordance with the general principles of Union law.

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(175)In the case of procedures awarded in lots or through multiple sourcing, a contracting authority should be able to partially 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 is possible to hold it liable for damages in accordance with the general principles of Union law.

(176)The award of contracts following multiple sourcing procurement, should be allowed in duly justified cases, in particular, in order to avoid the over-reliance on a single provider, for critical equipment and services, taking into account the objectives of technological independence and continuity of services.

🡻 2018/1046 recital 114

(177)As is the case in Directive 2014/24/EU, it is necessary to clarify the conditions under which it is possible to modify a contract during its performance without a new procurement procedure. In particular, a new procurement procedure should not be required in the event of administrative changes, universal succession and application of clear and unequivocal revision clauses or options that 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 as regards 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 the modified terms or conditions been part of the initial procedure.

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(178)Experience gained has shown that it is necessary to clarify in which cases a modification is considered altering the subject matter of the contract.

🡻 2018/1046 recital 115

(179)It is necessary to provide for the option of requiring 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 the option of requiring a retention money guarantee to cover the contract liability period, in line with customary practice in the sectors concerned.

🡻 2018/1046 recital 116

(180)In order to determine the applicable thresholds and procedures, it is necessary to clarify whether Union institutions, executive agencies and Union 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 their departments cannot conclude contracts, but only service-level agreements, between themselves.

🡻 2018/1046 recital 117 (adapted)

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(181)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 ⇨ and in Directive 2014/23/EU for concessions ⇦ , 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 contracting needs of Union institutions. The revision of those thresholds as provided for in Directive ⌦ Directives ⌫ 2014/24/EU ⌦ and 2014/23/EU ⌫ should therefore be directly applicable to procurement ⇨ and respectively concessions ⇦ under this Regulation.

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(182)The award of concession contracts should be simplified by applying the thresholds of Directive 2014/23/EU to concessions.

🡻 2018/1046 recital 118

(183)For harmonisation and simplification purposes, the standard procedures applicable to procurement should also be applied to purchases provided for under the light regime for contracts for social and other specific services referred to in Article 74 of Directive 2014/24/EU. Therefore, the threshold for light regime purchases should be aligned with the threshold for service contracts.

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(184)In order to better adapt procedures to market conditions outside the Union, this Regulation should include specific provisions under which Union delegations award contracts on their own account in third countries. Therefore, it is appropriate to revise the thresholds for awarding contracts applied by the Union delegations in third countries and align them to those applied for awarding contracts in the field of external actions.

🡻 2018/1046 recital 119

(185)It is necessary to clarify the conditions of application of the standstill period to be observed before signing a contract or framework contract.

🡻 2018/1046 recital 120

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

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(187)The rules on access to procurement, applicable both at the time of tender submission and during contract implementation, should include the conditions laid down in implementing acts (International Procurement Instrument measures) adopted under Regulation 20xx/xxx 44 [IPI Regulation] as well as the respective obligations upon successful tenderers set out in that Regulation.

🡻 2018/1046 recital 121

(188)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 the field of external actions and to remove unnecessary repetitions and cross-referencing.

🡻 2018/1046 recital 122

(189)It is necessary to clarify which economic operators have access to procurement under this Regulation depending on their place of establishment and to provide explicitly for the possibility of such access also for international organisations.

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(190)In duly justified cases, where the contract is to be awarded in a third country, the authorising officer responsible should be allowed to open access to the procurement procedure to natural or legal persons established in a third country that does not have a special agreement with the Union in the field of procurement. This flexibility should be provided in particular where there are no natural or legal persons established in countries that have access to the procurement under a special agreement with the Union in the field of procurement who can provide the required work, supplies or services. The rules on access to procurement, applicable both at the time of tender submission and during contract implementation, should include the conditions laid down in implementing acts (International Procurement Instrument measures) adopted under Regulation 20xx/xxx [IPI Regulation].

🡻 2018/1046 recital 123

(191)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 those rules on the other, the technical rules on procurement should be set out in an 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 that Annex.

🡻 2018/1046 recital 124

(192)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 can be used to cover grants. In particular, grant decisions should be phased out due to their limited use and the progressive introduction of e-grants. The structure should be simplified by moving the provisions on instruments which are not grants to other parts of this Regulation. The nature of bodies which can receive operating grants should be clarified by no longer referring to bodies pursuing an aim of general Union interest since those bodies are covered by the notion of bodies having an objective forming part of and supporting a Union policy.

🡻 2018/1046 recital 125

(193)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.

🡻 2018/1046 recital 126

(194)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.

🡻 2018/1046 recital 127

(195)Experience gained in the use of lump sums, unit costs or flat-rate financing has shown that such forms of financing significantly simplify administrative procedures and substantially reduce the risk of error. Regardless of the field of Union intervention, lump sums, unit costs and flat rates are suitable forms of financing, in particular for standardised and recurrent actions, such as mobility or training activities. Moreover, as institutional cooperation between public administrations of Member States and of beneficiary or partner countries (institutional twinning) is implemented by Member State institutions, the use of simplified cost options is justified and should foster their engagement. In the interest of increased efficiency, Member States and other recipients of Union funds should be able to make more frequent use of simplified cost options. In this context, the conditions for using lump sums, unit costs and flat rates should be made more flexible. It is necessary to provide explicitly 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-based lump sums, unit costs and flat rates should remain an option where output-based ones are not possible or appropriate.

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(196)In order to ensure legal certainty, it is necessary to clarify that, where a grant takes the form of financing not linked to costs, the provisions on an estimated budget, co-financing and no double funding do not apply since they cannot be applied in a case where the amount to be reimbursed is linked to defined conditions or results and is decoupled from the underlying costs.

🡻 2018/1046 recital 128

(197)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 officers responsible. Where appropriate, such authorisation can 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.

🡻 2018/1046 recital 129

(198)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.

🡻 2018/1046 recital 130

(199)While the potential of more frequent use of simplified forms of financing should be realised, compliance with the principle of sound financial management, and in particular the principles of economy, efficiency and no double funding, should be ensured. For that purpose, simplified forms of financing should ensure that the resources employed are adequate to the objectives to be achieved, that the same costs are not financed more than once from the budget, that the co-financing principle is respected and that overall overcompensation of recipients is avoided. Therefore, simplified forms of financing should be based on statistical or accounting data, similar objective means or expert judgement. In addition, suitable checks, controls and periodic assessments should continue to apply.

🡻 2018/1046 recital 131

(200)The scope of checks and controls as opposed to the periodic assessments 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 and/or results. 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 determined ex ante by the authorising officer responsible or by the Commission they should not be challenged by ex post controls. This should not prevent the reduction of a grant in the event of poor, partial or late implementation or of irregularity, fraud or a breach of other obligations. In particular, a grant should be reduced where the conditions triggering the payment of lump sums, unit costs or flat rates have not been fulfilled. The frequency and scope of the periodic assessment should depend on the evolution and the nature of the costs, in particular taking into account substantial changes in market prices and other relevant circumstances. The periodic assessment could lead to adjustments 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. The periodic assessment of lump sums, unit costs or flat rates might require access to the accounts of the beneficiary for statistical and methodological purposes and such access is also necessary for fraud-prevention and detection purposes.

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(201)Where a grant takes the form of a flat rate, unit cost or lump sum and there is thus no ex post verification of the underlying costs, it is not possible to check that the eligible costs were incurred during the lifetime of the action. In order to ensure legal certainty, it should be clarified that ex post checks and controls on beneficiaries will verify that the fulfilment of the conditions triggering the payment of the flat rate, unit costs, or lump sum was achieved during the implementation period.

🡻 2018/1046 recital 132

(202)In order to facilitate the participation of small organisations in the implementation of the Union 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 should be able to rely to a greater extent on volunteers’ work for the sake of providing co-financing to the action or the work programme. Without prejudice to the maximum co-financing rate specified in the basic act, in such cases, the Union grant should 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. In addition, the value of the volunteers’ work should not exceed 50 % of the in-kind contributions and any other co-financing.

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(203)To ensure legal certainty, it should be clarified that, where in-kind contributions from third parties in the form of volunteers’ work are presented as eligible costs in the estimated budget, the co-financing to which the 50% limit is applied should include all the sources of financing, that is the Union grant, in-kind contributions and other sources of financing.

🡻 2018/1046 recital 133

(204)In order to protect one of the fundamental principles of public finances, the no-profit principle should be retained in this Regulation.

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(205)To ensure legal certainty when calculating the Union contribution in the case of a profit in a grant funded by the Union budget, it should be clarified that the recovery of the percentage of the profit corresponding to the Union contribution to the eligible costs should not differentiate between actually incurred costs and simplified costs.

🡻 2018/1046 recital 134

(206)In principle, grants should be awarded following a call for proposals. Where exceptions are allowed, they should be interpreted and applied restrictively in terms of scope and duration. The exceptional possibility to award grants without a call for proposals to bodies with a de facto or de jure monopoly should only be used where the bodies concerned are the only ones capable of implementing the relevant types of activities or have been vested with such a monopoly by law or by a public authority.

🡻 2018/1046 recital 135

(207)In the framework of moving towards e-grants and e-procurement, applicants and tenderers should be asked to provide a proof of their legal status and financial viability only once within a specific period and should not be required to resubmit supporting documents in each award procedure. It is therefore necessary to align the requirements for the number of years for which documents will be requested under grant award procedures and procurement procedures.

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(208)A beneficiary of a grant can provide financial support to a third party based on the fulfilment of certain conditions, and the amount paid to any third party should not exceed EUR 60 000. That amount may only be exceeded where achieving the objectives of the action would otherwise be impossible or overly difficult. In order to allow more flexibility for implementing the budget in crisis and emergency situations, it should also be possible to exceed EUR 60 000 without case-by-case justification in the cases of humanitarian aid, emergency support operations, civil protection operations or crisis management aid.

(209)Where the implementation of an action or a work programme requires a beneficiary to carry out procurement, it should be clarified that any beneficiary may use its own purchasing practices provided they ensure best value for money, or as appropriate, lowest price, irrespective of whether the beneficiary awards a public contract and is a contracting authority within the meaning of this Regulation. The definition of “contract” should be amended accordingly.

🡻 2018/1046 recital 136

(210)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.

🡻 2018/1046 recital 137

(211)In order to allow for the more flexible implementation of prizes, the obligation under Regulation (EU, Euratom) No 966/2012 to publish contests for prizes with a unit value of EUR 1000000 or more in the statements accompanying the draft budget should be replaced by an obligation to submit prior information to the European Parliament and to the Council and to explicitly mention such prizes in the financing decision.

🡻 2018/1046 recital 138

(212)Prizes should be awarded in accordance with the principles of transparency and equal treatment. In that context, the minimum characteristics of contests should be laid down, in particular the arrangements for paying the prize to the winners after its award, and the appropriate means of publication It is also necessary to establish a clearly defined award procedure, from submission of the applications to the provision of information to applicants and notification of the winning applicant, which mirrors the grant award procedure.

🡻 2018/1046 recital 139

(213)This Regulation should lay down the principles and conditions applicable to 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.

🡻 2018/1046 recital 140

(214)In recent years the Union has increasingly used financial instruments that allow a higher leverage of the budget to be achieved but, at the same time, they generate a financial risk for the budget. Those financial instruments include not only the financial instruments covered by Regulation (EU, Euratom) No 966/2012, 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 in this Regulation, 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.

🡻 2018/1046 recital 141

(215)Financial instruments and budgetary guarantees 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 and budgetary guarantees should only be implemented if there is no risk of distortion of competition in the internal market or inconsistency with State aid rules.

🡻 2018/1046 recital 142

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

🡻 2018/1046 recital 143

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

🡻 2018/1046 recital 144

(218)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.

🡻 2018/1046 recital 145

(219)Any repayment from a financial instrument or budgetary guarantee should be used for the instrument or guarantee which produced the repayment with a view to enhancing the efficiency of that instrument or guarantee, unless otherwise specified in the basic act, and should be taken into account when proposing future appropriations to that instrument or guarantee.

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(220)It is important that the audited financial statements for financial instruments and budgetary guarantees implemented under indirect management be provided in time for the Court of Auditors to take them into account when making its observations on the provisional accounts.

🡻 2018/1046 recital 146

(221)It is appropriate to recognise the alignment of interests in pursuing policy objectives of the Union and, in particular, that the EIB and the EIF have the specific expertise to implement financial instruments and budgetary guarantees.

🡻 2018/1046 recital 147

(222)The EIB and the EIF, acting as a group, should have the possibility to transfer part of the implementation to each other, where such transfer might benefit the implementation of a given action and as further defined in the relevant agreement with the Commission.

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(223)For consistency and in order to take account of the Multiannual Financial Framework for 2021 to 2027, for financial instruments and budgetary guarantees, it is necessary to clarify certain provisions on reporting by the persons or entities entrusted with the implementation of Union funds in accordance with Article 62(1)(c), on the application of Title X in case of combination thereof with ancillary support from the budget, including grants, and on combination with funds implemented under shared management.

🡻 2018/1046 recital 148

(224)It should be clarified that, where financial instruments or budgetary guarantees are combined with ancillary forms of support from the budget, the rules on financial instruments and budgetary guarantees should apply to the whole measure. Such rules should be complemented, where applicable, by specific requirements set out in the sector-specific rules.

🡻 2018/1046 recital 149

(225)The implementation of financial instruments and budgetary guarantees financed by the budget should adhere to the Union policy on non-cooperative jurisdictions for tax purposes, and updates thereto, as laid down in relevant legal acts of the Union and in Council conclusions, in particular the Council conclusions of 8 November 2016 on the criteria for and process leading to the establishment of the EU list of non-cooperative jurisdictions for tax purposes 45 and the Annex thereto, as well as the Council conclusions of 5 December 2017 on the EU list of non-cooperative jurisdictions for tax purposes 46 and the Annexes thereto.

