This project is co-financed by the European Union and the Republic of Turkey

1. Bölgesel Rekabet Edebilirlik Operasyonel Programı’nın Uygulanması için Kurumsal Kapasitenin Oluşturulmasına Yönelik Teknik Yardım Technical Assistance on Institutional Building for the Implementation of RCOP in Turkey This project is co-financed by the European Union and the Republic of Turkey Financial Management 17th April, 2013

2. CONTENT 1. Financial Management Actors 2. General Overview to IPA Funds 3. Flow of Funds and Disbursement Rules 4. Financial Management of Contracts 5. Tax Issues

3. 1. FINANCIAL MANAGEMENT ACTORS

4. Institutions/bodies for Financial Management •European Commission (EC) • National Authorizing Officer (NAO) • National Fund (NF) • Operating Structure/Contracting Authority (OS/CA) • End Recipient of Assistance (ERA) • Controctors/Consultant

5. 2. GENERAL OVERVIEW TO IPA FUNDS

6. Candidate Status Croatia (Hırvatistan - 1 Temmuz 2013’de tam üye) Macedonia (Makedonya) Turkey (Türkiye) Iceland (İzlanda) Montenegro (Karadağ) Potential candidate status Albania, Bosnia& Herzegovina (Arnavutluk, Bosna Hersek) Serbia, Kosovo (Sırbistan, Kosova) Budget Allocation (IPA) 2007-2013 Instrument for Pre- Accession Assistance

7. Budget Allocation (IPA) 2007-2013 Instrument for Pre- Accession Assistance

8. Yearly Budget Allocation for RCOP Advance payment %30 64.275.000 EUR

9. 3. FLOW OF FUNDS AND DISBURSEMENT RULES

10. Flow of Funds for TR Contribution

11. Flow of Funds for EU Contribution

12. Disbursement Rules of IPA Funds n+3 Rules; by 31 December of the third year following year n being the one in which the budget commitment should be used for the purpose of pre-financing or interim payments. Pre-financing (for OP): 30% of the total IPA contribution for the three most recent years. m+15 rules; The total amount paid as pre-financingshall be reimbursed to the Commission with all interest accrued if no payment application for the programme concerned is sent within 15 months of the date on which the Commission pays the first pre-financing amount.

13. 4. FINANCIAL MANAGEMENT OF CONTRACTS

14. Responsibilities of the Finance Division • Expenditure Forecast, • Management of flow of funds (request for funds, allocation of national contribution, transfer of national contribution to the NF ) • Payments (check and keep of letter of guarantee, preparation of payment dossier, read&approved by ERA’s, invoice check, execution of payment, transfer of payment order, releasing of guarantee,) • Reports to the NF (yearly expenditure forecast, monthly financial report, statement of expenditure, financial reports) • Tax issues (VAT exemption form, tax ruling, tables for MoF)

15. Responsibilities of the Finance Division • Accounting (data entries, approvals of data entry, reconciliation, back-up), • Participation to kick off meeting,provisional and final acceptances visits of supply and works contracts, • Participation to Monthly Management Meetings of service and works contracts.

16. Types of Contracts Service:Procurement of consultancy,research, know-how and training Supplies: Procurement of equipment, materials Works:infrastructure, superstructure and other engineering works

17. Payment Types of Contracts

18. SERVICE CONTRACTS Budget items of the fee-based service contract: • Man-day/Fees (Adam günü/Ücret) • Incidentals (AriziBütçe) • LumpSums (Götürü Bedel Aktiviteler) (ifany) • Expenditure Verification (HarcamaTeyidi)

19. Required documents for fee based service contracts payments

20. Required documents for global price service contracts payments

21. Documents to be Approved for Service ContractsAll the approvals should be received from the relevant authority prior to the implementation

22. WORKS CONTRACTS Budget items of works contracts: • Permanent works (construction, electrical, mechanical works) • Contingency (%10 of the permanent works)

23. Required documents for works contracts payments

24. Documents to be Approved for Works ContractsAll the approvals should be received from therelevant authority prior to the implementation

25. SUPPLY CONTRACTS Budget items of works contracts: • Equipment

26. Required documents for supply contracts payments

27. Documents to be Approved for Supply ContractsAll the approvals should be received from the relevant authority prior to the implementation

28. The role of the End Recipient of Assistance (ERA) for invoice approval • Approving the copy of invoice/s “Read and Approved” in technical terms by filling the checklist (Annex 4) which will be sent to ERA with the copy of the invoice stamped ‘Read and Approved’ by the Contracting Authority. ERA should approve the invoice within 5 calendar days following the receipt of invoice by the ERA. If “Read and Approved” is not received from the ERA in 5 calendar days following the receipt of invoice by the ERA and in the absence of any comments within that period they will be considered to be tacitly approved.

29. 5. TAX ISSUES

30. TAX REGULATIONS • To approve documents according to the IPA General Tax Exemption Communique for IPA Framework Agreement No.1 introduced by the Ministry of Finance and its annexes for Attachments: 1/a, 7, 8,10,. • Please see the “Tax Exemption Guide for EU Financial Aid” published by Revenue Administration under the below link: http://www.gib.gov.tr/fileadmin/beyannamerehberi/abmaliyardim_rehberi.pdf

31. Documents to be Approved by ERA Responsibilities and duties of the ERA related to financial implementation and tax regulations are as follows; • To approve the Contracts between the Contractor and supplier/service provider for the VAT exemption for the purchases above 2.000 TL and list (Ek-7)of the contracts/purchases above 2000 TL in three monthly basis; • To approve the list (Ek-8) for the purchases of contractors below 2.000 TL in three monthly basis;

32. Documents to be Approved by ERA • To approve (Ek-1/a) “List of goodsto be imported (İthal Edilecek Mallar Listesi)” preparedbyContractor, • Toapprovethelist(Ek-10) of goodspurchasedwith “SpecialCompsumptionTax”

33. Thank you ...