REGULATION (EU, Euratom) 2018/1046 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 18 July 2018

on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular point (d) of Article 46, Article 149, point (a) of Article 153(2), Articles 164, 172, 175, 177 and 178, Articles 189(2), 212(2) and 322(1) and Article 349 thereof, in conjunction with the Treaty establishing the European Atomic Energy Community, and in particular Article 106a thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the Court of Auditors (1),

Having regard to the opinion of the European Economic and Social Committee (2),

Having regard to the opinion of the Committee of the Regions (3),

Acting in accordance with the ordinary legislative procedure (4),

Whereas:

(1) Following three years of implementation, further amendments should be made to the financial rules applicable to the general budget of the Union (the ‘budget’) in order to remove bottlenecks in implementation by increasing flexibility, to simplify delivery for the stakeholders and the services, to focus more on results, and to improve accessibility, transparency and accountability. Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council (5) should therefore be repealed and replaced by this Regulation.

(2) In order to reduce the complexity of the financial rules applicable to the budget and to include the relevant rules in one single regulation, the Commission should repeal Delegated Regulation (EU) No 1268/2012 (6). In the interest of clarity, the main rules from Delegated Regulation (EU) No 1268/2012 should be included in this Regulation, while other rules should be included in guidance for services.

(3) The fundamental budgetary principles should be maintained. Existing derogations from those principles for specific areas such as research, external actions and structural funds should be reviewed and simplified as far as possible, taking into account their continuing relevance, their added value for the budget, and the burden they impose on stakeholders.

(4) Rules on the carry-over of appropriations should be presented more clearly and a distinction should be made between automatic and non-automatic carry-overs. The Union institutions concerned should provide information to the European Parliament and to the Council on both automatic and non-automatic carry-overs.

(5) The carrying-over and use of external assigned revenue for the succeeding programme or action should be allowed with a view to using such funds efficiently. It should be possible to carry over internal assigned revenue only to the following financial year, except where this Regulation provides otherwise.

(6) With regard to internal assigned revenue, the financing of new building projects with the revenue from lettings and the sale of buildings should be allowed. To that end, such revenue should be considered as internal assigned revenue which can be carried over until it is fully used.

(7) Union institutions should be able to accept any donation made to the Union.

(8) A provision should be introduced to allow for in-kind sponsorship by a legal person of an event or activity for promotional or corporate social responsibility purposes.

(9) The concept of performance as regards the budget should be clarified. Performance should be linked to the direct application of the principle of sound financial management. The principle of sound financial management should also be defined, and a link should be established between objectives set and performance indicators, results and economy, efficiency and effectiveness in the use of appropriations. For reasons of legal certainty, while avoiding conflicts with existing performance frameworks of the different programmes, performance terminology, in particular output and results, should be defined.

(10) In accordance with the Interinstitutional Agreement of 13 April 2016 on Better Law-Making (7), Union legislation should be of high quality and should focus on areas where it has the greatest added value for citizens and is as efficient and effective as possible in delivering the common policy objectives of the Union. Making existing and new spending programmes and activities entailing significant spending subject to evaluation can help achieve those objectives.

(11) In accordance with the principle of transparency enshrined in Article 15 of the Treaty on the Functioning of the European Union (TFEU), Union institutions are to conduct their work as openly as possible. With regard to budget implementation, the application of that principle implies that citizens should know where, and for what purpose, funds are spent by the Union. Such information fosters democratic debate, contributes to the participation of citizens in the Union’s decision-making process, reinforces institutional control and scrutiny over Union expenditure, and contributes to boosting its credibility. Communication should be more targeted and should aim to increase the visibility of the Union contribution for citizens. Such objectives should be achieved by the publication, preferably using modern communication tools, of relevant information concerning all recipients of funds financed from the budget which takes into account those recipients’ legitimate interests of confidentiality and security and, as far as natural persons are concerned, their right to privacy and the protection of their personal data. Union institutions should therefore adopt a selective approach in the publication of information, in accordance with the principle of proportionality. Decisions to publish should be based on relevant criteria in order to provide meaningful information.