🡻 2018/1046 recital 150

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

🡻 2018/1046 recital 151

(227)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 a liquidity cushion that allows the budget to respond in an orderly manner to the payment obligations that might 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.

🡻 2018/1046 recital 152

(228)The contingent liabilities arising from budgetary guarantees can cover a wide range of financing and investment operations. The possibility of a 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 full respect, at any moment, for the ceiling for annual payment appropriations set out in Council Decision (EU, Euratom) 2020/20532014/335/EU, Euratom 47 .

🡻 2018/1046 recital 153

(229)That framework should also provide for management and control, including regular reporting 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 arising from the related instrument. The sustainability of the contingent liabilities should be assessed annually in the context of the budgetary procedure. An early warning mechanism should be established to avoid a shortage of provisions to cover financial liabilities.

🡻 2018/1046 recital 154

(230)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.

🡻 2018/1046 recital 155

(231)In order to ensure the proper functioning of the common provisioning fund for the post-2020 programming period, the Commission should, by 30 June 2019, submit an independent external evaluation of the advantages and disadvantages of entrusting the financial management of the assets of the common provisioning fund to the Commission, to the EIB, or to a combination of the two, taking into account the relevant technical and institutional criteria used in comparing asset management services, including the technical infrastructure, comparison of costs for the services given, institutional set-up, reporting, performance, accountability and expertise of each institution and the other asset management mandates for the budget. The evaluation should be accompanied, where appropriate, by a legislative proposal.

🡻 2018/1046 recital 156

(232)The rules applicable to provisioning and to the common provisioning fund should provide a solid internal control framework. The guidelines applicable to the management of the resources in the common provisioning fund should be established by the Commission after having consulted the accounting officer of the Commission. The authorising officers of the financial instruments, budgetary guarantees or financial assistance should actively monitor the financial liabilities under their responsibility and the financial manager of the resources of 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 of the Commission.

🡻 2018/1046 recital 157

(233)Budgetary guarantees and financial assistance should follow the same set of principles established for financial instruments. Budgetary guarantees, in particular, should be irrevocable, unconditional and on demand. They should be implemented under indirect management or, only in exceptional cases, under direct management. They should only cover financing and investment operations and their counterparts should contribute their own resources to the operations covered.

🡻 2018/1046 recital 158

(234)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. To that end, the Commission should be empowered in the relevant basic act to borrow the necessary funds 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 to any other commercial risk.

🡻 2018/1046 recital 159

(235)The provisions related to financial instruments should apply as soon as possible in order to achieve the simplification and effectiveness sought. The provisions related to the budgetary guarantees and to financial assistance, as well as to 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 Title X and, on the one hand, the proposal for the post-2020 multiannual financial framework and, on the other hand, the specific programmes related to that framework.

🡻 2018/1046 recital 160

(236)Regulation (EU, Euratom) No 1141/2014 of the European Parliament and of the Council 48 lays down 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 certain 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 Member States, and transparency.

🡻 2018/1046 recital 161

(237)Rules should be included in this Regulation on contributions from the budget to European political parties as envisaged by Regulation (EU, Euratom) No 1141/2014.

🡻 2018/1046 recital 162

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

🡻 2018/1046 recital 163

(239)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.

🡻 2018/1046 recital 164

(240)Union funding awarded to finance the operating costs of 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 third parties such as national political parties. 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.

🡻 2018/1046 recital 165

(241)The award of contributions should also be simplified and adapted to the specificities of European political parties, in particular by the absence of selection criteria, the establishment of a single full pre-financing payment as a general rule, and by the possibility to use lump sums, flat-rate financing and unit costs.

🡻 2018/1046 recital 166

(242)The contributions from the budget should be suspended, reduced or terminated if European political parties infringe Regulation (EU, Euratom) No 1141/2014.

🡻 2018/1046 recital 167

(243)Penalties that are based both on this 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 this 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.

🡻 2018/1046 recital 168

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

🡻 2018/1046 recital 169

(245)In order to reinforce the role of the European Parliament and of the Council, the procedure for establishing Union trust funds should be clarified. It is also necessary to specify the principles applicable to the contributions to Union trust funds, in particular the importance of securing contributions from other donors which justify their establishment with regard to added value. It is also necessary to clarify the responsibilities of the financial actors and of the board of the Union trust fund and to define rules ensuring a fair representation of the participating donors on the board of the Union trust fund and a mandatory vote in favour by the Commission for the use of the funds. It is also important to set out in more detail the reporting requirements applicable to Union trust funds.

⇩ new

(246)The Union should be able to participate in global initiatives, when such participation contributes to the achievement of Union policy objectives. In order to provide a suitable legal framework for Union participation in global initiatives, Union contribution to such initiatives should be included as a new budget implementation instrument. The use of this new financial vehicle would be subject to conditions and limited to cases where other instruments provided in the Financial Regulation do not enable the achievement of the respective EU policy objectives with the same scale and impact.

(247)In order to adapt to the progress on digitalisation, the lists of external experts drawn up following a call for expression of interest should be valid longer than the duration of the multiannual programme provided a rotation of the experts is ensured and new experts are able to express their interest. In addition, it is necessary to allow Union institutions to attract highly skilled external experts in order to ensure the evaluation process and the specific opinions and advice provided by the experts is of high quality. In order to successfully compete with other actors on the market, the Union institutions should be allowed to offer more competitive remuneration in exceptional and duly justified cases. Finally, in the interest of legal certainty, the rules applicable to remunerated external experts should be clarified to mirror the different steps of the award procedure.

(248)In order to provide a clear legal framework for the Union institutions to donate services, supplies or works, non-financial donations should be included as a new budget implementation instrument. This instrument should not be confused with the general framework of support provided by the Union to third countries which is of a broader nature but can include non-financial donations. In light of the COVID-19 pandemic, such an instrument should provide a stable legal basis in particular for future crisis and emergency situations and ensure that the Union institutions have the appropriate budget support tools to help Member States, other persons and entities when support is most needed. That instrument should be implemented under direct management. Related provisions, such as definitions, suspension, termination and reduction, and evaluation committee should be adjusted accordingly.

(249)Similar to the introduction of non-financial donations, the EU institutions should also be able to award prizes which are not financial. This is also important in order to allow contests among young people who do not have a bank account in their Member State, but who can easily receive their reward in a practical form. For this purpose, the definition and the provisions on ‘prizes’ should be adjusted accordingly.

🡻 2018/1046 recital 170

(250)In line with the streamlining of the existing rules and in order to avoid undue repetition, the special provisions set out in Part Two of Regulation (EU, Euratom) No 966/2012, applicable to the EAGF, to research, to external actions and to specific Union funds, should only be introduced in the relevant parts of this Regulation, provided that the provisions are still used and relevant.

🡻 2018/1046 recital 171

(251)The provisions on the presentation of accounts and accounting should be simplified and clarified. It is therefore appropriate to group together all provisions on annual accounts and other financial reporting.

⇩ new

(252)The deadlines for the observations by the Court of Auditors on the provisional accounts and for the submission of the final accounts should be adjusted to take into account the timetable of the discharge procedure.

🡻 2018/1046 recital 172

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

⇩ new

(254)In its Communication on the European Green Deal, the Commission encourages the renovation of buildings in order to reduce their emissions and make them more energy efficient. Taking into account the rapid evolution of the market for energy efficient buildings, there is an acute need for the Union institutions to incorporate the Green Deal commitments in their own building policy and to renovate their buildings. In addition, the recent development of working methods accelerated by the Covid-19 pandemic requires adapting the institutions’ office stock in order to develop a dynamic office policy. As a consequence, financing of structural renovations by loans should be allowed. The interpretation of the concept of new building projects should be broadened and, in particular, include any project concerning structural renovation.

🡻 2018/1046 recital 173

(255)In order to adapt the rules applicable to certain Union bodies, the detailed rules on procurement and the detailed conditions and the minimum ratio for the effective provisioning rate, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of the framework financial regulation for bodies set up under the TFEU and the Euratom Treaty, the model financial regulation for public-private partnership bodies, amendments to Annex I to this Regulation, the detailed conditions and methodology for the calculation of the effective provisioning rate and the amendment of the defined minimum ratio of the effective provisioning rate, which should not be set at a level lower than 85 %. 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 of 13 April 2016 on Better Law-Making. 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.

🡻 2018/1046 recital 174 (adapted)

In order to ensure that the European Union Programme for Employment and Social Innovation (EaSI), established by Regulation (EU) No 1296/2013 of the European Parliament and of the Council 49 , swiftly provides adequate resources to support changing political priorities, the indicative shares for each of the three axes and the minimum percentages for each of the thematic priorities within each axis should allow for a greater flexibility, while maintaining an ambitious deployment rate for EURES cross-border partnerships. This should improve the management of EaSI and allow for the focusing of budgetary resources on actions that produce better employment and social results.

🡻 2018/1046 recital 175 (adapted)

In order to facilitate investments in cultural and sustainable tourism infrastructure, without prejudice to the application of legal acts of the Union in the environmental field, in particular Directives 2001/42/EC 50 and 2011/92/EU 51 of the European Parliament and of the Council, as appropriate, certain restrictions as regards the scope of support under Regulation (EU) No 1301/2013 of the European Parliament and of the Council 52 for such investments should be clarified. It is therefore necessary to introduce clear restrictions as regards limiting the scale of the contribution of the ERDF to such investments from 2 August 2018.

🡻 2018/1046 recital 176 (adapted)

In order to respond to the challenges posed by increasing flows of migrants and refugees, the objectives to which the ERDF can contribute in its support of migrants and refugees should be spelled out with a view to enabling Member States to provide investments focusing on legally staying third-country nationals, including applicants for asylum and beneficiaries of international protection.

🡻 2018/1046 recital 177 (adapted)

With a view to facilitating the implementation of operations under Regulation (EU) No 1303/2013 of the European Parliament and of the Council 53 , the scope of potential beneficiaries should be enlarged. Therefore, it should be allowed for managing authorities to consider natural persons as beneficiaries and a more flexible definition of beneficiaries in the context of State aid should be set out.

🡻 2018/1046 recital 178 (adapted)

As a matter of practice, macroregional strategies are agreed upon the adoption of Council conclusions. As the case has been since the entry into force of Regulation (EU) No 1303/2013, such conclusions can, where appropriate, be endorsed by the European Council, taking into account the powers of that institution laid down in Article 15 TEU. The definition of ‘macroregional strategies’ set out in that Regulation should therefore be amended accordingly.

🡻 2018/1046 recital 179 (adapted)

With a view to ensuring sound financial management of the ERDF, the ESF, the Cohesion Fund, the EAFRD and the EMFF (‘the European Structural and Investment Funds’ – ‘ESI Funds’) which are implemented under shared management, and to clarify Member States’ obligations, the general principles set out in Article 4 of Regulation (EU) No 1303/2013 should refer to the principles set out in this Regulation concerning internal control of budget implementation and avoidance of conflicts of interests.

🡻 2018/1046 recital 180 (adapted)

With a view to 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 ESI Fund for those areas. Where appropriate, coordination with the Asylum, Migration and Integration Fund should be ensured.

🡻 2018/1046 recital 181 (adapted)

In order to ensure coherence of programming arrangements, an alignment between Partnership Agreements and the amendments of programmes approved by the Commission in the preceding calendar year should be carried out once per year.

🡻 2018/1046 recital 182 (adapted)

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.

🡻 2018/1046 recital 183 (adapted)

In order to facilitate the implementation of community-led local development and integrated territorial investments, the roles and responsibilities of local action groups as regards community-led local development strategies, and of local authorities, regional development bodies or non-governmental organisations as regards integrated territorial investments (ITIs), in relation to other programme bodies should be clarified. Designation as an intermediate body in accordance with the Fund-specific rules should only be required in cases where the relevant bodies carry out additional tasks that fall under the responsibility of the managing or certifying authority or of the paying agency.

🡻 2018/1046 recital 184 (adapted)

Managing authorities should have the possibility to implement financial instruments through a direct award of a contract to the EIB and to international financial institutions.

🡻 2018/1046 recital 185 (adapted)

Many Member States have established publicly-owned banks or institutions that operate under a public policy mandate to promote economic development activities. Such publicly-owned banks or 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 primarily focus on maximising profits. The primary role of such publicly-owned banks or institutions is to mitigate market failures where in certain regions or for certain policy areas or sectors financial services are underprovided by commercial banks. Those publicly-owned banks or 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 in order to maximise the impact of the ESI Funds in the real economy. Such an outcome would be in line with the Commission policy to facilitate the role of such publicly-owned banks or institutions as fund managers both in the implementation of ESI Funds as well as in the combination of the ESI Funds with EFSI financing, as set out in particular in the Investment Plan for Europe. Without prejudice to contracts already awarded for the implementation of financial instruments in compliance with applicable law, it is justified to clarify that it is possible for managing authorities to award contracts directly to such publicly-owned banks or institutions. Nevertheless, in order to ensure that the possibility of direct award remains consistent with the principles of the internal market, strict conditions to be fulfilled by publicly-owned banks or institutions should be laid down.

Such conditions should include that there is to be no direct private-capital participation, with the exception of non-controlling and non-blocking forms of private-capital participation in line with the requirements set out in Directive 2014/24/EU. Moreover, and strictly limited to the scope of application of Regulation (EU) No 1303/2013, a publicly-owned bank or institution should also be allowed to implement financial instruments where the private-capital participation confers no influence on decisions regarding the day-to-day management of the financial instrument supported by the ESI Funds.

