Revision of Financial Regulation & Its Implementing Rules

EuropeAid

Brussels, 16 November 2010

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SUMMARY

1. INTRODUCTION 2. DELEGATED COOPERATION 3. ASSIGNED REVENUES 4. PROCUREMENT, GRANTS OTHER TYPES OF FINANCIAL CONTRIBUTION

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INTRODUCTION

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Introduction Context

• 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: o Delegated cooperation o o o Assigned revenues & establishment of Trust Funds Grants Procurement

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DELEGATED COOPERATION

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Management modes New structure

TWO main categories

EU Budget EuropeAid Direct management Indirect management Heads of Delegation Member States (shared management) Third countries International organisations National agencies EIB-EIF / Financial institutions Public & Private Partnerships CFSP Missions Regulatory agencies

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Management modes (2) New structure (1)

More entities for indirect management

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Same bodies as before:

o Member States (sub-category - shared management) o o national public service mission bodies beneficiary countries o o o o bodies under art 185 (“traditional agencies”) persons under CFSP EIB/EIF and international organisations

… but also new type of entities: PPP, FI EuropeAid

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Management modes (3) New structure (2)

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New elements relating to existing entities

“EU Member States”: o Delegations to Member States will continue to be done o under “shared management” (it is not ICM!) In External action, it is very exceptional: • IPA: cross-border cooperation • ENPI: cross-border cooperation

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• International Organisations: o Other organisations assimilated by Commission decision o o No more limited to three cases EIB/EIF not anymore considered international organisations (ad hoc category)

Note: Executive Agencies – it is now direct management!

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Management Modes (4) New structure (3)

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New entities!

Public Private Partnerships: cooperation between public authorities and private sector for performance of public contracts or concessions: o o Established in Member States; OR Established by a Basic Act

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Financial Institution implementing “financial

instruments”: o o EU MS is a shareholder OR Established in a EU MS with a public service mission o If use of intermediaries: (i) they must satisfy same criteria; and (ii) no located in non-cooperative jurisdictions 9

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: o Audit: international standards o o Internal control: international standards Accounting: international standards o Procurement/Grants (general principles)/Financial instruments (principles of FR) •

New!

National agencies will be able to apply their procedures for grants

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Management Modes (6) Ex ante assessment (2)

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Alignment and mutual recognition

Who does the ex ante assessment ? RAO, but he/she can rely on assessment by:

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o other RAO if conclusions are relevant to the specific risks of tasks to be entrusted (nature and amounts) o

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) o Exception : EIB/EIF ex ante assessment will only be made once for all future implementation of financial instruments 11

Management Modes (7) Obligations in indirect management

New contractual obligations (art 53b FR & 34d IR) EuropeAid

• 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): o o Reasonable level of data protection, Contact point for OLAF o Additional obligations for financial instruments managed by EIB/EIF/financial institution 12

Management Modes (8) Deadlines for signature and contracts

More clarity and flexibility (art 166 FR & 34d IR) EuropeAid

• 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, concluded in D+3, except for multi-donor actions; • Conclusions: o Alignment to all cases of indirect management; o 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.

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Management Modes (9) Procedures

EuropeAid 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).

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Management Modes (10) Control issues

EuropeAid Reinforcement of assurance/control (art 53b(5) FR)

• Obligation to provide the Commission with*: o financial and narrative report and summary of results of all available audits and controls carried out concerning the action by 1 February o o 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 15

Management Modes (11) C

onclusions

What is new for national agencies?

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• 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.

