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 1B Budgeting and Payment Procedures for fee-based Service Contracts

2. Contents This project is co-financed by the European Union and the Republic of Turkey A. Budgeting of Service Contracts B. Payment for Service Contracts B1. Types of Payments B2. Administrative Checks B3. Execution of a Payment B.3.1. Verifications on experts/man-days B.3.2. Eligibility Verifications on Incidentals C. Exercise

3. Types of Contracts This project is co-financed by the European Union and the Republic of Turkey

4. Technical Assistance/ Service Contracts This project is co-financed by the European Union and the Republic of Turkey • Fee- based Service Contracts Contract under which the services are performed for an all-inclusive fixed price

5. This project is co-financed by the European Union and the Republic of Turkey A. Budgeting of Service Contracts

6. This project is co-financed by the European Union and the Republic of Turkey Cost estimation for budgeting: • Budget for services: • - estimation of activities, • - mandays/ fees • - travel costs • - per diems • other incidental costs etc.

7. Steps in budgeting This project is co-financed by the European Union and the Republic of Turkey Decision on activities and time planning Draft a resource plan per activity Estimate all relevant costs per activity Adjust costs in time for wage rises, inflation etc. Provide the breakdown in eligible and non eligible costs

8. Step 1. Activity PlanningActivity implementation schedule This project is co-financed by the European Union and the Republic of Turkey

9. Step 2: Resource schedule per activity Cost per planning period • Equipment • Salaries etc. Units, cost per unit, funding source

10. Step 3: Estimate costs per activity This project is co-financed by the European Union and the Republic of Turkey • Internal staff costs: estimate the duration of work and staff costs per month/year • External experts and consultants: estimate man-days and fees • Incidentals: for travel and accommodation costs (per-diem) • Incidentals:for meetings, conferences, other events, translation, printing etc.

11. Internal Staff Costs This project is co-financed by the European Union and the Republic of Turkey • Allowed if legal basis exists • Eligibility of staff costs undisputed if employed entirely & exclusively by the project • Eligibility of staff employed in part of a project, if evidence provided (transparency; working hours, rates) • Cost of staff outside scope of their employment contract (eg. university teachers) eligible if double invoicing ruled out

12. Travel and accommodation expenses This project is co-financed by the European Union and the Republic of Turkey • Per diems different in each country • Hotel accomodation included in per-diems • Private consumption is not eligible • Public and mass transport to be used • Costs not in line with these principles explained in writing on corresponding invoices

13. This project is co-financed by the European Union and the Republic of Turkey Step 4: Increases over time • Wage increases for internal staff • Fee increases for experts, consultants • Price increases related to incidental items

14. Step 5: Breakdown cost budgeting

15. Budgeting Service Contracts 2.Incidentals 2.1. Travel Costs and per-diems of 1.1 2.2. Travel Costs and per-diems of 1.2 2.3. Travel Costs and per-diems of 1.3 2.4. Anciliary costs of trainings (training venue, food and bavarage during the training) 2.5. Study visits(travel, per-diem etc.) 2.6. Other meetings 2.7. Printing and visibility costs??? 1.Fees 1.1. Key Experts International long Term Experts Local long Term Experts 1.2. Non Key Experts International long Term Experts Local long Term Experts 1.3. Short Term Experts 3. Expenditure Verification: 0 7,5% of the total contract value

16. Things to check!!!! This project is co-financed by the European Union and the Republic of Turkey • The number of experts are reasonable • The division of experts are reasonable between key, non-key and STE • The number of man-days are reasonable and within the dates of the contract period. • Should not forget in the incidentals (if needed) • * the trainings( travel, accomodation, per-diem, rooms, venue, catering(food and bavarage), printing materials. • * study visits (travel, accomodation, per-diem etc.) • * printing costs • In eligible costs that has to be financed by the Beneficiary • * Taxes and VAT • * In kind contribution like (own rooms of Ministries etc) cannot be financed by IPA funds • If an equipment is purchased outside Turkey or EU ( from USA, also not eligible, rule of origin).