🡻 2018/1046 recital 186 (adapted)

In order to maintain the possibility for the ERDF and EAFRD to contribute to joint uncapped guarantee and securitisation financial instruments in favour of SMEs, it is necessary to provide that it is possible for Member States to use the ERDF and EAFRD to contribute to such instruments during the entire programming period and to update relevant provisions relating to that option, such as those on ex ante assessments and evaluations and to introduce for the ERDF the possibility of programming at priority axis level.

🡻 2018/1046 recital 187 (adapted)

The adoption of Regulation (EU) 2015/1017 of the European Parliament and of the Council 54 , was intended to enable Member States to use the ESI Funds to contribute to the financing of eligible projects supported under the EFSI. A specific provision should be inserted in Regulation (EU) No 1303/2013 setting out the terms and conditions to allow for better interaction and complementarity that will facilitate the possibility to combine the ESI Funds with EIB financial products under the EFSI’s EU Guarantee.

🡻 2018/1046 recital 188 (adapted)

In carrying out their operations, the bodies implementing financial instruments should adhere to the Union policy on non-cooperative jurisdictions for tax purposes, and updates thereto, as laid down in relevant legal acts of the Union and in Council conclusions, in particular the Council conclusions of 8 November 2016 and the Annex thereto, as well as the Council conclusions of 5 December 2017 and the Annexes thereto.

🡻 2018/1046 recital 189 (adapted)

In order to simplify and harmonise the control and audit requirements and to improve the accountability of the financial instruments implemented by the EIB and other international financial institutions, it is necessary to amend the provisions on management and control of financial instruments to facilitate the assurance process. That amendment should not apply to financial instruments referred to in point (a) of Article 38(1) and Article 39 of Regulation (EU) No 1303/2013 which were established by a funding agreement signed before 2 August 2018. For such financial instruments, Article 40 of that Regulation as applicable at the moment of the signature of the funding agreement should continue to apply.

🡻 2018/1046 recital 190 (adapted)

In order to ensure uniform conditions for the implementation of Regulation (EU) No 1303/2013 in respect of the models for the control reports and the annual audit reports referred to in Article 40(1) of that Regulation, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council 55 .

🡻 2018/1046 recital 191 (adapted)

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 a contribution cancelled as a result of an individual irregularity to be reused for 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.

🡻 2018/1046 recital 192 (adapted)

In order to provide more time for the signature of funding agreements allowing for use of escrow accounts for payments for investments in final recipients after the end of the eligibility period for equity-based instruments, the deadline for signature of such funding agreements should be extended until 31 December 2018.

🡻 2018/1046 recital 193 (adapted)

In order to incentivise investors operating under the market economy principle to co-invest in public policy projects, the concept of differentiated treatment of investors, which allows under specific conditions for the ESI Funds to take a subordinated position to an investor operating under the market economy principle and to 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 the ESI Funds should be laid down.

🡻 2018/1046 recital 194 (adapted)

Given the protracted low-interest environment and in order not to unduly penalise bodies implementing financial instruments, it is necessary, subject to active treasury management, to enable financing of negative interest generated as a result of investments of the ESI Funds pursuant to Article 43 of Regulation (EU) No 1303/2013 from resources paid back into the financial instrument.

🡻 2018/1046 recital 195 (adapted)

In order to align reporting requirements with the new provisions on differentiated treatment of investors and to avoid duplication of certain requirements, Article 46(2) of Regulation (EU) No 1303/2013 should be amended.

🡻 2018/1046 recital 196 (adapted)

In order to facilitate the implementation of the ESI Funds, it is necessary to grant Member States the possibility to implement technical assistance actions through the direct award of a contract to the EIB, other international financial institutions and publicly-owned banks or institutions.

🡻 2018/1046 recital 197 (adapted)

In order to further harmonise the conditions for operations generating net revenue after their completion, the relevant provisions of this Regulation should apply to already selected but still ongoing operations and to operations which are still to be selected under that programming period.

🡻 2018/1046 recital 198 (adapted)

In order to give a strong incentive for the implementation of energy-efficiency measures, cost-savings that result from improved energy efficiency by an operation should not be treated as net revenue.

🡻 2018/1046 recital 199 (adapted)

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

🡻 2018/1046 recital 200 (adapted)

Due to the late adoption of Regulation (EU) No 508/2014 of the European Parliament and of the Council 56 and the fact that aid intensity levels have been established by that Regulation, it is necessary to set out certain exemptions in Regulation (EU) No 1303/2013 for the EMFF as regards revenue-generating operations. As those exemptions provide more favourable conditions for certain revenue-generating operations for which amounts or rates of support are defined in Regulation (EU) No 508/2014, it is necessary to establish a different date of application for those exemptions to ensure equal treatment of operations supported on the basis of Regulation (EU) No 1303/2013.

🡻 2018/1046 recital 201 (adapted)

In order to reduce administrative burden for beneficiaries, the threshold which exempts certain operations from the requirement to calculate and take into account revenue generated during their implementation should be raised.

🡻 2018/1046 recital 202 (adapted)

In order to facilitate synergies between the ESI Funds and other Union instruments, it should be possible for expenditure incurred to be reimbursed from different ESI Funds and Union instruments based on a proportion agreed in advance.

🡻 2018/1046 recital 203 (adapted)

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

🡻 2018/1046 recital 204 (adapted)

In order to reduce the administrative burden of the implementation of projects by beneficiaries, a new simplified cost option for financing based on conditions others than the costs of the operations should be introduced.

🡻 2018/1046 recital 205 (adapted)

In order to simplify the rules governing the use of funds and to reduce the associated administrative burden, Member States should increasingly make use of simplified cost options.

🡻 2018/1046 recital 206 (adapted)

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 final payment to the beneficiary, and that, when the investment consists in the lease purchase of a new machinery and equipment, the final payment occurs at the end of the contract period, that obligation should not apply to that type of investment.

🡻 2018/1046 recital 207 (adapted)

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 or projects forming part of an operation receiving support from the ERDF and the ESF below a certain threshold, subject to relevant transitional provisions. The managing authority, or the monitoring committee for the programmes under the European territorial cooperation goal, should be given the possibility to extend the transitional period for a period it considers appropriate if it considers that such obligation creates a disproportionate administrative burden. Such obligation should not apply to operations receiving support within the framework of State aid that does not constitute de minimis aid. For such operations, all forms of grants and repayable assistance should continue to be an option. At the same time, the use of draft budgets as an additional methodology for determining simplified costs should be introduced for all ESI Funds.

🡻 2018/1046 recital 208 (adapted)

In order to facilitate earlier and more targeted application of simplified cost options, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of supplementing Regulation (EU) No 1303/2013 with additional specific rules on the role, liabilities and responsibility of bodies implementing financial instruments, related selection criteria and products that it is possible to deliver through financial instruments, supplementing the provisions of Regulation (EU) No 1303/2013 on the standard scales of unit costs or the flat-rate financing, the fair, equitable and verifiable calculation method on which they might be established, and by specifying detailed modalities concerning 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 and their application. 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 of 13 April 2016 on Better Law-Making. 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.

🡻 2018/1046 recital 209 (adapted)

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.

🡻 2018/1046 recital 210 (adapted)

With a view to improving the effectiveness and impact of operations, implementation of operations which cover the whole territory of a Member State or operations covering different programme areas should be facilitated and possibilities for expenditure outside the Union for certain investments should be increased.

🡻 2018/1046 recital 211 (adapted)

In order to encourage Member States to make use of appraisals of major projects 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.

🡻 2018/1046 recital 212 (adapted)

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 while maintaining an appropriate focus on horizontal principles, including gender equality and sustainable development, which have generated important contributions to the effective implementation of the ESI Funds.

🡻 2018/1046 recital 213 (adapted)

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

🡻 2018/1046 recital 214 (adapted)

With a view to reducing the administrative burden and ensuring the effective use of technical assistance across the ERDF, the ESF and the Cohesion Fund and across categories of regions, flexibility for the calculation and monitoring of the respective limits applicable to technical assistance of Member States should be increased.

🡻 2018/1046 recital 215 (adapted)

With a view to streamlining 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.

🡻 2018/1046 recital 216 (adapted)

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

🡻 2018/1046 recital 217 (adapted)

In order 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.

🡻 2018/1046 recital 218 (adapted)

In order to increase proportionality of controls and to ease the administrative burden resulting from overlapping controls, especially for small beneficiaries, without undermining the principle of sound financial management, the single audit principle for the ERDF, the ESF, the Cohesion Fund and the EMFF should prevail and the thresholds below which an operation is not to be subject to more than one audit should be doubled.

🡻 2018/1046 recital 219 (adapted)

It is important to enhance the visibility of the ESI Funds and to raise awareness of their results and achievements with the public. Information and communication activities and measures to enhance visibility for the public remain essential in publicising the achievements of the ESI Funds and in demonstrating how the Union’s financial resources are invested.

🡻 2018/1046 recital 220 (adapted)

With a view to facilitating access of certain target groups to the ESF, the collection of data for certain indicators referred to in Annex I to Regulation (EU) No 1304/2013 of the European Parliament and of the Council 57 should not be required.

🡻 2018/1046 recital 221 (adapted)

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.

🡻 2018/1046 recital 222 (adapted)

In order to ensure that the entire programming period for Regulations (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013 and Regulation (EU) No 223/2014 of the European Parliament and of the Council 58 is governed by a coherent set of rules, it is necessary for some of the amendments to those Regulations to apply from 1 January 2014. By providing for a retroactive application of those amendments, legitimate expectations are taken into account.

🡻 2018/1046 recital 223 (adapted)

In order to expedite implementation of financial instruments combining support from the ESI Funds with EIB financial products under the EFSI’s EU guarantee and to provide a continuous legal basis for the signature of funding agreements allowing for use of escrow accounts for equity-based instruments, it is necessary for some of the amendments to this Regulation to apply with effect from 1 January 2018. By providing for a retroactive application of those amendments, the advanced facilitation of the financing of projects through combined support from the ESI Funds and the EFSI is ensured and a legal gap between the expiry date of certain provisions in Regulation (EU) No 1303/2013 and the date of entry into force of their extension by virtue of this Regulation is avoided.

🡻 2018/1046 recital 224 (adapted)

The simplifications and changes made to sector-specific rules should apply as soon as possible in order to facilitate an acceleration of implementation during the current programming period and should therefore apply from 2 August 2018.

🡻 2018/1046 recital 225 (adapted)

The European Globalisation Adjustment Fund (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 disproportionately impacted by major redundancies. In order to allow for continued assistance to NEETs, the amendment to Regulation (EU) No 1309/2013 of the European Parliament and of the Council 59 ensuring such continued assistance should apply with effect from 1 January 2018.

🡻 2018/1046 recital 226 (adapted)

It should be possible to establish blending facilities under Regulation (EU) No 1316/2013 of the European Parliament and of the Council 60 for one or more of the Connecting Europe Facility (CEF) sectors. Such blending facilities could finance blending operations which are actions combining non-reimbursable forms of support, such as support from Member States’ budgets, CEF grants, the ESI Funds and financial instruments from the Union budget, including combinations of CEF equity and CEF debt financial instruments and financing from the EIB Group, from national promotional banks, from development or other finance institutions, from investors and private financial support. Financing from the EIB Group should include EIB financing under the EFSI and private financial support should include both direct and indirect financial contributions as well as support received through public-private partnerships.

🡻 2018/1046 recital 227 (adapted)

The design and set up of blending facilities should be based on an ex ante assessment carried out in accordance with this Regulation and should reflect the results of lessons learned from the implementation of the CEF ‘Blending Call’ referred to in the Commission Implementing Decision of 20 January 2017 amending Commission Implementing Decision C(2014)1921 establishing a Multi-Annual Work Programme 2014-2020 for financial assistance in the field of Connecting Europe Facility (CEF) – Transport sector. CEF blending facilities should be established by the multiannual and/or annual work programmes and adopted in accordance with Articles 17 and 25 of Regulation (EU) No 1316/2013. The Commission should ensure transparent and timely reporting to the European Parliament and to the Council on the implementation of any CEF blending facility.

🡻 2018/1046 recital 228 (adapted)

The objective of CEF blending facilities should be to facilitate and streamline one application for all forms of support, including Union grants from the CEF and private-sector finance. Such blending facilities should aim to optimise the application process for project promoters by providing a single evaluation process, from the technical and financial points of view.

🡻 2018/1046 recital 229 (adapted)

CEF blending facilities should increase flexibility for submitting projects and simplify and streamline the process of project identification and financing. They should also increase the ownership and commitment of the financial institutions involved, thereby mitigating risks associated with the projects.

🡻 2018/1046 recital 230 (adapted)

CEF blending facilities should result in enhanced coordination, exchange of information and cooperation between Member States, the Commission, the EIB, national promotional banks and private investors with the aim of generating and supporting a healthy pipeline of projects pursuing CEF policy objectives.

🡻 2018/1046 recital 231 (adapted)

CEF blending facilities should aim to enhance the multiplier effect of Union spending by attracting additional resources from private investors, thus ensuring a maximum degree of private investor involvement. In addition, they should ensure that the actions supported become economically and financially viable and help to avoid a lack of investment leverage. They should contribute to the achievement of the Union objectives on meeting the targets set at the Paris Climate Conference (COP 21), job creation and cross-border connectivity. It is important that, when the CEF and the EFSI are both used for financing actions, the Court of Auditors examine whether the financial management has been sound in accordance with Article 287 TFEU and with Article 24(2) of Regulation (EU) No 1316/2013.

🡻 2018/1046 recital 232 (adapted)

In most cases, grants in the transport sector are expected to remain the primary means of supporting policy objectives of the Union. The application of CEF blending facilities should therefore not reduce the availability of such grants.

