Revision of Financial Regulation & Its Implementing Rules Brussels, 16 November 2010

1. Revision of Financial Regulation & Its Implementing Rules Brussels, 16 November 2010

2. SUMMARY • INTRODUCTION • DELEGATED COOPERATION • ASSIGNED REVENUES • PROCUREMENT, GRANTS OTHER TYPES OF FINANCIAL CONTRIBUTION

3. 1 INTRODUCTION

4. IntroductionContext • Wider context: preparation for the post-2013 programmes will also be under way • Calendar: Entry into force of the package: the latest by 1 June 2012. • Main areas of simplification: • Delegated cooperation • Assigned revenues & establishment of Trust Funds • Grants • Procurement

5. 2 DELEGATED COOPERATION

6. Management modes New structure TWO main categories EU Budget Direct management Indirect management Third countries International organisations National agencies EIB-EIF / Financial institutionsPublic & Private Partnerships CFSP Missions Regulatory agencies Member States (shared management) Heads of Delegation

7. Management modes (2)New structure (1) More entities for indirect management • Same bodies as before: • Member States (sub-category - shared management) • national public service mission bodies • beneficiary countries • bodies under art 185 (“traditional agencies”) • persons under CFSP • EIB/EIF and • international organisations … but also new type of entities: PPP, FI

8. Management modes (3)New structure (2) New elements relating to existing entities • “EU Member States”: • Delegations to Member States will continue to be done under “shared management” (it is not ICM!) • In External action, it is very exceptional: • IPA: cross-border cooperation • ENPI: cross-border cooperation • International Organisations: • Other organisations assimilated by Commission decision • No more limited to three cases • EIB/EIF not anymore considered international organisations (ad hoc category) Note: Executive Agencies – it is now direct management!

9. Management Modes (4)New structure (3) New entities! • Public Private Partnerships: cooperation between public authorities and private sector for performance of public contracts or concessions: • Established in Member States; OR • Established by a Basic Act • Financial Institution implementing “financial instruments”: • EU MS is a shareholder OR • Established in a EU MS with a public service mission • If use of intermediaries: (i) they must satisfy same criteria; and (ii) no located in non-cooperative jurisdictions

10. Management Modes (5)Ex ante assessment Harmonization of pillars • Limitation to 4 pillars: procurement/grants/financial instruments; accounting; internal control and audit • Clarification of standards for pillars: • Audit: international standards • Internal control: international standards • Accounting: international standards • Procurement/Grants (general principles)/Financial instruments (principles of FR) • New! National agencies will be able to apply their procedures for grants

11. Management Modes (6)Ex ante assessment (2) Alignment and mutual recognition • Who does the ex ante assessment? RAO, but he/she can rely on assessment by: • other RAO if conclusions are relevant to the specific risks of tasks to be entrusted (nature and amounts) • New!Other donor (only for third countries) if same criteria and standards as benchmarks (cf. EU Operational Framework for Aid Effectiveness, Part II, Section B) • Exception: EIB/EIF ex ante assessment will only be made once for all future implementation of financial instruments

12. Management Modes (7)Obligations in indirect management New contractual obligations (art 53b FR & 34d IR) • Harmonization • New FR obligations but already specified in the existing models (publication of beneficiaries, provisions on irregularities and fraud, suspension, termination) • New obligations (which need amendment of existing models): • Reasonable level of data protection, • Contact point for OLAF • Additional obligations for financial instruments managed by EIB/EIF/financial institution

13. Management Modes (8)Deadlines for signature and contracts More clarity and flexibility (art 166 FR & 34d IR) • All agreements for indirect management concluded between the EU and delegatees by 31 December N+1; • Contracts concluded by the delegatees to implement the action, concludedin D+3, except for multi-donor actions; • Conclusions: • Alignment to all cases of indirect management; • More flexibility for agreements with National Agencies: • Under current rules if there is no FA, contracts should be signed in N+1; • More flexibility for multi-donor actions.

14. Management Modes (9)Procedures More consistency and simplification (Art 43b IR) • Procurement: “international standards” specified (principles of transparency, non discrimination, competition) – reference to the EU Directives • Grants: new for EU budget!procedures can also be used by national agencies if compliant with the principles mentioned (non-retroactivity, co-financing, etc).