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ASSIGNED REVENUES

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Assigned revenues: Transfer Agreements

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• 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; 18

Assigned revenues: Transfer Agreements (2)

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• Making available commitment appropriations: o With Member States in EURO: upon signature of Transfer Agreement for the whole amount indicated in the Agreement o With Member States in another currency: upon actual receipt of funds 19

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PROCUREMENT, GRANTS & OTHER TYPES OF FINANCIAL CONTRIBUTION

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Procurement New thresholds – Service contracts

CURRENT THRESHOLDS PROPOSED THRESHOLDS EuropeAid

> 200,000 International restricted > 300,000 International restricted 10,000 – 200, 000 0 – 10,000 FWC (where possible) / Competitive Negotiated 20,000-300,000 Single tender 2,500-20,000 0-2,500 FWC / Competitive negotiated / AMI Single tender Invoice 21

Procurement New thresholds – Supply contracts

CURRENT THRESHOLDS PROPOSED THRESHOLDS EuropeAid

> 150,000 International open > 300,000 International open 60,000-150,000 Local open 100,000-300,000 FWC / Local open 10,000-60,000 0-10,000 Competitive negotiated 100,000 -20,000 Single tender 2,500 -20,000 FWC / Competitive negotiated Single tender 0-2,500 Invoice 22

Procurement New thresholds – Work contracts

CURRENT THRESHOLDS PROPOSED THRESHOLDS EuropeAid

> 5,000,000 International open / International restricted (exceptional) > 5,000,000 300,000-5,000,000 Local open 300,000-5,000,000 International open / International restricted Local open 10,000-300,000 0-10,000 Competitive negotiated 20,000 -300,000 Single tender 0 20,000 Competitive negotiated Single tender 23

Procurement New cases for negotiated procedure

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All: Replacement of contractor

- where an new contract has to be concluded after early termination of an existing contract • Services: o 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 o the initial contract) Legal services : competitive negotiated procedure (regardless of value of contract) 24

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

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Procurement & Grants Guarantees on pre-financing

EuropeAid CURRENT RULES PROPOSED RULES

Procurement - pre-financing > 150.000

- where financial capacity is not assessed - possible waiver: public bodies Procurement AO Risk assessment - where financial capacity is not assessed Grants - pre-financing > 60.000 and > 80 % of the grant value - NGO: pre-financing > 1,000,000 or > 90% of the grant value - possible waiver: public bodies and international organizations Grants AO Risk assessment 26

Procurement & Grants Exclusion Cases

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• New cases: o New illegal activity: Money laundering ; o 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: o Professional misconduct: ALSO decisions of EIB and o international organizations Professional conduct offence: ONLY Member State authorities 27

Procurement & Grants Exclusion Cases (2)

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• Two additional exceptions to the obligation to exclude: o o 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 28

Grants Performance based grants

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• Output control vs. Input control • Tools: o Simplification of lump sums : ex ante methodology or on the basis of budget submitted by applicant o “Factual audits”: achieved?

was the output of the grant effectively 29

Grants Sub-granting

CURRENT RULES EuropeAid PROPOSED RULES

• It cannot be the primary aim of the action • Conditions for giving financial support are defined in the • contract: activities Amounts are small: total < 100,000 and each < 10,000 • The beneficiary offers adequate guarantees as regards the • recovery.

Conditions for giving financial support are defined in the contract: activities, • persons/categories, procedures Amounts are small: each < 50,000 30

Grants Rules on pre-financing

CURRENT RULES

< 250,000 250,000 – 750,000 > 750,000

EuropeAid PROPOSED RULES

Not due Deducted from final payment Interest

is not due

unless otherwise provided in agreements.

Interest shall be re-used for the corresponding programme.

Annual Recovery 31

Grants Other

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• Deadline for submission of applications: By post/courier service: deadline =

receipt by the contracting authority

and not date of dispatch • Co- financing : o more flexibility for 100% financing o Total costs vs. Eligible costs • Non profit : o Broader exception (only for external actions): generation o 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 32

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Grants Other (2)

Direct award : updated definition of “crisis situation”

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• 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: o Recurrent errors by one beneficiary proven by o controls/audit with impact on non-audited project Extension of findings to non audited projects and request reimbursement 33

New category of financial contribution: Prizes and financial instruments

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

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Further information

On EuropeAid: http://ec.europa.eu/europeaid/index_en.htm

• On the speakers:

Javier RAYA AGUADO

Head of Contractual matters section [email protected]

Dolores DOMINGUEZ PEREZ

Contractual matters section [email protected]

Unit G7: Financial and contractual matters, and legal affairs EuropeAid

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