(12) Without prejudice to the rules on the protection of personal data, the utmost transparency regarding information on recipients should be sought. The information on recipients of Union funds implemented under direct management should be published on a dedicated website of Union institutions, such as the Financial Transparency System, and should include at least the name and the locality of the recipient, the amount legally committed and the purpose of the measure. That information should take into account relevant criteria such as the periodicity, the type and the importance of the measure.

(13) It should be possible for the Commission to implement the budget indirectly through Member State organisations. For reasons of legal certainty, it is therefore appropriate to define a Member State organisation as an entity established in a Member State as a public-law body, or as a body governed by private law entrusted with a public-service mission and provided with adequate financial guarantees by that Member State. Financial backing provided to such private-law bodies by a Member State in accordance with existing requirements set out in Union law, in a form decided by that Member State and not necessarily requiring a bank guarantee, should be considered as adequate financial guarantees.

(14) For prizes, grants and contracts awarded following the opening-up of a public procedure to competition, and in particular for contests, calls for proposals and calls for tenders, in order to respect the principles of the TFEU and in particular the principles of transparency, proportionality, equal treatment and non-discrimination, the name and locality of the recipients of Union funds should be published. Such publication should contribute to the control of the award procedures by the unsuccessful applicants in the competition.

(15) Personal data referring to natural persons should not be publicly available for longer than the period during which the funds are being used by the recipient and should therefore be removed after two years. The same should apply to personal data referring to legal persons whose official name identifies one or more natural persons.

(16) In most of the cases covered by this Regulation, the publication concerns legal persons. Where natural persons are concerned, the publication of personal data should respect the principle of proportionality between the importance of the amount granted and the need to control the best use of the funds. In such cases, the publication of the region on level 2 of the common classification of territorial units for statistics (NUTS) is consistent with the objective of publication of information on recipients and ensures equal treatment between Member States of different sizes while respecting the recipients’ right to private life and, in particular, the protection of their personal data.

(17) For reasons of legal certainty and in accordance with the principle of proportionality, the situations in which publication should not take place should be specified. For example, information should not be published with regard to scholarships or other forms of direct support paid to natural persons most in need, to certain contracts with a very low value or to financial support below a certain threshold provided through financial instruments, or in cases where disclosure risks threatening the rights and freedoms of the individuals concerned as protected by the Charter of Fundamental Rights of the European Union or causing harm to the commercial interests of the recipients. For grants, however, there should be no special exemption from the obligation to publish information on the basis of a specific threshold, in order to maintain the current practice and to allow for transparency.

(18) Where personal data of recipients is published for the purposes of transparency in relation to the use of Union funds and the control of award procedures, those recipients should be informed of such publication, as well as of their rights and the procedures applicable for exercising those rights, in accordance with Regulations (EC) No 45/2001 (8) and (EU) 2016/679 (9) of the European Parliament and of the Council.

(19) In order to ensure that the principle of equal treatment is respected for all recipients, the information related to natural persons should also be published, in line with the obligation for Member States to establish a large degree of transparency for contracts above the thresholds laid down in Directive 2014/24/EU of the European Parliament and of the Council (10).

(20) In the case of indirect and shared management, the persons, entities or designated bodies implementing Union funds should make available information on recipients and final recipients. In the case of shared management, the information should be published in accordance with sector-specific rules. The Commission should make available information about a single website, including a reference to its address, where the information on recipients and final recipients can be found.

(21) In the interest of increased readability and transparency of data on financial instruments implemented under direct and indirect management, it is appropriate to merge all reporting requirements into one single working document to be attached to the draft budget.

(22) In order to promote best practices in the implementation of the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF), as well as the European Agricultural Guarantee Fund (EAGF), the Commission should, for information purposes, be able to make available to bodies responsible for management and control activities a non-binding methodological guide setting out its own control strategy and approach, including checklists, and examples of best practice. That guide should be updated whenever necessary.

(23) It is appropriate to provide for the possibility for Union institutions to conclude service-level agreements with each other in order to facilitate the implementation of their appropriations and also for the possibility to conclude such agreements between departments of Union institutions, Union bodies, European offices, bodies or persons entrusted with implementation of specific actions in the common foreign and security policy (CFSP) pursuant to Title V of the Treaty on European Union (TEU) and the Office of the Secretary-General of the Board of Governors of the European schools for the provision of services, supply of products or execution of works or of building contracts.