🡻 2018/1046 recital 233 (adapted)

Participation of private co-investors in the transport projects could be facilitated by mitigating the financial risk. First-loss guarantees provided by the EIB under the joint financial mechanisms supported by the budget such as blending facilities can be appropriate to that end.

🡻 2018/1046 recital 234 (adapted)

Funding from the CEF should be based on the selection and award criteria established in the multiannual and the annual work programmes pursuant to Article 17(5) of Regulation (EU) No 1316/2013 regardless of the form of funding used, or combination thereof.

🡻 2018/1046 recital 235 (adapted)

The experience gained with blending facilities should be taken into consideration in the evaluations of Regulation (EU) No 1316/2013.

🡻 2018/1046 recital 236 (adapted)

The introduction of CEF blending facilities by this Regulation should not be understood to prejudge the outcome of the negotiations on the post-2020 multiannual financial framework.

🡻 2018/1046 recital 237 (adapted)

Taking into account the very high rate of execution of the CEF in the transport sector and 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, projects on the other section of the core network and projects eligible under the horizontal priorities as listed in Annex I to Regulation (EU) No 1316/2013, it is necessary to exceptionally allow for additional flexibility in the use of the multiannual work programme allowing the amount of the financial envelope to reach up to 95 % of the financial budgetary resources referred to in Regulation (EU) No 1316/2013. It is, however, important that further support be provided in the remaining CEF implementing period to priorities covered by annual work programmes.

🡻 2018/1046 recital 238 (adapted)

Due to the different nature of the CEF telecom sector as compared to the CEF transport and CEF energy sectors, namely the smaller average size of grants and differences in the type of costs and the type of projects, unnecessary burden on beneficiaries and Member States participating in related actions should be avoided through a less burdensome certification obligation, without weakening the principle of sound financial management.

🡻 2018/1046 recital 239 (adapted)

Under Regulation (EU) No 283/2014 of the European Parliament and of the Council 61 , it is currently only possible to use grants and procurement to support actions in the area of digital service infrastructures. In order to ensure that digital service infrastructures function as efficiently as possible, other financial instruments which are currently used under the CEF, including innovative financial instruments, should also be made available to support such actions.

🡻 2018/1046 recital 240 (adapted)

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.

🡻 2018/1046 recital 241 (adapted)

With a view to further simplifying 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.

🡻 2018/1046 recital 242 (adapted)

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.

🡻 2018/1046 recital 243 (adapted)

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

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(256)Some modifications regarding the transmission to the Commission of data on recipients for the purposes of publication, and regarding the electronic recording and storage of data on recipients and the use of the single integrated IT system for data-mining and risk-scoring to access and analyse those data should apply only to programmes adopted under and financed from the post-2027 multiannual financial framework in order to ensure a smooth transition by allowing sufficient time for the necessary adaption of electronic data systems and of relevant agreements, as well as the provision of guidance and training.

(257)The European Data Protection Supervisor was consulted in accordance with Article 42 of Regulation (EU) 2018/1725 of the European Parliament and of the Council and delivered an opinion on XX/XX 20XX.

(258)This Regulation should enter into force on the day following that of its publication in the Official Journal of the European Union,

🡻 2018/1046 recital 244 (adapted)

Considering the need for the coherent application of the relevant financial rules within the financial year, it is in principle advisable that Part One of this Regulation (the Financial Regulation) starts applying at the beginning of a financial year. However, in order to ensure that important simplification provided for in this Regulation, both as regards the Financial Regulation and the amendments to sector-specific rules, benefit the recipients of Union funds as early as possible, it is appropriate to provide, exceptionally, for the application of this Regulation from its entry into force. At the same time, in order to allow additional time for adaptation to the new rules, Union institutions should continue to apply Regulation (EU, Euratom) No 966/2012 until the end of the financial year 2018 with regard to the implementation of their respective administrative appropriations.

🡻 2018/1046 recital 245 (adapted)

Some modifications regarding financial instruments, budgetary guarantees and financial assistance should only apply from the date of application of the post-2020 multiannual financial framework in order to allow sufficient time to adapt the applicable legal bases and programmes to the new rules.

🡻 2018/1046 recital 246 (adapted)

The information on the annual average of full-time equivalents and on the estimated amount of assigned revenue carried over from preceding years should be provided for the first time together with the draft budget to be presented in 2021 in order to allow sufficient time for the Commission to adapt to the new obligation,

🡻 2018/1046 (adapted)

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HAVE ADOPTED THIS REGULATION:

PART ONE

FINANCIAL REGULATION

TITLE I

SUBJECT MATTER, DEFINITIONS AND GENERAL PRINCIPLES

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 the European Atomic Energy Community (‘the budget’) and the presentation and auditing of their accounts.

Article 2

Definitions

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

(1)‘applicant’ means a natural person or an entity with or without legal personality who has submitted an application in a grant award procedure ⇨ , in a non-financial donation award procedure ⇦ or in a contest for prizes;

(2)‘application document’ means a tender, a request to participate, ⇨ an application further to a call for expression of interest, ⇦ a grant application ⇨ , an application for a non-financial donation ⇦ or an application in a contest for prizes;

(3)‘award procedure’ means a procurement procedure, a grant award procedure, a contest for prizes ⇨ , an award procedure for a non-financial donation ⇦ or a procedure for the selection of experts or persons or entities implementing the budget pursuant to point (c) of the first subparagraph of Article 62(1), point (c), first subparagraph;

(4)‘basic act’ means a legal act, other than a recommendation or an opinion, 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, and which 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) and 31(2), Article 33, and Articles 42(4) and 43(2) TEU;

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

(6)‘blending facility or platform’ means a cooperation framework established between the Commission and development or other public finance institutions with a view to combining non-repayable forms of support and/or financial instruments and/or budgetary guarantees from the budget and repayable forms of support from development or other public finance institutions, as well as from private-sector finance institutions and private-sector investors;

(7)‘budget implementation’ means the carrying out of activities relating to the management, monitoring, control and auditing of budget appropriations in accordance with the methods provided for in Article 62;

(8)‘budgetary commitment’ means the operation by which the authorising officer responsible reserves the budget appropriations necessary to cover subsequent payments to honour legal commitments;

(9)‘budgetary guarantee’ means a legal commitment of ⇨ an instrument through which ⇦ the Union to support ⌦ supports ⌫ a programme of actions by taking on the budget a ⇨ an irrevocable and unconditional ⇦ financial obligation that can be called upon should a specified event materialise during the implementation of the programme, and that remains valid for the duration of the maturity of the commitments made under the supported programme;

(10)‘building contract’ means a contract covering the purchase, exchange, long lease, usufruct, leasing, rental or hire purchase, with or without option to buy, of land, buildings or other immovable property. It covers both existing buildings and buildings before completion provided that the candidate has obtained a valid building permit for it. It does not cover buildings designed in accordance with the specifications of the contracting authority that are covered by works contracts;

(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 178174 and 182178, in order to entrust the execution of works or the provision and management of services to an economic operator (the ‘concession’), and where:

(a)the remuneration consists either solely in the right to exploit the works or services or in that right together with payment;

(b)the award of the concession contract involves 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 concerned;

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(15) ‘constitution phase’ means the period during which the global provisioning is paid into the common provisioning fund;

🡻 2018/1046 (adapted)

⇨ new

(1615) ‘contingent liability’ means a potential financial obligation that could be incurred depending on the outcome of a future event;

(1716)‘contract’ means a public contract or a concession contract ⇨ or, for Title VIII, a subcontract or purchase contract concluded by a beneficiary ⇦ ;

(1817)‘contractor’ means an economic operator with whom a public contract has been signed;

(1918)‘contribution agreement’ means an agreement concluded with persons or entities implementing Union funds pursuant to points (c)(ii) to (viii) of the first subparagraph of Article 62(1);

(2019)‘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 referred to in the first sentence;

(2120)‘counterpart’ means the party that is granted a budgetary guarantee;

(2221)‘crisis’ means:

(a)a situation of immediate or imminent danger threatening to escalate into an armed conflict or to destabilise a country or its neighbourhood;

(b)a situation caused by natural disasters, man-made crisis such as wars and other conflicts or extraordinary circumstances having comparable effects related, inter alia, to climate change, ⇨ public and animal health, food safety emergencies and global health threats such as pandemics, ⇦ environmental degradation, privation of access to energy and natural resources or extreme poverty;

(2322)‘decommitment’ means an operation whereby the authorising officer responsible cancels wholly or partly the reservation of appropriations previously made by means of a budgetary commitment;

(2423)‘dynamic purchasing system’ means a completely electronic process for making commonly used purchases of items generally available on the market;

(2524)‘economic operator’ means any natural or legal person, including a public entity, or a group of such persons, who offers to supply products, execute works or provide services or supply immovable property;

(2625)‘equity investment’ means the provision of capital to a company, invested directly or indirectly in return for total or partial ownership of that company and where the equity investor may assume some management control of the company and may share the company’s profits;

(2726)‘European office’ means an administrative structure set up by the Commission, or by the Commission with one or more other Union institutions, to perform specific cross-cutting tasks;

(2827)‘final administrative decision’ means a decision of an administrative authority having final and binding effect in accordance with the applicable law;

(2928)‘financial asset’ means any asset in the form of cash, an equity instrument of a publicly or privately held entity or a contractual right to receive cash or another financial asset from such entity;

(3029)‘financial instrument’ means a Union measure of financial support provided from the budget to address one or more specific policy objectives of the Union which may take the form of equity or quasi-equity investments, loans or guarantees, or other risk-sharing instruments, and which may, where appropriate, be combined with other forms of financial support or with funds under shared management or funds of the European Development Fund (EDF);

(3130)‘financial liability’ means a contractual obligation to deliver cash or another financial asset to another entity;

(3231)‘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;

(3332)‘global provisioning’ means the total amount of resources deemed necessary over the entire lifetime of a budgetary guarantee ⇨ or financial assistance to a third country ⇦ as a result of applying the provisioning rate referred to in Article 215211(1) to the amount of the budgetary guarantee ⇨ or financial assistance to a third country ⇦ authorised by the basic act referred to in points (b) ⇨ and (c) ⇦ of Article 214210(1);

(3433)‘grant’ means a financial contribution by way of donation. Where such a contribution is provided under direct management, it shall be governed by Title VIII;

(3534)‘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;

(3635)‘guarantee on demand’ means a guarantee that must be honoured by the guarantor upon the counterpart’s demand, notwithstanding any deficiencies in the enforceability of the underlying obligation;

(3736)‘in-kind contribution’ means non-financial resources made available free of charge by third parties to a beneficiary;

(3837)‘legal commitment’ means an act whereby the authorising officer responsible enters into or establishes an obligation which results in ⌦ a ⌫ subsequent payment or payments and the recognition of expenditure ⇨ covered by a budgetary commitment ⇦ charged to the budget, ⇨ or in an obligation to provide a non-financial donation, ⇦ and which includes specific agreements and contracts concluded under financial framework partnership agreements and framework contracts;

(3938)‘leverage effect’ means the amount of reimbursable financing provided to eligible final recipients divided by the amount of the Union contribution;

(4039)‘liquidity risk’ means the risk that a financial asset held in the common provisioning fund might not be sold during a certain period of time without incurring a significant loss;

(4140)‘loan’ means an agreement which obliges the lender to make available to the borrower an agreed amount of money for an agreed period and under which the borrower is obliged to repay that amount within the agreed period;

(4241)‘low value grant’ means a grant lower than or equal to EUR 60000;

(4342)‘Member State organisation’ means an entity established in a Member State as a public law body, or as a body governed by private law entrusted with a public service mission and provided with adequate financial guarantees from the Member State;

(4443)‘method of implementation’ means any of the methods of budget implementation referred to in Article 62, that is direct management, indirect management and shared management;

(4544)‘multi-donor action’ means any action where Union funds are pooled with at least one other donor;

⇩ new

(46) ‘multiple sourcing procurement’ means a procurement where it is intended to award multiple contracts concluded in writing in parallel between multiple economic operators and one or more contracting authorities within the meaning of Article 178(1), in order to entrust the execution of identical or quasi-identical services, supplies or works to be performed in parallel by different contractors;

🡻 2018/1046

(4745)‘multiplier effect’ means the investment by eligible final recipients divided by the amount of the Union contribution;

⇩ new

(48) ‘non-governmental organisation’ means a voluntary, independent from government, non-profit organisation, which is not a political party or a trade union;

🡻 2018/1046

⇨ new

(4946)‘output’ means the deliverables generated by the action determined in accordance with sector-specific rules;

(5047)‘participant’ means a candidate or tenderer in a procurement procedure, an applicant in a grant award procedure ⇨ or in a non-financial donation award procedure ⇦ , an expert in a procedure for selection of experts, an applicant in a contest for prizes or a person or entity participating in a procedure for implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1), point (c), first subparagraph;

⇩ new

(51) ‘presumed successful tenderer’ means any tenderer in a procurement procedure that is ranked first, subject to further checks and provision of supporting documents on exclusion and/or selection criteria in order to be proposed by the evaluation committee as a successful tenderer. Where the award procedure foresees to award the contract to several tenderers, then the presumed successful tenderer shall be deemed to refer to the best ranked tenderers equal to the number of contracts to be awarded.