17. Exercise This project is co-financed by the European Union and the Republic of Turkey Preparing a budget for a service contract

18. This project is co-financed by the European Union and the Republic of Turkey B. Payment for Service Contracts

19. Payments to the Contractors This project is co-financed by the European Union and the Republic of Turkey • Funds in the bank sub-accounts are at the disposal of the Contracting Authority for the whole duration of the Financing Agreement without further request to the National Fund. • The Contracting Authority is only authorised to make payments from sub-accounts against signed contracts endorsed by the Commission • Payments to Contractors shall be reported to the NF by the Contracting Authority on a regular basis - with the Monthly Report

20. B.1. Types of Payments This project is co-financed by the European Union and the Republic of Turkey • Pre-financing • Further pre-financing • Interim Payment • Balance

21. Pre- financing: This project is co-financed by the European Union and the Republic of Turkey • If implementation period of the contract is 12 months or less : maximum of 40 % of the total contract amount; • If implementation period is between 12 and 24 months: maximum of 30 % of the total contract amount; • If implementation period is 24 months or more: maximum of 20 % of the total contract amount;

22. This project is co-financed by the European Union and the Republic of Turkey Required Documents for pre-financing: • Signed contract • Invoice / request for pre-financing payment • Financial guarantee (for the full amount of the pre-financing payment) if the pre-financing amount exceeds €150 000. The guarantee remains valid until it is released by the Contracting Authority, i.e. - related pre-financing has been cleared, at the very latest by the time 80% of the amount of the contract has been paid • The consultant is not obliged to ask for pre-financing

23. This project is co-financed by the European Union and the Republic of Turkey Time Frame for pre-financing payment • Within 45 days of receipt of the contract signed by all parties and all relevant documents (request for payment, financial guarantee if applicable).

24. Further pre-financing/ interim payments: This project is co-financed by the European Union and the Republic of Turkey • Generally based on 6 monthly installments • The actual amounts payable after the first pre-financing will vary. • When the cumulative amount of payments made reaches 80 % of the contract amount, the entire pre-financing must have been cleared • Once all pre-financing is cleared or if no pre-financing is requested [Special Conditions Art. 7.2] The interim invoices are paid such that the sum of payments does not exceed 90% of the maximum contract value stated in Art. 3 of the Special Conditions.

25. Required documents for further pre-financing/interim payments: This project is co-financed by the European Union and the Republic of Turkey • Invoice / request for further pre-financing payment/interim payment • A detailed list of expenses for fees and incidentals which form the financial report which shall indicate the cumulative expenditure and the balance available. • Interim Progress Report • Expenditure Verification Report by external auditors • Timesheets for the related period • Working at weekend or national holiday approvals • Subject to the approval of the interim report by end recipient and Contracting Authority in accordance with Article 27 of General Conditions

26. This project is co-financed by the European Union and the Republic of Turkey Time Frame for further pre-financing/Interim Payment • Within 45 days of receipt of the invoice, interim progress report, expenditure verification report (subject to approval), provided that appropriate substantiating documents have been provided and the expenditure is eligible

27. This project is co-financed by the European Union and the Republic of Turkey Balance Payment: • Maximum 10% of the contract value • Balance of the final value of the contract after deduction of the amounts already paid.

28. This project is co-financed by the European Union and the Republic of Turkey Required Documents for Balance Payment • Invoice/ request for the balance payment • A detailed list of expenses for fees and incidentals which form the financial report which shall indicate the cumulative expenditure and the balance available • Final Progress Report • Financial Report verified by external auditors • Expenditure Verification Report by external auditors • Timesheets for the relevant final period • Working at weekend and national holiday approvals • Subject to the approval of the final report by end recipient and Contracting Authority in accordance with Article 27 of General Conditions

29. This project is co-financed by the European Union and the Republic of Turkey Time Frame for balance payment • Within 45 days of receipt of a proper invoice, final progress report, final expenditure verification report and all other relevant documents (timesheets, etc.)