15. Management Modes (10)Control issues Reinforcement of assurance/control (art 53b(5) FR) • Obligation to provide the Commission with*: • financial and narrative report and summary of results of all available audits and controls carried out concerning the action by 1 February • a management declaration of assurance by 1 February* • an audit opinion on the DAS by 15 March* • Clearance of accounts procedures applicable to all indirect management entities (art 34cb IR) * Flexibility to be negotiated with IO and third countries

16. Management Modes (11)Conclusions What is new for national agencies? • Only four pillars. • New obligations: data protection, reinforced assurance. • Possibility to recognise “assessments” made by national agencies of procedures of beneficiary countries. • More flexibility for contractualisation period (D+3 or more in cases of multi-donor actions). • Possibility to use its own grant procedures.

17. 3 ASSIGNED REVENUES

18. Assigned revenues: Transfer Agreements • More potential donors: legal entities (i.e. private foundations) and natural persons; • No requirement of authorization by Basic Act: new possibility for actions without Basic Act (i.e. joint evaluations); • Flexibility for the priority rule: if an action is not completed the funds from donors can be reimbursed; • Carry over provision (for both operational and administrative expenditure) for the whole duration of the action;

19. Assigned revenues: Transfer Agreements (2) • Making available commitment appropriations: • With Member States in EURO: upon signature of Transfer Agreement for the whole amount indicated in the Agreement • With Member States in another currency: upon actual receipt of funds

20. 4 PROCUREMENT, GRANTS & OTHER TYPES OF FINANCIAL CONTRIBUTION

21. ProcurementNew thresholds – Service contracts

22. ProcurementNew thresholds – Supply contracts

23. ProcurementNew thresholds – Work contracts

24. ProcurementNew cases for negotiated procedure • All: Replacement of contractor- where an new contract has to be concluded after early termination of an existing contract • Services: • Extension of services already started: The extension of the contract not limited to a single one (value and duration shall not exceed the value and the duration of the initial contract) • Legal services: competitive negotiated procedure (regardless of value of contract)

25. Procurement Other • Eligibility rules for participation in procurement procedures without Basic Act: possibility of third country nationals • Quality standards: no limitation to European standards • Avoid overregulation: rules mandated by IR would be transferred to PRAG/Instruction Notes

26. Procurement & GrantsGuarantees on pre-financing

27. Procurement & GrantsExclusion Cases • New cases: • New illegal activity: Money laundering; • Persons with powers of representation, decision making or control over tenderers/candidates/applicants: illegal activities and professional conduct offence • On the basis of decisions taken by: • Professional misconduct: ALSO decisions of EIB and international organizations • Professional conduct offence: ONLY Member State authorities

28. Procurement & GrantsExclusion Cases (2) • Two additional exceptions to the obligation to exclude: • Candidates/tenderers/applicants that have taken adequate measures against persons having powers of representation • Captive situations (monopoly) in order to ensure continuity of service: In case of bankruptcy and analogous situations; grave professional misconduct and non compliance with social obligations

29. GrantsPerformance based grants • Output control vs. Input control • Tools: • Simplification of lump sums: ex ante methodology or on the basis of budget submitted by applicant • “Factual audits”: was the output of the grant effectively achieved?

30. GrantsSub-granting

31. GrantsRules on pre-financing

32. GrantsOther • Deadline for submission of applications: By post/courier service: deadline = receipt by the contracting authority and not date of dispatch • Co- financing: • more flexibility for 100% financing • Total costs vs. Eligible costs • Non profit: • Broader exception (only for external actions): generation of income was provided in the agreement and where it is reinvested to ensure the sustainability of the action • Profit is recovered on a pro rata basis

33. GrantsOther (2) • Direct award: updated definition of “crisis situation” • Operating grants: clarification of bodies pursuing aims of general European interest: not only European bodies • Low value grants > 50,000 EUR (eligibility check) • No obligation to have selection procedure with Evaluation Committee in case of direct award of grants • Extrapolation of errors: • Recurrent errors by one beneficiary proven by controls/audit with impact on non-audited project • Extension of findings to non audited projects and request reimbursement

34. New category of financial contribution:Prizes and financial instruments • Prizes are not anymore regarded as grants: new specific rules • Financial instruments: • Loans, guarantees, equity/quasi-equity investments or participations, other risk-bearing instruments, possibly combined with grants • Principles shall also apply to directly related elements (i.e. technical assistance) • Implemented: directly or indirectly (EIB, EIF, any other financial institution)

35. Further information • On EuropeAid: http://ec.europa.eu/europeaid/index_en.htm • On the speakers: Javier RAYA AGUADO Head of Contractual matters section Javier.RAYA-AGUADO@ec.europa.eu Dolores DOMINGUEZ PEREZ Contractual matters section Dolores.DOMINGUEZ-PEREZ@ec.europa.eu Unit G7: Financial and contractual matters, and legal affairs