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 8th October, 2012

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) the Former Yugoslav Republic of 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

9. 3. FLOW OF FUNDS AND DİSBURSEMENT RULES

10. Flow of Funds for TR Contribution

11. Flow of Funds for EU Contribution

12. Flow of Funds Main Account (EU) Main Account (TR) Sub-Account (EU) Sub-Account (TR) Contractor Account

13. 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.

14. 4. FINANCIAL MANAGEMENT OF CONTRACTS

15. 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)

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

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

18. Payment Types of Contracts

19. SERVİCE CONTRACTS Budget items of the fee-based service contract: • Man-day/Fees (Adam günü/Ücret) • Incidentals (AriziBütçe) • Expenditure Verification (HarcamaTeyidi)

20. Required documents for fee based service contracts payments

21. Required documents for global price service contracts payments

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

23. Templates for service contracts • Invoice and Annex I10(Invoice control checklist) • Timesheet • Progress Report • STE Approval Request • Incidental Budget Approval

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

25. Required documents for fee based service contracts payments

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

27. Templates for works contracts • Invoice and Annex I10(Invoice control checklist) • Progress Report • Provisional/ Final Acceptance

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

29. Required documents for supply contracts payments

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

31. Time Frame for payment Service and Supply; • Within 45 days of receipt of the contract signed by all parties and all relevant documents (request for payment, financial guarantee if applicable). Works; • Within 56 days of receipt of advance payment request, 77 days of receipt of interim and final payment requests.

32. The role of the End Recipient of Assistance (ERA) • 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.

33. 5. TAX ISSUES

34. 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

35. 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;

36. 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”

37. Thank you ...