30. B.2. Administrative Checks This project is co-financed by the European Union and the Republic of Turkey • Request for payment/Invoice • Progess Reports • Financial Guarantee • Audit Firm

31. Request for Payments/ Invoices This project is co-financed by the European Union and the Republic of Turkey • An official commercial request for payment/invoice • Full name and address of the consultant • Full bank account details(bank name and address, account number, IBAN code,name of account holder • The complete contract number • The complete contract title • Invoice number • Date of issue of the invoice • The type of payment claim • The period covered by the payment claim

32. After the request of payment is received from a Consultant: This project is co-financed by the European Union and the Republic of Turkey • The invoice of the Consultant is registered in the Invoice Register upon receipt by the OS • The original invoice is also registered into the accounting system • The Invoice is checked with Invoice Identification Control Sheet(Please see Annex 1) • If approved a payment order is prepared by IPA Expert- Payment 1 • Once the payment to the contractor is done the Contracting Authority shall inform the Consultant about the payment

33. The role of the end-recipient: This project is co-financed by the European Union and the Republic of Turkey • A copy of the front page of the invoices stating “Read and Approved” signed and dated by two authorised signatures one of which is the SPO( Senior Programme Officer) is a pre-requisite for starting the payment request and execution of the payment deadline of 15 days. • (Please see Annex 2)

34. Approval of the progress report This project is co-financed by the European Union and the Republic of Turkey • The approval of the progress report is a pre- requisite to proceed with the payment • The period of the progress report should comply with the period of expenses in the request for payment/invoice. • The progress reports should be accompanied by a financial report and an expenditure verification by the audit firm

35. Financial Guarantee This project is co-financed by the European Union and the Republic of Turkey • If the pre- financing payment stated in Article 7.2 of the Special Conditions exceeds EUR 150.000, the Consultant must provide a financial guarantee for the full amount of pre- financing payment • The financial quarantee must remain valid until 80% of the amount of the contract has been paid

36. Audit Firm for the expenditure verification & eligibility of costs This project is co-financed by the European Union and the Republic of Turkey • Notification from the Consultant related to the audit firm • The audit firm has to be a member of an internationally- recognised supervisory body for statutory auditing according to Atricle 20 of the contract

37. B.3. Execution of a Payment This project is co-financed by the European Union and the Republic of Turkey

38. B.3.1. Verifications on fees/man-days This project is co-financed by the European Union and the Republic of Turkey • To execute a payment there should be reliable and sufficient evidence that: • the experts employed by the consultant have actually been working on the contract for the number of days claimed in the Consultant’s invoices • Fees are paid for services actually rendered, the time worked. The working period performed for the project by experts are calculated in working days as indicated in the Budget Breakdown (usually Annex V to the Contract).

39. Fees This project is co-financed by the European Union and the Republic of Turkey • Fee rates comprise: • the remuneration actually paid to the experts concerned per working day (e.g. sick leave, annual leave or any other absence from the office will not be paid for) • administrative costs of employing the experts such as: • relocation, expatriation and repatriation expenses • accommodation • leave • medical insurance • any other employment benefits accorded to the experts by the Consultant • the margin, covering the Consultant’s overheads, profit and backstopping facilities • The annual leave entitlement of experts must not exceed 60 calendar days (the responsibility of the consultant)

40. Fees This project is co-financed by the European Union and the Republic of Turkey • For long-term experts (LTEs) travel days from/ to country of residence (or hometown for long-term experts who reside in Turkey) or to/from base of operations are not considered working days • For short-term experts ‘‘travel days’’ from/to country of residence (or hometown for short term experts who reside in Turkey) from/to base of operations (duty station) can only be considered working days if meetings/ work take place on the same day • For missions the part of the assignment which requires the long term or short-term expert to leave his/her duty station to engage in project-related activities in another province or country is considered working days for all experts. All LTE’s and STE’s deserves fee.