🡻 2018/1046

(5248)‘prize’ means a financial contribution given as a reward following a contest. Where such a contribution is provided under direct management, it shall be governed by Title IX;

(5349)‘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;

(5450)‘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 167163;

(b)the invitation to tender;

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

(d)the draft contract;

⇩ new

(55) ‘professional conflicting interests’ means a situation in which the previous or ongoing professional activities of an economic operator affect or risk affecting its capacity to perform a contract in an independent, impartial and objective manner;

🡻 2018/1046 (adapted)

⇨ new

(5651)‘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 178174 and 182178, 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, comprising:

(a)building contracts;

(b)supply contracts;

(c)works contracts;

(d)service contracts;

(5752)‘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 and which can be structured as debt, typically unsecured and subordinated and in some cases convertible into equity, or into preferred equity;

(5853)‘recipient’ means a beneficiary, a contractor, a remunerated external expert or a person or entity receiving prizes ⇨ , non-financial donations ⇦ or funds ⇨ support from the budget ⇦ under a financial instrument ⇨ or a budgetary guarantee, ⇦ or implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1);

(5954)‘repurchase agreement’ means the sale of securities for cash with an agreement to repurchase them on a specified future date, or on demand;

(6055)‘research and technological development appropriation’ means an appropriation entered either in one of the titles of the budget relating to the policy areas linked to ‘Indirect research’ or ‘Direct research’ or in a chapter relating to research activities in another title;

(6156)‘result’ means the effects of the implementation of an action determined in accordance with sector-specific rules;

(6257)‘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;

(6358)‘service contract’ means a contract covering all intellectual and non-intellectual services other than those covered by supply contracts, works contracts and building contracts;

(6459)‘sound financial management’ means implementation of the budget in accordance with the principles of economy, efficiency and effectiveness;

(6560)‘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 Regulation (EEC, Euratom, ECSC) No 259/68;

(6661)‘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-financed by a grant;

(6762)‘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;

(6863)‘supply contract’ means a contract covering the purchase, leasing, rental or hire purchase, with or without option to buy, of products, and which may include, as an incidental matter, siting and installation operations;

(6964)‘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;

(7065)‘tenderer’ means an economic operator that has submitted a tender;

(7166)‘Union’ means the European Union, the European Atomic Energy Community, or both, as the context may require;

(7267)‘Union institution’ means the European Parliament, the European Council, the Council, the 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 or the European External Action Service (the ‘EEAS’); the European Central Bank shall not be considered to be a Union institution;

(7368)‘vendor’ means an economic operator registered in a list of vendors to be invited to submit requests to participate in or submit tenders;

(7469)‘volunteer’ means a person working on a non-compulsory basis for an organisation without being paid;

(7570)‘ ⌦ a ⌫ work’ means the outcome of building or civil engineering works taken as a whole that is sufficient in itself to fulfil an economic or technical function;

(7671)‘works contract’ means a contract covering either:

(a)the execution or both the execution and design of a work; ⌦ or ⌫

(b)the execution or both the execution and design of a work ⌦ works ⌫ related to one of the activities referred to in Annex II to Directive 2014/24/EU; or

(c)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 the provisions of this Regulation other than those set out 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 or amendments.

Article 4

Periods, dates and time limits

Unless otherwise provided in this Regulation, Council Regulation (EEC, Euratom) No 1182/71 62 shall apply to the deadlines set out in this Regulation.

Article 5

Protection of personal data

This Regulation is without prejudice to Regulations (EU) 2018/1725(EC) No 45/2001 and (EU) No 2016/679.

TITLE II

BUDGET AND BUDGETARY PRINCIPLES

Article 6

Respect for budgetary principles ⌦ and general regime of conditionality for the protection of the Union budget ⌫

1. 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 and transparency as set out in this Regulation.

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2. The establishment and implementation of the budget shall also comply with the provisions of Regulation (EU, Euratom) 2020/2092 on a general regime of conditionality for the protection of the Union budget.

🡻 2018/1046

⇨ new

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 implementation of the provisions of the TEU relating to the common foreign and security policy (CFSP), and 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 from preceding financial years;

(c)appropriations made available again in accordance with Article 15;

(d)appropriations arising from pre-financing payments which have been repaid in accordance with point (b) of Article 12(4);

(e)appropriations provided following the receipt of revenue assigned during the financial year or carried over from preceding financial years.

3.    Commitment appropriations shall cover the total cost of the legal commitments entered into during the financial year, subject to Article 115114(2).

4.    Payment appropriations shall cover payments made to honour the legal commitments entered into in the financial year or preceding financial years. ⇨ They shall also cover the provisioning of financial liabilities referred to in Article 215. ⇦

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 the first subparagraph of Article 113112(1) and in Article 113112(2).

Article 8

Specific rules on the principles of unity and budgetary accuracy

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

2.    Without prejudice to authorised expenditure arising from contingent liabilities as provided for in Article 214210(2), no expenditure may be committed or authorised in excess of the authorised appropriations.

3.    An appropriation shall be entered in the budget only if it is for an item of expenditure considered necessary.

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

CHAPTER 2

Principle of annuality

Article 9

Definition

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

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

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3. The entries in respect of the own resources referred to in point (c) of Article 2(1) of Decision (EU, Euratom) 2020/2053 may be adjusted in accordance with Regulation (EU, Euratom) No 2021/770.

4. [The entries in respect of the own resources referred to in points (e), (f) and (g) of Article 2(1) of Decision (EU, Euratom) 2020/2053 may be adjusted in accordance with Regulation (EU, Euratom) [XXX].]

🡻 2018/1046

⇨ new

53.    Commitments shall be entered in the accounts for a financial year on the basis of the legal commitments entered into ⇨ and of the provisioning of financial liabilities referred to in Article 215 made, ⇦ up to 31 December of that year. However, the global budgetary commitments referred to in Article 113112(4) shall be entered in the accounts for a financial year on the basis of the budgetary commitments up to 31 December of that year.

64.    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.

75.    By way of derogation from paragraphs 53 and 64:

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

(b)expenditure implemented under shared management with the exception of the EAGF shall be entered in the accounts for a financial year on the basis of the reimbursements made by the Commission to Member States by 31 December of that year, including the expenditure charged by 31 January of the following financial year as laid down in Articles 30 and 31.

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 definitively adopted.

2.    As of 15 October of the financial year, the following expenditure may be committed in advance against the appropriations provided for the following financial year:

(a)routine administrative expenditure, provided that such expenditure has been approved in the last budget duly adopted, and only up to a maximum of one quarter of the total corresponding appropriations decided upon by the European Parliament and by the Council for the current financial year;

(b)routine management expenditure for the EAGF, provided that the basis for such expenditure is laid down in an existing basic act, and only up to a maximum of three quarters of the total corresponding appropriations decided upon by the European Parliament and by the Council for the current financial year.

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 to 8.

2.    The following appropriations may be carried over by a decision taken pursuant to paragraph 3, but only to the following financial year:

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

(b)appropriations 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 that purpose by 31 December of that year. Such appropriations 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 insufficient;

(d)non-committed appropriations relating to the actions referred to in Article 5(2)4(1) of Regulation (EU) No 1306/2013 2021/2116 of the European Parliament and of the Council 63 .

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By way of derogation from point (d), non-committed appropriations of the agricultural reserve referred to in Article 16 of Regulation (EU) 2021/2116 shall be carried over without time limitation to finance the agricultural reserve in the following financial years. Those appropriations shall be carried over in accordance with paragraph 4.

🡻 2018/1046 (adapted)

⇨ new

With regard to point (c) of the first subparagraph, the Union institution concerned shall first use the appropriations authorised for the current financial year and shall not use the appropriations carried over until the former are exhausted.

Carry-overs of non-committed appropriations as referred to in point (d) of the first subparagraph of this paragraph, first subparagraph, point (d), shall not exceed, within a limit of 2 % of the initial appropriations voted by the European Parliament and by the Council, the amount of the adjustment of direct payments applied in accordance with Article 1726 of Regulation (EU)No 1306/2013 2021/2116 during the preceding financial year. Appropriations which are carried over shall be returned to the budget lines which cover the actions referred to in Article 5(2), point (c), of Regulation (EU) 2021/2116 point (b) of Article 4(1) of Regulation (EU) No 1306/2013.

3.    The Union institution concerned shall take its decision on carry-overs as referred to in paragraph 2 by 15 February of the following financial year. It shall inform the European Parliament and the Council by 15 March of that year 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) of the first subparagraph of paragraph 2 have been applied to each carry-over.

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

(a)commitment appropriations for the ⌦ Solidarity and ⌫ Emergency Aid Reserve and for the European Union Solidarity Fund. Such appropriations may be carried over only to the following financial year and may be ⇨ used ⇦ committed up to 31 December of that year ⇨ . The carried-over appropriations shall be used first in the following financial year ⇦ ;

(b)appropriations corresponding to internal assigned revenue. Such appropriations may be carried over only to the following financial year and may be committed up to 31 December of that year, with the exception of the internal assigned revenue from lettings and the sale of buildings and land which may be carried over until it is fully used. Commitment appropriations, as referred to in Regulation (EU) No 1303/2013, and in Regulation (EU) No 514/2014 of the European Parliament and of the Council 64  ⇨ and Regulation (EU) 2021/1060 ⇦ , which are 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)appropriations corresponding to external assigned revenue. Such appropriations shall be fully used by the time all the operations relating to the programme or action to which they are assigned have been carried out or they 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 21(2)(g) for which appropriations not committed within five years shall be cancelled;

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(d)payment appropriations resulting from payment suspensions under the EAGF. Notwithstanding paragraph 7, those appropriations may be used for the reimbursement of the suspended amounts after the lifting of the EAGF payment suspensions.

(e)commitment and payment appropriations under Regulation (EU) 2021/947, Regulation (EU) 2021/1529, Council Decision (EU) 2021/ 1764 and, Council Regulation (Euratom) 2021/948. Such appropriations may be committed and used up to 31 December of the following year. The carried-over amounts shall be used first in the following financial year;

(f)commitment and payment appropriations for the Union Civil Protection Mechanism. Such appropriations which have not been used by the end of the financial year for which they were entered in the annual budget shall be automatically carried over and may be committed and used up to 31 December of the following year. Those carried-over appropriations shall be used solely for response actions and shall be used first in the following financial year;

(g)appropriations related to the agricultural reserve in accordance with Article 16 of Regulation (EU) 2021/2116.

🡻 2018/1046 (adapted)

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5.    The treatment of external assigned revenue as referred to in point (c) of paragraph 4 of this Article resulting from the participation of European Free Trade Association (EFTA) States in certain Union programmes in accordance with point (e) of Article 21(2) shall be in line with Protocol No 32 annexed to the Agreement on the European Economic Area (EEA Agreement).

6.    In addition to the information provided for in paragraph 3, the Union institution concerned shall submit to the European Parliament and to the Council information on appropriations which were automatically carried over, including the amounts involved and the provision of this Article under which the appropriations were carried over.

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

8.    Without prejudice to paragraph 4, appropriations placed in reserve and appropriations for staff expenditure shall not be carried over. For the purposes of this Article, staff expenditure comprises remuneration and allowances for members and for staff of Union institutions who are subject to the Staff Regulations.

Article 13

Detailed provisions on cancellation and carry-over of appropriations

1.    The commitment appropriations and the non-differentiated appropriations referred to in point (a) of the first subparagraph of Article 12(2) may be carried over only if the commitments could not be made before 31 December of the financial year for reasons not attributable to the authorising officer and if the preparatory stages are sufficiently advanced to make it reasonable to expect that the commitment will be made by 31 March of the following financial year, or, in relation to building projects, by 31 December of the following financial year.

2.    The preparatory stages referred to in point (a) of the first subparagraph of Article 12(2), which shall be completed by 31 December of the financial year in order to allow a carry-over to the following financial year, are in particular:

(a)for individual budgetary commitments within the meaning of point (a) of the first subparagraph of Article 113112(1), the completion of the selection of potential contractors, beneficiaries, prize winners or delegates;

(b)for global budgetary commitments within the meaning of point (b) of the first subparagraph of Article 113112(1), the adoption of a financing decision or the closing of the consultation of the departments concerned within each Union institution on the adoption of the financing decision.

3.    Appropriations carried over in accordance with point (a) of the first subparagraph of Article 12(2) which have not been committed by 31 March of the following financial year, or by 31 December of the following financial year for amounts relating to building projects, shall be automatically cancelled.

The Commission shall inform the European Parliament and the Council of the appropriations cancelled in accordance with the first subparagraph within one month following the cancellation.

Article 14

Decommitments

1.    Where budgetary commitments are decommitted in any financial year after the year in which they were made as a result of the total or partial non-implementation of the actions for which they were earmarked, the appropriations corresponding to such decommitments shall be cancelled, unless otherwise provided in Regulations (EU) No 1303/2013, and Regulation (EU) No 514/2014 ⇨ , Regulation (EU) No 223/2014, Regulation (EU) 2021/1060 and Regulation (EU) 2021/2116 ⇦ and without prejudice to ⌦ notwithstanding ⌫ Article 15 of this Regulation.

2.    Commitment appropriations referred to in Regulations (EU) No 1303/2013, Regulation and (EU) No 514/2014 ⇨ , Regulation (EU) No 223/2014, Regulation (EU) 2021/1060 and Regulation (EU) 2021/2116 ⇦ shall be decommitted automatically in accordance with those Regulations.

3.    This Article does not apply to external assigned revenue referred to in Article 21(2).

Article 15

Making appropriations corresponding to decommitments available again

1.    The appropriations corresponding to decommitments referred to in Regulations (EU) No 1303/2013, Regulation (EU) No 223/2014, Regulation and (EU) No 514/2014 ⇨ , Regulation (EU) 2021/1060 and Regulation (EU) 2021/2116 ⇦ 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 shall 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.    In addition to the case referred to in paragraph 1 of this Article, the appropriations corresponding to decommitments shall be made available again in the event of ⇨ the decommitment of resources transferred back to the Fund from which they have been initially transferred in line with the provisions of Article 26 of Regulation (EU) 2021/1060 ⇦ .:

   (a)    the decommitment 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 from a programme dedicated to a specific financial instrument in favour of small and medium-sized enterprises (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.    Commitment appropriations corresponding to the amount of decommitments made as a result of total or partial non-implementation of 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 budgetary procedure.