(24) It is appropriate to lay down the procedure for setting up new European offices and to distinguish between obligatory and non-obligatory tasks of such offices. A possibility for Union institutions, Union bodies and other European offices to delegate the powers of the authorising officer to the director of a European office should be introduced. European offices should also have the possibility to conclude service-level agreements for the provision of services, supply of products or execution of works or of building contracts. It is appropriate to set out specific rules for the drawing-up of accounting records, provisions authorising the accounting officer of the Commission to delegate some of his or her tasks to staff in those offices and operating procedures for bank accounts which the Commission should be able to open in the name of a European office.

(25) In order to improve the cost-effectiveness of executive agencies and in light of the practical experience gained with other Union bodies, it should be possible to entrust the accounting officer of the Commission with all or part of the tasks of the accounting officer of the executive agency concerned.

(26) For reasons of legal certainty, it is necessary to clarify that directors of executive agencies act as authorising officers by delegation when managing operational appropriations of programmes delegated to their agencies. To achieve the full effect of efficiency gains resulting from a global centralisation of certain support services, the possibility for executive agencies to implement administrative expenditure should be explicitly provided for.

(27) It is necessary to establish rules on the powers and responsibilities of financial actors, in particular authorising officers and accounting officers.

(28) The European Parliament, the Council, the Court of Auditors and the accounting officer of the Commission should be informed of the appointment or termination of the duties of an authorising officer by delegation, internal auditor and accounting officer within two weeks of such appointment or termination.

(29) Authorising officers should be fully responsible for all revenue and expenditure operations executed under their authority, and for internal control systems, and should be held accountable for their actions, including, where necessary, through disciplinary proceedings.

(30) The tasks, responsibilities and principles of the procedures to be observed by the authorising officers should also be laid down. Authorising officers by delegation should ensure that the authorising officers by subdelegation and their staff receive information and training concerning the control standards and the respective methods and techniques and that measures are taken in order to ensure the functioning of the control system. The authorising officer by delegation should report to his or her Union institution on the performance of the duties in the form of an annual report. That report should include the required financial and management information to support that officer’s declaration of assurance on the performance of his or her duties, including the information on the overall performance of the operations carried out. The supporting documents relating to the operations carried out should be kept for at least five years. The various forms of negotiated procedure for the award of public contracts should be the subject of a special report from the authorising officer by delegation to the Union institution concerned and of a report from that Union institution to the European Parliament and to the Council, since those procedures represent derogations from the usual award procedures.

(31) The double role of Heads of Union delegations, and of their deputies in their absence, as authorising officers by subdelegation for the European External Action Service (EEAS) and, as regards operational appropriations, for the Commission should be taken into account.

(32) The delegation of powers of budget implementation by the Commission concerning the operational appropriations of its own section of the budget to the deputy Heads of Union delegations should be restricted to situations where the performance of those tasks by the deputy Heads of Union delegations is strictly necessary in order to ensure business continuity during the absence of Heads of Union delegations. The deputy Heads of Union delegations should not be allowed to exercise those powers on a systematic basis or for reasons of internal work division.

(33) The accounting officer should be responsible for the proper implementation of payments, the collection of revenue and the recovery of amounts receivable. The accounting officer should manage the treasury, bank accounts and third-party files, keep the accounts and be responsible for drawing up the financial statements of Union institutions. The accounting officer of the Commission should be the only person who is entitled to lay down the accounting rules and the harmonised charts of accounts, while the accounting officers of all other Union institutions should lay down accounting procedures applicable in their institutions.

(34) The arrangements for the appointment and termination of the duties of the accounting officer should also be established.

(35) The accounting officer should set up procedures to ensure that the accounts opened for the requirements of treasury management and imprest accounts are not in debit.

