Revision of Financial Regulation & Its Implementing Rules Brussels, 11 June 2010

1. Revision of Financial Regulation & Its Implementing Rules Brussels, 11 June 2010

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

3. 1 INTRODUCTION

4. Introduction • DG AIDCO’s objectives: Simplification of EU rules and procedures for a more efficient implementation of EU external aid • Occasion: Triennial Review FR/IR (proposal 28 May 2010) – review of Management modes/Procurement/Grants Note that, after Lisbon Treaty - EP stronger role: ordinary legislative procedure (ex co-decision) – expected to be adopted in 2012 • In 2010, proposals for the amendment of the FR and IR to adapt them to the Lisbon Treaty & EEAS has been adopted by the Commission.

5. Triennial Review of the Financial RegulationContext • Commission proposal adopted on 28 May 2010 … but work already initiated in 2009 • DG AIDCO put forward more than 50 proposals in June 2009: Internal consultations; coordination with RELEX family DGs and consultations with external stakeholders • Active participation in an inter-service group on the Financial Regulation • DG AIDCO’S reply to the ISC (March-April 2010) was the most extensive reply and close follow-up with DG BUDG

6. Triennial Review of the Financial RegulationContext (2) • 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 (as requested by AIDCO): • Delegated cooperation • Assigned revenues & establishment of Trust Funds • Grants • Procurement

7. Triennial Review of the Financial RegulationContext (3) • The rationale of AIDCO’s proposals were: • Simplified possibility for the EU to delegate tasks to other actors (such as national agencies) = smoother implementation of the principles of Aid Effectiveness, in light of the EU and international commitments; • Facilitate role of the Commission as recipient of funds (Trust Funds, more flexible assigned revenues) – also for Aid Effectiveness reasons; • Simplification of grant & procurement procedures. Overall results – Simplification achieved, but concern of “budgetary”/audit authorities to keep control & assurance.

8. 2 DELEGATED COOPERATION

9. Management modesCurrent structure From 5 categories …. EU Budget Shared (Member States) Decentralised (Third Countries) Joint (international organisations) centralised direct Indirect

10. Management modes (2)New structure …..to 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

11. Management modes (3)New actors in indirect management More entities for indirect management (art 53 FR) • Same bodies: • Member States (sub-category ex-shared management with specific rules) • national bodies, • beneficiary countries, • bodies under art 185 (“traditional agencies”) • persons under CFSP, • EIB/EIF and • international organisations (opening for new type of IOs by Commission decision) Executive agencies are now part of “direct” management

12. Management Modes (4)New actors in indirect management (2) • New! Financial Institutions implementing Financing Instruments: • Member State is a shareholder OR • Established in a Member State with a public service mission • If use of intermediaries: (i) they must satisfy same criteria; and (ii) no located in non-cooperative jurisdictions • New! 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

13. Management Modes (5)Ex ante assessment Alignment and “mutual recognition” • Harmonization of pillars– Alignment to “4 pillars”: procurement/grants/financial instruments; accounting; internal control and audit (art 53b FR) • Who does the ex ante assessment (art 34b & 34c IR)? • RAO – can also rely on assessment of other RAO within the Commission • New! Assessment done by other donor (only for third countries) – Possibility for “mutual recognition” of assessments, if same criteria & “international standards” as benchmarks (cf. EU Operational Framework for Aid Effectiveness, Part II, Section B)

14. Management Modes (6)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

15. Management Modes (7)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.

16. Management Modes (8)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).

17. Management Modes (9)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

18. Management Modes (10)Conclusions What is new for national agencies? • Only four pillars. • New obligations: data protection, reinforced assurance. • Possibility to recognise “assessments” made by this 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.

19. 3 ASSIGNED REVENUES & TRUST FUNDS

20. 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;

21. 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

22. EU Trust Funds • Possibility to set up Trust Funds in external actions: • Crisis and post-crisis • Thematic actions • Request of the European Parliament in order to gain visibility • More flexibility than assigned revenues (decision-making and expenditure) • Placed outside the EU Budget • Board will take decisions on use of funds BUT with positive vote of the Commission

23. 4 PROCUREMENT, GRANTS & OTHER TYPES OF FINANCIAL CONTRIBUTION

24. ProcurementNew thresholds – Service contracts

25. ProcurementNew thresholds – Supply contracts

26. ProcurementNew thresholds – Work contracts

27. 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)

28. 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

29. Procurement & GrantsGuarantees on pre-financing

30. 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

31. 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

32. 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?

33. GrantsSub-granting

34. GrantsRules on pre-financing

35. 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

36. 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

37. 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)

38. Further information • On EuropeAid: http://ec.europa.eu/europeaid/index_en.htm • On the speakers: • Laurent SARAZIN Head of Unit Laurent.SARAZIN@ec.europa.eu 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