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4.    Commitment appropriations corresponding to the amount of decommitments made as a result of total or partial non implementation of an action under Regulation (EU) 2021/947, Regulation (EU) 2021/1529, Decision (EU) 2021/1764 and Council Regulation (Euratom) 2021/948 shall be made available again to the benefit of the budget line of origin.

🡻 2018/1046

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Article 16

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 budget for the preceding 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 budget for 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 budget for the preceding financial year, as referred to 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 Union action and management needs so require, the Council, acting by qualified majority on a proposal from the Commission, may authorise expenditure in excess of one provisional twelfth but not exceeding a total of four provisional twelfths, 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. The Council shall without delay forward its decision on authorisation to the European Parliament.

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

(a)acting by a majority of its component members, decides to reduce the expenditure before the expiry of the 30 days, in which case the Commission shall submit a new proposal;

(b)informs the Council and the Commission that it does not wish to reduce the 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 Union action 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 for 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, shall in no circumstances be exceeded.

CHAPTER 3

Principle of equilibrium

Article 17

Definition and scope

1.    Revenue and payment appropriations shall be in balance.

2.    The Union and the Union bodies referred to in Articles 70 and 71 shall not raise loans within the framework of the budget.

Article 18

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 event of a surplus or as a payment appropriation in the event of a deficit.

2. The estimates of the revenue or payment appropriations referred to in paragraph 1 of this Article shall be entered in the budget during the budgetary procedure and in a letter of amendment submitted pursuant to Article 42 of this Regulation. The estimates shall be drawn up in accordance with Article 1 of Council Regulation (EU, Euratom) 2021/768 65 No 608/2014 66 .

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 devoted solely to that discrepancy. In such a case, the Commission shall submit the draft amending budget simultaneously to the European Parliament and to the Council within 15 days of submission of the provisional accounts.

CHAPTER 4

Principle of unit of account

Article 19

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 77, 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 EEAS, the authorising officer responsible, shall be authorised to carry out operations in other currencies.

2.    Without prejudice to specific provisions laid down in sector-specific rules, or in specific contracts, grant agreements, contribution agreements and financing agreements, conversion by the authorising officer responsible 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 authorising officer responsible shall use the one referred to in paragraph 3.

3.    For the purposes of the accounts provided for in Articles 82, 83 and 84, conversion between the euro and another currency shall be made using the monthly accounting exchange rate of the euro. That accounting exchange rate shall be established by the accounting officer of the Commission 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 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 20

Scope

Without prejudice to Article 21, total revenue shall cover total payment appropriations. Without prejudice to Article 27, all revenue and expenditure shall be entered in the budget in full without any adjustment against each other.

Article 21

Assigned revenue

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

2.    The following shall constitute external assigned revenue:

(a)specific additional financial contributions from Member States ⇨ , including voluntary contributions, ⇦ to the following types of actions and programmes: ⇨ Union programmes, instruments and activities; ⇦(i)certain supplementary research and technological development programmes;

(ii)certain external aid actions or programmes financed by the Union and managed by the Commission;

(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 ECSC Treaty and on the Research Fund for Coal and Steel, annexed to the TEU and to the TFEU.

(c)the interest on deposits and the fines provided for in Council Regulation (EC) No 1467/97 67 ;

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

(e)financial contributions to Union activities from third countries or from bodies other than those set up under the TFEU or the Euratom Treaty;

(f)internal assigned revenue referred to in paragraph 3, to the extent that it is ancillary to external assigned revenue referred to in 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 Union institutions or other Commission departments, in accordance with Article 59, 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)revenue arising from the repayment, in accordance with Article 101, of amounts wrongly paid;

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

(d)insurance payments received;

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

(f)repayments to financial instruments or budgetary guarantees pursuant to the second subparagraph of Article 213209(3);

(g)revenue arising from subsequent reimbursement of taxes pursuant to point (b) of the first subparagraph of Article 27(3).

4.    Assigned revenue shall be carried over and transferred in accordance with points (b) and (c) of Article 12(4) and with Article 32.

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

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

Article 22

Structure to accommodate assigned revenue and provision of corresponding appropriations

1.    Without prejudice to point (c) of the first subparagraph of paragraph 2 of this Article and to Article 24, the structure to accommodate assigned revenue in the budget shall comprise:

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

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

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(c)an attached annex, forming an integral part of the budget, setting out all the budget lines for which external assigned revenue is foreseen and providing information on the estimated amount of such revenue to be received.

🡻 2018/1046 (adapted)

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 Union institution, save in any of the following cases:

(a)in the case provided for in point (a) of Article 21(2) for financial contributions from Member States and where the contribution agreement is expressed in euro, commitment appropriations may be made available upon signature of the contribution agreement by the Member State;

(b)in the cases provided for in point (b) of Article 21(2) and in points (i) and (iii) of Article 21(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 21(2), the entry of the 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 the first subparagraph of this paragraph shall be implemented in accordance with Article 20.

3.    The estimates of amounts receivable referred to in points (b) and (g) of Article 21(2) shall be sent to the accounting officer for registration.

Article 23

Contributions from Member States to research programmes

1.    The contributions from Member States to the financing of certain supplementary research programmes, provided for ⌦ referred to ⌫ in Article 5 of Regulation (EU, Euratom) No 609/2014, shall be paid as follows:

(a)seven twelfths of the sum entered in the budget shall be paid by 31 January of the current financial year;

(b)the remaining five twelfths shall be paid by 15 July of the current financial year.

2.    Where the budget has not been definitively adopted before the start of a financial year, the contributions provided for in paragraph 1 shall be based on the sum entered in the budget for the preceding financial year.

3.    Any contribution or additional payment owed by Member States to the budget shall be entered in the Commission’s account or accounts within thirty calendar days of the call for funds.

4.    Payments made shall be entered in the account provided for in Regulation (EU, Euratom) No 609/2014 and shall be subject to the conditions laid down by that Regulation.

Article 24

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

1.    The budget structure to accommodate the revenue from the participation of EFTA States in certain Union programmes shall be as follows:

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

(b)in the statement of expenditure, an annex, forming an integral part of the budget, shall set out all the budget lines covering the Union activities in which EFTA States participate, and shall include information on the estimated amount of the participation of each EFTA State.

2.    Under Article 82 of the EEA Agreement, the amounts of the annual participation of EFTA States, as confirmed to the Commission by the Joint Committee of the European Economic Area in accordance with Article 1(5) of Protocol No 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.

3.    The use of the revenue arising from the financial contribution of EFTA States shall be monitored separately.

Article 25

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 50000 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. The European Parliament and the Council shall act on the matter within two months of receiving a request for such an authorisation from the Union institutions concerned. If no objection is made within that period, the Union institutions concerned shall take a final decision regarding the acceptance of the donation. The Union institutions concerned shall in their request to the European Parliament and to the Council explain the financial charges entailed by the acceptance of donations made to the Union.

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3.    Notwithstanding paragraph 2, in exceptional circumstances, the Commission may accept any in-kind donation made to the Union, irrespective of its value, where such a donation is made for the purposes of humanitarian aid, emergency support, civil protection or crisis management aid.

The Commission may accept such a donation provided that:

(a)acceptance is in accordance with the principles of sound financial management and transparency;

(b)it does not give rise to conflicts of interest;

(c)it does not harm the image of the Union;

(d)the donor is not, at the time of the acceptance, in one of the situations referred to in Articles 139(1) and 144(1) and is not registered as excluded in the database referred to in Article 145(1). The donor shall submit the declaration referred to in Article 140.

🡻 2018/1046 (adapted)

Article 26

Corporate sponsorship

1.    ‘Corporate sponsorship’ 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, which shall be published on their respective websites, Union institutions and bodies may exceptionally accept corporate sponsorship provided that:

(a)there is due regard to the principles of non-discrimination, proportionality, equal treatment and transparency at all stages of the procedure for accepting corporate sponsorship;

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

(c)it does neither generate conflict of interests nor concern exclusively social events;

(d)the event or activity is not exclusively financed through corporate sponsorship;

(e)the service in return for the corporate sponsorship is limited to the public visibility of the trademark or name of the sponsor;

(f)the sponsor is not, at the time of the sponsorship procedure, in one of the situations referred to in Articles 139136(1) and 144141(1) and is not registered as excluded in the database referred to in Article 145142(1).

3.    Where the value of the corporate sponsorship exceeds EUR 5000, the sponsor shall be listed in a public register that includes information on the type of event or activity being sponsored.

Article 27

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 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 Member States pursuant to Protocol No 7 on the privileges and immunities of the European Union, annexed to the TEU and to the TFEU, 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 the case referred to in point (b) of the first subparagraph, subsequently reimbursed taxes shall be treated as internal assigned revenue.

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

CHAPTER 6

Principle of specification

Article 28

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 Union institutions may transfer appropriations within the budget subject to the specific conditions laid down in Articles 29 to 32.

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

The limits referred to in Articles 29, 30 and 31 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 for the purposes of calculating the limits referred to in Articles 29, 30 and 31 shall be the sum of the transfers to be made on the budget line from which transfers are being made, after adjustment for earlier transfers made. The amount corresponding to the transfers which are carried out autonomously by the Commission, or by any other Union institution concerned without a decision of the European Parliament and of the Council, shall not be taken into consideration.

Proposals for transfers and all information for the European Parliament and for the Council concerning transfers made under Articles 29, 30 and 31 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 budget lines to which the appropriations are to be transferred and for those from which they are to be taken.

Article 29

Transfers by Union institutions other than the Commission

1.    Any Union 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 financial year shown on the budget line from which the transfer is made;

(b)from one chapter to another without limit.

2.    Without prejudice to paragraph 4 of this Article, three weeks before making a transfer, as referred to in paragraph 1, the Union institution shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified objections are raised within that period by either the European Parliament or the Council, the procedure laid down in Article 31 shall apply.

3.    Any Union institution other than the Commission may propose to the European Parliament and to the Council, within its own section of the budget, transfers from one title to another exceeding the limit referred to in point (a) of paragraph 1 of this Article. Those transfers shall be subject to the procedure laid down in Article 31.

4.    Any Union institution other than the Commission may, within its own section of the budget, make transfers within articles without informing the European Parliament and the Council beforehand.

Article 30

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 financial year shown on the budget line from which the transfer is made, and up to a maximum of 30 % of the appropriations for the financial year shown on the budget line to which the transfer is made;

(c)with regard to operational expenditure, transfer appropriations between chapters within the same title up to a maximum of 10 % of the appropriations for the financial year shown on the budget line from which the transfer is made;

(d)with regard to research and technological development appropriations implemented by the JRC, within the title of the budget relating to the ‘Direct research’ policy area, transfer appropriations between chapters of up to a maximum of 15 % of the appropriations on the budget line from which the transfer is made;

(e)with regard to research and technological development, transfer operational appropriations from one title to another, provided that the appropriations are used for the same purpose;

(f)with regard to operational expenditure of the funds implemented under shared management, 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 establishing the fund concerned or constitute technical assistance expenditure;

(g)transfer appropriations from the budgetary item of a budgetary guarantee to the budgetary item of another budgetary guarantee, in the exceptional cases when the provisioned resources in the common provisioning fund of the latter are insufficient to pay a guarantee call and subject to the subsequent restoring of the amount transferred in accordance with the procedure set out in Article 216212(4).

The expenditure referred to in point (b) of the first subparagraph of this paragraph shall cover, for each policy area, the items referred to in Article 47(4).

Where the Commission transfers EAGF appropriations pursuant to the first subparagraph after 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 paragraph, the Commission shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified objections are raised within that period by the European Parliament or by the Council, the procedure laid down in Article 31 shall apply.

By way of derogation from the fourth subparagraph, the Commission may, during the last two months of the financial year, autonomously transfer appropriations concerning expenditure on staff, external personnel and other agents from one title to another within the total limit of 5 % of the appropriations for that 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 transfers 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 49 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 of unused appropriations for that year still available in the titles falling under the heading of the multiannual financial framework dedicated to Union external action to the titles concerning crisis management aid and humanitarian aid operations.

Article 31

Transfer proposals submitted to the European Parliament and to the Council by Union institutions

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

2.    The Commission may submit proposals for transfers of payment appropriations to the funds implemented under shared management with the exception of the EAGF to the European Parliament and to the Council by 10 January of the following financial year. The transfer of the payment appropriations may be made from any budgetary item. In such cases, the six-week period referred to in paragraph 4 shall be reduced to three weeks.

If the transfer is not approved or only partially approved by the European Parliament and by 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 in accordance with 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. In urgent circumstances, the European Parliament and the Council shall deliberate within three weeks of receipt of the proposal.

5.    Where the Commission intends to transfer EAGF appropriations in accordance with this Article, it shall submit transfer proposals to the European Parliament and to the Council by 10 January of the following financial year. In such cases, the six-week period referred to in paragraph 4 shall be reduced to three weeks.

6.    A transfer proposal shall be approved or considered to 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)neither the European Parliament nor the Council takes a decision to amend or refuse the transfer proposal.

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

(a)the transfer represents less than 10 % of the appropriations of the budget line from which the transfer is made and does not exceed EUR 5000000;

(b)the transfer concerns only payment appropriations and the overall amount of the transfer does not exceed EUR 100000000.

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 Union institution concerned withdraws its transfer proposal.

Article 32

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.    Decisions on transfers to allow the use of the ⌦ Solidarity and ⌫ Emergency Aid Reserve ⌦ under Article 9(1), point (b), of Regulation (EU, Euratom) 2020/2093 ⌫ shall be taken by the European Parliament and by the Council on a proposal from the Commission.

For the purposes of this paragraph, the procedure set out in Article 31(3) and (4) 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 the Emergency Aid Reserve, they shall refrain from acting on that proposal.