41. Fees This project is co-financed by the European Union and the Republic of Turkey • Weekend days, national, official and religious holidays are not considered as working days for both LTE’s and STE’s. However, if it is required for an expert to work at weekends and/ or national holidays for the necessity of project’s implementation, prior approval in writing should be taken • For short-term experts 7 hours work deemed to be equivalent to one day worked. • No payments are made to STE’s more than the days /months allocated to the specific assignment • Home office is not eligible for payment, unless otherwise is specified in the Contract

42. STE Approvals This project is co-financed by the European Union and the Republic of Turkey • Has to be send by the Consultant to the Contracting Authority prior to the mobilisation of the STEs • The approved days on the STE approval should comply with the stated days on the timesheet • The expert should not start her/his functions before the approval of the end- receipient and/or CFCU (Please see Annex 3)

43. Timesheets It is a summary of the work done by the expert: • Under what activity • When • Where • For how long T/S is the base for invoicing = liability for Consultant • Time worked must be evidenced by time sheets for each individual expert that are to be submitted by the Consultant by time sheets for each individual expert using the standard format and countersigned by the Beneficiary(Please see Annex 4)

44. B.3.2. Eligibility Verifications on Incidentals This project is co-financed by the European Union and the Republic of Turkey • All incidental expenditure incurred in the course of the contract as required by the Terms of Reference is to be invoiced at actual cost(Please see Annex 5) • If the invoice and /or other documents are not compatible with the Turkish regulations, no payment shall be executed for the related invoice (e.g. translation and interpretation invoices etc., cash register slip is not considered as an invoice, as the name of the recipient does not appear) • If otherwise is not stated in the ToR, “visa expenses” of experts (if required) is not covered under incidentals

45. Per-diems: This project is co-financed by the European Union and the Republic of Turkey • Per-diems are based on overnight stayed outside the main project location • If the expert does not stay overnight no per-diem will be paid (only the travel expenses are be paid under incidentals if stated in the contract) • The per diem include inner-city travels so they are not eligible once more under reimbursable costs

46. Per-diems This project is co-financed by the European Union and the Republic of Turkey • Per-diems are based on overnight stayed outside the main project location • If the expert does not stay overnight no per-diem will be paid (only the travel expenses are be paid under incidentals if stated in the contract) • The per diem include inner-city travels so they are not eligible once more under reimbursable costs

47. This project is co-financed by the European Union and the Republic of Turkey Taxation • All Value Added Tax (VAT), customs and import duties cannot be paid • All VAT should be exempted from the incidental expenditure. If not, VAT amounts will be deducted from the related expenses by Contracting Authority. Therefore, no tax related amount should be invoiced.

48. This project is co-financed by the European Union and the Republic of Turkey Exchange Rates • Conversion of expenses incurred in currencies other than Euro should be based on the theInfoeuro exchange rate of the specified month, the monthly Infoeuro exchange rates published monthly by the European Commission web site. www.europa.eu.int/comm/budget/inforeuro/index.cfm?fuseaction=dsp_html_monthly_rates&lamguage=en) • Issuance date of the supporting document will be the basis for the exchange rate to be used (e.g. for a flight ticket issued in March and where the flight itself took place in April, the monthly exchange rate of March has to be used to convert into Euro)

49. This project is co-financed by the European Union and the Republic of Turkey Travel • Any long distance air travel must be by economy class while long distance train travel may be by First Class. • In order to justify the costs, if required, of international travel by airplane (or any other means of travel such as boat, train etc.) the following items are required: • the complete original used (air) (boat) (train) etc ticket • boarding passes, if applicable • the original invoice from the travel agency • Fuel, gasoline and car rental expenses for inter city transportation should be according to stated budget lines backed with relevant supporting documents

50. Physical Storage of the Documents This project is co-financed by the European Union and the Republic of Turkey • Because the relevant documentation must be kept for a 7-year period after the final payment made under the contract, all supporting documents are preferably put into sequence: • according to the different expense categories in the Budget Breakdown of the contract • chronologically by date of issue and, • consecutively numbered (1, 2, 3 etc.) • stapled or glued to a normal white sheet (DIN-A4) on one side only