Revision of Financial Regulation & Its Implementing Rules

EuropeAid

Brussels, 11 June 2010

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SUMMARY

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

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INTRODUCTION

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Introduction EuropeAid

• 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.

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Triennial Review of the Financial Regulation Context EuropeAid

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

Triennial Review of the Financial Regulation Context (2) EuropeAid

• 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): o Delegated cooperation o o o Assigned revenues & establishment of Trust Funds Grants Procurement 6

Triennial Review of the Financial Regulation Context (3)

• The rationale of AIDCO’s proposals were:

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o 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; o Facilitate role of the Commission as recipient of funds (Trust Funds, more flexible assigned revenues) – also for Aid Effectiveness reasons; o Simplification of grant & procurement procedures.

Overall results – Simplification achieved, but concern of “budgetary”/audit authorities to keep control & assurance.

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DELEGATED COOPERATION

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Management modes Current structure

From 5 categories ….

centralised

EU Budget

Shared (Member States) Decentralised (Third Countries)

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Joint (international organisations) direct Indirect 9

Management modes (2) New structure

…..to 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 (3) New actors in indirect management More entities for indirect management (art 53 FR) EuropeAid

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Same bodies:

o Member States (sub-category ex-shared management o with specific rules) national bodies, o o o o o 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

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Management Modes (4) New actors in indirect management (2) EuropeAid

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New!

Financial Institutions implementing Financing

Instruments: o o Member State is a shareholder OR Established in a Member State with a public service o 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: o Established in Member States; OR o Established by a Basic Act 12

Management Modes (5) Ex ante assessment Alignment and “mutual recognition” EuropeAid

• 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)?

o RAO – can also rely on assessment of other RAO within the Commission o

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 13 Aid Effectiveness, Part II, Section B)

Management Modes (6) 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 14

Management Modes (7) 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 (8) 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 (9) 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 17

Management Modes (10) 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 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.

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ASSIGNED REVENUES & TRUST FUNDS

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Assigned revenues: Transfer Agreements EuropeAid

• 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; 20

Assigned revenues: Transfer Agreements (2) EuropeAid

• 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 21

EU Trust Funds

• Possibility to set up o Trust Funds in external actions: Crisis and post-crisis o Thematic actions

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• 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 22

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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 24

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 0 20,000 FWC / Competitive negotiated Single tender 0-2,500 Invoice 25

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 26

Procurement New cases for negotiated procedure EuropeAid

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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) 27

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 29

Procurement & Grants Exclusion Cases EuropeAid

• 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 30

Procurement & Grants Exclusion Cases (2) EuropeAid

• 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 31

Grants Performance based grants EuropeAid

• 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 32

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 33

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 34

Grants Other EuropeAid

• 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 35

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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 36

New category of financial contribution: Prizes and financial instruments EuropeAid

• 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) 37

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Further information

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

• On the speakers: •

Laurent SARAZIN

Head of Unit [email protected]

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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