Proposals for transfers from the ⌦ Solidarity and ⌫ Emergency Aid Reserve ⌦ for assistance under Article 9(1), point (b), of Regulation (EU, Euratom) 2020/2093 ⌫ shall be accompanied by appropriate and detailed supporting documents demonstrating:

(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 budget line to which the transfer is to be made;

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

CHAPTER 7

Principle of sound financial management and performance

Article 33

Performance and principles of economy, efficiency and effectiveness

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

(a)the principle of economy which requires that the resources used by the Union institution concerned 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 the resources employed, the activities undertaken and the achievement of objectives;

(c)the principle of effectiveness which concerns the extent to which the objectives pursued are achieved through the activities undertaken.

2.    In line with the principle of sound financial management, the use of appropriations shall focus on performance and for that 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)progress in, and problems with, the achievement of objectives shall be reported to the European Parliament and to the Council in accordance with point (h) of the first subparagraph of Article 41(3), first subparagraph, point (h), and with point (e) of Article 253247(1), point (e);.

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(d)programmes and activities should be implemented to achieve their set objectives without doing significant harm to the environmental objectives of climate change mitigation, climate change adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control and the protection and restoration of biodiversity and ecosystems, as set out in Article 9 of Regulation (EU) 2020/852 of the European Parliament and of the Council 68 .

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3.    Specific, measurable, attainable, relevant and time-bound objectives as referred to in paragraphs 1 and 2 and relevant, accepted, credible, easy and robust indicators shall be defined where relevant.

Article 34

Evaluations

1.    Programmes and activities which entail significant spending shall be subject to ex ante and retrospective evaluations, 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, the added value of Union involvement, objectives, expected effects of different options and monitoring and evaluation arrangements.

For major programmes or activities that are expected to have significant economic, environmental or social impacts, the ex ante evaluation may take the form of an impact assessment that, in addition to meeting the requirements set out in the first subparagraph, analyses the various options concerning the methods of implementation.

3.    Retrospective evaluations shall assess the performance of the programme or activity, including aspects such as effectiveness, efficiency, coherence, relevance and EU added value. Retrospective evaluations shall be based on the information generated by the monitoring arrangements and indicators established for the action concerned. They shall be undertaken at least once during the term of every multiannual financial framework and where possible in sufficient time for the findings to be taken into account in ex ante evaluations or impact assessments which support the preparation of related programmes and activities.

Article 35

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 showing the estimates in terms of payment and commitment appropriations, by an assessment of the different financing options available, and by an ex ante evaluation or impact assessment as provided for in Article 34.

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

The financial statement shall contain the financial and economic data necessary 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 commitment and payment appropriations and posts, including for external personnel, and an evaluation of their medium-term and, where possible, long-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 shall provide information on the internal control system set up, an estimate of the costs and benefits of the controls implied by such a system and an assessment of the expected level of risk of error, as well as information on existing and planned fraud prevention and protection measures.

Such assessment 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 expected level of risk of error as referred to in paragraph 3.

Article 36

Internal control of budget implementation

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

2.    For the purposes of budget implementation, internal control shall be applied at all levels of management and shall be 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 ⇨ , corruption, conflicts of interest, double funding ⇦ and ⌦ other ⌫ irregularities ⇨ , including through the electronic recording and storage of data on the recipients of Union funds including their beneficial owners, as defined in Article 3, point (6), of Directive (EU) 2015/849 , and through the use of a single integrated IT system for data-mining and risk-scoring provided by the Commission to access and analyse those data ⇦ ;

(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 elements:

(a)segregation of tasks;

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

(c)avoidance of conflict of interests;

(cd)adequate audit trails and data integrity in data systems ⇨ including electronic ones ⇦ ;

(de)procedures for monitoring effectiveness and efficiency;

(ef)procedures for follow-up of identified internal control weaknesses and exceptions;

(fg)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 ⇨ and of an anti-fraud 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 on 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 concerned, including basic acts on the elements of the internal control;

(f)the elimination of multiple controls;

(g)the improvement of the cost benefit 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.

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6.    For the purposes of point (d) of paragraph 2, the following data shall be recorded and stored electronically in an open, interoperable and machine-readable format and regularly made available in the single integrated IT system for data-mining and risk-scoring provided by the Commission:

(a)the recipient’s full legal name in the case of legal persons, the first and last name in the case of natural persons, their VAT identification number or tax identification number where available or another unique identifier at country level and the amount of funding. If a natural person, also the date of birth;

(b)the first name(s), last name(s), date of birth, and VAT identification number(s) or tax identification number(s) where available or another unique identifier at country level of beneficial owner(s) of the recipients, where the recipients are not natural persons.

7.    The single integrated IT system for data-mining and risk-scoring shall be designed to facilitate risk assessment for the purposes of selection, award, financial management, monitoring, investigation, control and audit and contribute to effective prevention, detection, correction and follow-up of fraud, corruption, conflicts of interest, double funding and other irregularities.

The use of and access to the data processed by the single integrated IT system for data-mining and risk-scoring shall comply with applicable data protection rules and shall be limited to the Commission or an executive agency as referred to in Article 69, the Member States implementing the budget pursuant to Article 62(1), first subparagraph, point (b), the Member States that receive and implement Union funds pursuant to budget implementation under Article 62(1), first subparagraph, point (a), the persons or entities implementing the budget pursuant to Article 62(1), first subparagraph, point (c), OLAF, the Court of Auditors, EPPO and other Union investigative and control bodies, within the exercise of their respective competences.

The Commission shall be the controller within the meaning of Article 3(8) of Regulation (EU) 2018/1725 and shall be responsible for the development, management and supervision of the single integrated IT system for data-mining and risk-scoring, for ensuring the security, integrity and confidentiality of data, the authentication of the users and for protecting the IT system against mismanagement and misuse.

8.    Member States that receive and implement Union funds, pursuant to budget implementation under Article 62(1), first subparagraph, point (a), shall apply paragraphs 1 to 7 of this Article.

9. For the purposes of the application of the requirements of paragraphs 2, 3 and 6 of this Article by Member States implementing the budget under Article 62(1), first subparagraph, point (b), references to recipients shall be understood as references to beneficiaries as defined in sector-specific rules.

10.    As part of its control strategy, the Commission shall, where appropriate, design and perform controls and audits that use automated IT tools and emerging technologies.

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CHAPTER 8

Principle of transparency

Article 37

Publication of accounts and 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 website of Union institutions, on the Commission’s initiative, as soon as possible and no later than four weeks after the definitive adoption of the budget.

The consolidated annual accounts shall be published in the Official Journal of the European Union and on the website of Union institutions.

Article 38

Publication of information on recipients and other information

1.    The Commission shall make available ⇨ on its website ⇦ , in an appropriate and timely manner, information on recipients of funds financed from the budget ⇨ no later than 30 June of the year following the financial year in which the funds were legally committed ⇦ , where the budget is implemented by it in accordance with point (a) of the first subparagraph of Article 62(1), first subparagraph, point (a) ⇨, by Union institutions in accordance with Article 59(1), and by the Union bodies referred to in Articles 70 and 71 ⇦ .

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Where the budget is implemented in accordance with Article 62(1), first subparagraph, points (b) and (c), and with Member States in accordance to Article 62(1), first subparagraph, point (a), the Commission shall make available on its website information on recipients no later than 30 June of the year following the financial year in which the contract or agreement setting out the conditions of support was established. Where the budget is implemented in accordance with Article 62(1), first subparagraph, point (b), references in this Article to recipients shall be understood as references to beneficiaries as defined in sector-specific rules.

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The first subparagraph of this paragraph shall also apply to other Union institutions when they implement the budget pursuant to Article 59(1).

2.    Save in the cases referred to in paragraphs 3 and 4, the following information shall be published ⇨ in an open, interoperable and machine-readable format, which allows data to be sorted, searched, extracted, compared and reused⇦ , having due regard for the requirements of confidentiality and security, in particular the protection of personal data:

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(a)whether the recipient is a natural or a legal person;

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(ba)⇨ the recipient’s full legal name in the case of a legal person and their VAT identification number or tax identification number where available or another unique identifier established at country level, ⇦ the ⌦ first and last ⌫ name of the recipient ⌦ in the case of a natural person ⌫ ;

(cb)the locality of the recipient, namely:

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

(ii)the region on NUTS 2 level when the recipient is a natural person ⇨ and is domiciled in the European Union or the country when the recipient is a natural person and is not domiciled in the European Union ⇦ ;

(dc)the amount legally committed ⇨ and, in case of a commitment with multiple recipients, the breakdown of this amount per recipient where available ⇦ ;

(ed)the nature and purpose of the measure.The information referred to in the first subparagraph of this paragraph shall only be published for prizes, grants and contracts which have been awarded as a result of contests, grant award procedures or procurement procedures, and for experts selected pursuant to Article 237(2).

3.    The information referred to in the first subparagraph of paragraph 2 shall not be published ⇨ and shall not be submitted for publication in accordance with paragraph 6 of this Article 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 195191(4), point (b);

(b)very low value contracts awarded to experts selected pursuant to Article 242237(2) as well as very low value contracts below the amount referred to in point 14.4 of Annex I;

(c)financial support provided through financial instruments ⇨ or budgetary guarantees ⇦ for an amount lower than EUR 500 000;

(d)where disclosure risks threatening the rights and freedoms of the persons or entities concerned as protected by the Charter of Fundamental Rights of the European Union or harming the commercial interests of the recipients;.

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(e) where it is not required for publication in sector-specific rules where the budget is implemented in accordance with Article 62(1), first subparagraph, point (b) .

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In the cases referred to in point (c) of the first subparagraph, the information made available 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 natural persons are concerned, the disclosure of the information referred to in the first subparagraph of paragraph 2 shall be based on relevant criteria such as the frequency or the type of the measure and the amounts involved.

4.    Persons or entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1), first subparagraph, point (c), shall publish information on recipients in accordance with their rules and procedures, to the extent that those rules are deemed equivalent following the assessment carried out by the Commission pursuant to point (e) of the first subparagraph of Article 158 ⇨ (3) and ⇦ 154(4), first subparagraph, point (e), and provided that any publication of personal data is subject to safeguards equivalent to those set out in this Article.

Bodies designated pursuant to Article 63(3) shall publish information in accordance with sector-specific rules. Those sector-specific rules may, in accordance with the relevant legal basis, derogate from paragraphs 2 and 3 of this Article, in particular for the publication of personal data, where justified on the basis of the criteria referred to in the third subparagraph of paragraph 3 of this Article, and taking into account the specificities of the sector concerned.

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Member States that receive and implement Union funds, pursuant to budget implementation under Article 62(1), first subparagraph, point (a), shall ensure ex post publication of information on their recipients, in a single website, in accordance with paragraphs 2 and 3 of this Article.

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5.    The information referred to in paragraph 1 shall be published on the websites of Union institutions, no later than 30 June of the year following the financial year in which the funds were legally committed.

The websites of Union institutions shall contain a reference to the address of the website where the information referred to in paragraph 1 can be found if it is not published directly on a dedicated website of Union institutions.

The Commission shall make available, in an appropriate and timely manner, information about a single website, including a reference to its address, where the information as provided by the ⇨ Member States, ⇦ persons, entities or bodies referred to in paragraph 4 can be found.

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6.    For the purposes of the first and second subparagraphs of paragraph 1 of this Article and without prejudice to paragraph 4 and to sector-specific rules, Union institutions implementing the budget pursuant to Article 59(1), Member States implementing the budget pursuant to Article 62(1), first subparagraph, point (b), Member States that receive and implement Union funds pursuant to budget implementation under Article 62(1), first subparagraph, point (a), persons or entities implementing the budget pursuant to Article 62(1), first subparagraph, point (c) and Union bodies referred to in Articles 70 and 71 shall transmit electronically to the Commission, in an open, interoperable and machine-readable format, at least once a year and at the latest by 31 March of the year following the financial year in which the funds were legally committed or in which the contract or agreement setting out the conditions of support was established, whichever is applicable, the data on their recipients referred to in paragraph 2 of this Article with the exception of the data referred to in the first subparagraph of paragraph 3 of this Article.

In addition, the data to be transmitted shall also include the VAT identification number or tax identification number of natural persons where available or another unique identifier established at country level with a view to improve the quality of the data transmitted without it being used for publication.

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76.    Where personal data are published, the information shall be removed two years after the end of the financial year in which the funds were legally committed. This shall also apply to personal data referring to legal persons whose official name identifies one or more natural persons.

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Where the budget is implemented in accordance with Article 62(1), first subparagraph, points (b) and (c), the personal data shall be removed two years after the end of the financial year in which the contract or agreement setting out the conditions of support was established.

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TITLE III

ESTABLISHMENT AND STRUCTURE OF THE BUDGET

CHAPTER 1

Establishment of the budget

Article 39

Estimates of revenue and expenditure

1.    Each Union 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 to 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, international cooperation, humanitarian aid and crisis response, regarding their respective responsibilities.

3.    The Commission shall draw up its own estimates, which it shall send, directly after their adoption, to the European Parliament and to the Council. In preparing its estimates, the Commission shall use the information referred to in Article 40.

Article 40

Estimated budget of the Union bodies referred to in Article 70

By 31 January each year, each Union body referred to in Article 70 shall, in accordance with the instrument establishing it, send the Commission, the European Parliament and the Council its draft single programming document containing its annual and multi-annual programming with the corresponding planning for human and financial resources.

Article 41

Draft budget

1.    The Commission shall submit a proposal containing the draft budget to the European Parliament and to 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, 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 39. It may also contain different estimates from those drawn up by Union institutions.

The draft budget shall follow the structure and presentation set out in Articles 47 to 52.

Each section of the draft budget shall be preceded by an introduction drawn up by the Union 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 the categories of expenditure covered by point 2630 of the Interinstitutional Agreement of 162 December 20202013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management 69 . Summary data shall be provided for the categories of expenditure not covered by point 2630 of that Interinstitutional Agreement.

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)a comparative table including the draft budget for other Union institutions and the original estimates of other Union institutions as sent to the Commission and, where applicable, setting out the reasons for which the draft budget contains estimates different from those drawn up by other Union institutions;

(b)any working document it considers useful in connection with the establishment plans of Union institutions, showing the latest authorised establishment plan and presenting:

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

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

(iii)the number of posts actually filled on the last day of the year preceding the year in which the draft budget is presented and the annual average of full-time equivalents actually in place for that preceding year, indicating their distribution by grade, by gender and by administrative unit;

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

(v)for each category of external personnel, 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 Union bodies referred to in Articles 70 and 71, a working document presenting the revenue and expenditure, as well as all information on staff as referred to in point (b) of this subparagraph;

(d)a working document on the planned implementation of appropriations for the financial year ⇨ , information on the implementation of the assigned revenue in the preceding year, including information on the amounts carried over to 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 ⇨ and a working document on the Commission’s building policy as referred to in Article 271(1) ⇦ ;

(f)a working document on pilot projects and preparatory actions which also contain an assessment of the results and the 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 is 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 is to contribute to;

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

(iii)progress in achieving programme objectives, as specified in Article 33;

(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 financial year;

(i)a summary statement of the schedule of payments summarising per programme and per heading payments due in subsequent financial years to meet budgetary commitments proposed in the draft budget entered into in preceding financial years.

Where public-private partnerships make use of financial instruments, the information relating to those instruments shall be included in the working document referred to in paragraph 4.

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, its duration and the added value of the Union contribution;

(b)the financial institutions involved in implementation, including any issues relating to the application of Article 159(2)155(2);

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

(d)the envisaged operations, including target volumes based on the target leverage and expected private capital to be mobilised 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 that duration exceeds three years;

(g)revenue and repayments under Article 213209(3), presented separately, including an evaluation of their use;

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

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

(j)⇨ realised losses from ⇦ 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 and the achieved leverage and multiplier effects, and also the amount of private capital mobilised;

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

The working document referred to in the first subparagraph 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.

The Commission shall explain the reasons for the duration referred to in point (f) of the first subparagraph and shall, where appropriate, provide an action plan for the reduction of the duration in the framework of the annual discharge procedure.

The working document referred to in the first subparagraph shall summarise in a clear and concise table information per financial instrument.

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

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

(b)the counterparts for the budgetary guarantee, including any issues relating to the application of Article 159(2)155(2);

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

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

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

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

(g)⇨ amount of provisioning for liabilities arising from each budgetary guarantee, an assessment of the adequacy of its provisioning rate and of the need for its replenishment ⇦ information about the financial management, the performance and the risk of the common provisioning fund at the end of the preceding calendar year;

(h)the effective provisioning rate of the common provisioning fund and, where applicable, the subsequent operations in accordance with Article 217213(4).;

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

(j)pursuant to Article 210(3), an assessment of the sustainability of the contingent liabilities borne by the budget arising from budgetary guarantees or financial assistance.

6.    Where the Commission makes use of Union trust funds for external actions, it shall attach to the draft budget a detailed working document on the activities supported by those trust funds, including:

(a)on their implementation, containing, inter alia, information on the monitoring arrangements with the entities implementing the trust funds;

(b)their management costs;

(c)the contributions from other donors than the Union;

(d)a preliminary assessment of their performance based on the conditions set out in Article 238234(3);

(e)a description on how their activities have contributed to the objectives laid down in the basic act of the instrument from which the Union contribution to the trust funds were provided.

7.    The Commission shall attach to the draft budget a list of its decisions imposing fines in the area of competition law and the amount of each fine imposed, together with information on whether the fines have become definitive or whether they are or could still become subject to an appeal before the Court of Justice of the European Union, as well as, where possible, information on when each fine is expected to become definitive.

8.    The Commission shall attach to the draft budget a working document indicating, for each budget line receiving internal or external assigned revenue:

   (a)    the estimated amount of such revenue to be received;

   (b)    the estimated amount of such revenue carried over from preceding years.

89.    The Commission shall also attach to the draft budget any further working document it considers useful for the European Parliament and for the Council to assess the budget requests.

910.    In accordance with Article 8(5) of Council Decision 2010/427/EU 70 , the Commission shall transmit to the European Parliament and to 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 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 central administration of the EEAS, together with operational expenditure, broken down by geographic area (regions, countries), thematic areas, Union delegations and missions.

1011.    The working document referred to in paragraph 10 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, compared to the preceding financial year, of posts by grade and category in the central administration of the EEAS, and in all Union delegations;

(c)show the number of posts authorised for the financial year and for the preceding financial year, as well as the number of posts occupied by diplomats seconded from Member States, and by Union officials;

(d)provide a detailed picture of all personnel in place in Union delegations at the time of presenting the draft budget, including a breakdown by geographic area, gender, individual country and mission, distinguishing between establishment plan posts, contract agents, local agents and seconded national experts, and of appropriations requested in the draft budget for such types of personnel with corresponding estimates of the number of full-time equivalents on the basis of the appropriations requested.

Article 42

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 another Union institutions in respect of its respective section, submit simultaneously to the European Parliament and to the Council one or more letters of amendment to the draft budget before the Conciliation Committee referred to in Article 314 TFEU is convened. Such letters may include a letter of amendment updating, in particular, expenditure estimates for agriculture.

Article 43

Obligations of Member States as a result of 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 that occurs after 1 January, be bound to make the payments due to the Union, as specified in Regulation (EU, Euratom) No 609/2014 ⇨ , Regulation (EU, Euratom) No 2021/770 and Regulation (EU, Euratom) [XXX] ⇦ .

Article 44

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 18;

(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.

If there are unavoidable, exceptional and unforeseen circumstances, in particular in view of the mobilisation of the European Union Solidarity Fund, 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 Union institutions other than the Commission shall be sent to the Commission.

Before presenting a draft amending budget, the Commission and the other Union institutions concerned shall examine the scope for reallocation of the relevant appropriations, with particular reference to any expected under-implementation of appropriations.

Article 43 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 or in the case of the mobilisation of the European Union Solidarity Fund for which a draft amending budget can be presented at any time of the year, submit its draft amending budgets simultaneously to the European Parliament and to the Council by 1 September of each financial year. It may attach an opinion to the requests for amending budgets from other Union institutions.

4.    Draft amending budgets shall be accompanied by statements of reasons and information on budget implementation for the preceding and current financial years available at the time of their establishment.

Article 45

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 shall 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 46

Structure of the budget

The budget shall consist of the following:

(a)a general statement of revenue and expenditure;

(b)separate sections for each Union institution, with the exception of the European Council and of the Council which shall share the same section, subdivided into statements of revenue and expenditure.

Article 47

Budget nomenclature

1.    Commission revenue and the revenue and expenditure of the other Union institutions shall be classified by the European Parliament and by 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 section of the budget relating to the Commission shall be set out on the basis of a nomenclature adopted by the European Parliament and by the Council and classified according to the purpose of the expenditure.

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, sound financial management and transparency. 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 choices on political priorities possible and enabling efficient and effective implementation.

3.    The Commission may request the addition of a token entry pro memoria on an entry without authorised appropriations. Such a request shall be approved in accordance with the procedure laid down in Article 31.

4.    When presented by purpose, administrative appropriations for individual titles shall be classified as follows:

(a)expenditure on staff authorised in the establishment plan, which shall include an amount of appropriations and a number of 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 30(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)expenditure on 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 48

Negative revenue

1.    The budget shall not contain negative revenue, except where it results from negative remuneration of deposits in total.

⇩ new

2.    By way of derogation from paragraph 1, the following shall be deducted from the revenue of the budget:

(a) negative remuneration of deposits in total;

(b) where the amounts of the fines, other penalties or sanctions under the TFEU or the Euratom Treaty referred to in Article 109(1) are cancelled or reduced by the Court of Justice of the European Union, any interest or other charge due to the parties concerned, including any negative return related to those amounts.

🡻 2018/1046

32. The own resources paid under Decision (EU, Euratom) 2020/20532014/335/EU, Euratom shall be net amounts and shall be shown as such in the summary statement of revenue in the budget.

Article 49

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 budget lines concerned.

The appropriations in that title may be used only after transfers in accordance with the procedure laid down in point (c) of the first subparagraph of Article 30(21), point (a), 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 31 of this Regulation, for all other cases.

2.    In the event of serious implementation difficulties, the Commission may, in the course of a financial year, propose 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 31.

Article 50

Negative reserve

The section of the budget relating to the Commission may include a ‘negative reserve’ limited to a maximum amount of EUR 200 000 000. 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 transfers in accordance with the procedure laid down in Articles 30 and 31.

Article 51

Emergency Aid Reserve

1.    The section of the budget relating to the Commission shall include a reserve for emergency aid for third countries.

2.    The reserve referred to in paragraph 1 shall be drawn upon before the end of the financial year by means of transfers in accordance with the procedure laid down in Articles 30 and 32.

Article 52

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 current 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 47(1), including 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 following the same structure as set out 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 Union body referred to in Article 70 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 section of the budget relating to the Commission:

–the budget lines containing the budgetary 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 provided by the Union in respect of such operations;

(iii)in a document annexed to the section of the budget relating to the Commission, as an indication, also of the corresponding risks:

–ongoing capital operations and debt management;

–the capital operations and debt management for year n;

⇩ new

–a comprehensive overview of borrowing and lending operations;

🡻 2018/1046 (adapted)

⇨ new

(e)with regard to financial instruments to be established without a basic act:

(i)budget lines corresponding to the relevant operations;

(ii)a general description of the financial instruments, including their duration and their impact on the budget;

(iii)the envisaged operations, including target volumes based on the expected multiplier and leverage effect;

(f)with regard to the funds implemented by persons or entities pursuant to point (c) of the first subparagraph of Article 62(1):

(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;

(g)the total amount of CFSP expenditure entered in a chapter, entitled ‘CFSP’, with specific articles covering CFSP expenditure and containing specific budget 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 53

Rules on the establishment plans for staff

1.    The establishment plans referred to in point (c) of Article 52(1) shall constitute an absolute limit for each Union institution or body. No appointment shall be made in excess of the limit set.

However, save in the case of grades AD 14, AD 15 and AD 16, each Union 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 Union institution or body has taken part in a benchmarking exercise with other Union institutions and bodies as initiated by the Commission’s staff screening exercise.

Three weeks before making the modifications referred to in the second subparagraph, the Union institution shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified objections are raised within this period by either the European Parliament or the Council, the Union institution shall refrain from making the modifications and the procedure laid down in Article 44 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 54

Compliance with the Mmultiannual Ffinancial Fframework and ⌦ the decision on the system of own resources of the European Union ⌫ Decision 2014/335/EU, Euratom

The budget shall comply with the Mmultiannual Ffinancial Fframework and Decision (EU, Euratom) 2020/20532014/335/EU, Euratom.

Article 55

Compliance of Union acts with the budget

Where the implementation of a Union act exceeds the appropriations available in the budget, such an act shall not be implemented in financial terms until the budget has been amended accordingly.

TITLE IV

BUDGET IMPLEMENTATION

CHAPTER 1

General provisions

Article 56

Budget implementation in accordance with the principle of sound financial management

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.

Article 57

Information on transfers of personal data for audit purposes

⇨ In award procedures, including ⇦ iIn any call made in the context of grants, ⇨ non-financial donations, ⇦ procurement or prizes implemented under direct management, potential beneficiaries, candidates, tenderers and participants shall, in accordance with Regulation (EU) 2018/1725(EC) No 45/2001 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 Court of Auditors ⇨ , to the EPPO, ⇦ or to the European Anti-Fraud Office (OLAF) and between authorising officers of the Commission, and the executive agencies referred to in Article 69 of this Regulation and the Union bodies referred to in Articles 70 and 71 of this Regulation.

Article 58

Basic act and exceptions

1.    Appropriations entered in the budget for any Union action shall only be used if a basic act has been adopted.

2.    By way of derogation from paragraph 1, and subject to the conditions set out in paragraphs 3, 4 and 5, the following appropriations 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;

(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;

(c)appropriations for preparatory measures in the field of Title V of the TEU;

(d)appropriations for one-off actions, or for 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 to the Euratom Treaty, other than its right of legislative initiative to submit proposals as referred to in point (b) of this paragraph, and under specific powers directly conferred on it by Articles 154, 156, 159 and 160 TFEU, Articles 168(2), 171(2) and 173(2) TFEU, the second paragraph of Article 175 TFEU, Article 181(2) TFEU, Article 190 TFEU and Articles 210(2) and 214(6) TFEU and Articles 70 and 77 to 85 of the Euratom Treaty;

(e)appropriations for the operation of each Union institution under its administrative autonomy.

3.    With regard to appropriations referred to in point (a) of paragraph 2, the relevant commitment appropriations may be entered in the budget for not more than two consecutive financial years. The total amount of appropriations for pilot projects shall not exceed EUR 40000000 in any financial year.

4.    With regard to appropriations referred to in point (b) of paragraph 2, 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. As a result, the amount of the appropriations committed shall not correspond to the amount of those envisaged for financing the definitive action itself.

The total amount of appropriations for new preparatory actions referred to in point (b) of paragraph 2 shall not exceed EUR 50000000 in any financial year, and the total amount of appropriations actually committed for preparatory actions shall not exceed EUR 100000000.

5.    With regard to the appropriations referred to in point (c) of paragraph 2, preparatory 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.