(36) The conditions for the use of imprest accounts, a system of management which constitutes an exception to normal budgetary procedures and only concerns limited amounts, should be laid down, and the tasks and responsibilities of the imprest administrators, as well as those of the authorising officer and the accounting officer in connection with the control of imprest accounts, should be set out. The Court of Auditors should be informed of any appointment of an imprest administrator. For reasons of efficiency, imprest accounts should be set up in Union delegations for appropriations from both the sections of the budget relating to the Commission and to the EEAS. It is also appropriate to allow, under specific conditions, for the use of imprest accounts in the Union delegation for payments of limited amounts by budgetary procedures. As regards the appointment of imprest administrators, it should be possible to select them also from personnel employed by the Commission in the field of crisis-management aid and humanitarian aid operations whenever there is no available Commission staff covered by the Staff Regulations of Officials of the European Union and the Conditions of Employment of Other Servants of the Union, laid down in Council Regulation (EEC, Euratom, ECSC) No 259/68 (11) (‘Staff Regulations’).

(37) In order to take into account the situation in the field of crisis-management aid and humanitarian aid operations whenever there are no Commission staff covered by the Staff Regulations available and the technical difficulties to have all legal commitments signed by the authorising officer responsible, it should be allowed for the personnel employed by the Commission in that field to enter into legal commitments of a very low value up to EUR 2 500 which are linked to the payments executed from imprest accounts, and for Heads of Union delegations or their deputies to enter into legal commitments on the instruction of the authorising officer responsible of the Commission.

(38) Once the tasks and responsibilities of financial actors have been defined, it is only possible to hold them liable under the conditions laid down in the Staff Regulations. Specialised financial irregularities panels have been set up in Union institutions pursuant to Regulation (EU, Euratom) No 966/2012. However, due to the limited number of cases submitted to them and for reasons of efficiency, it is appropriate to transfer their functions to an interinstitutional panel established pursuant to this Regulation (‘the panel’). The panel should be set up to assess requests and issue recommendations on the need to take decisions on exclusion and imposition of financial penalties referred to it by the Commission or other Union institutions and bodies, without prejudice to their administrative autonomy in respect of members of their staff. That transfer also aims to avoid duplication and to mitigate the risks of contradictory recommendations or opinions, in cases where both an economic operator and a member of staff of a Union institution or body are involved. It is necessary to maintain the procedure by which it is possible for an authorising officer to seek confirmation of an instruction which that officer considers to be irregular or contrary to the principle of sound financial management, and thus be released from any liability. The composition of the panel should be modified when it fulfils this role. The panel should have no investigative powers.

(39) As regards revenue, it is necessary to address negative adjustments of own resources covered by Council Regulation (EU, Euratom) No 609/2014 (12). Except in the case of own resources, it is necessary to maintain the existing tasks and controls falling within the responsibility of the authorising officers at the different stages of the procedure: establishment of the estimate of amounts receivable, issuing of recovery orders, dispatch of the debit note informing the debtor that the amount receivable has been established and the decision, where necessary, to waive an entitlement subject to criteria guaranteeing compliance with sound financial management in order to ensure an efficient collection of revenue.

(40) The authorising officer should be able to waive totally or partially the recovery of an established amount receivable when the debtor has entered into any of the insolvency proceedings as defined in Regulation (EU) 2015/848 of the European Parliament and of the Council (13), in particular in cases of judicial arrangements, compositions and analogous proceedings.

(41) Specific provisions on procedures for the adjustment or the reduction to zero of an estimate of the amount receivable should be laid down.

(42) It is necessary to clarify the timing of the entry in the budget of amounts received by way of fines, other penalties and sanctions, and of any accrued interest or other income generated by them.

(43) Due to the recent developments on the financial markets and the interest rate applied by the European Central Bank (ECB) to its principal refinancing operations, it is necessary to review the provisions concerning the interest rate for fines or other penalties and to provide for rules in the case of a negative interest rate.

(44) To reflect the specific nature of amounts receivable consisting in fines or other penalties imposed by Union institutions under the TFEU or the Treaty establishing the European Atomic Energy Community (the Euratom Treaty), it is necessary to introduce specific provisions on the interest rates applicable to amounts due but not yet paid, in the event that such amounts are increased by the Court of Justice of the European Union.

(45) The rules on recovery should be both clarified and strengthened. In particular, it should be specified that the accounting officer is to recover amounts by offsetting them also against amounts owed to the debtor by an executive agency when it implements the budget.

(46) In order to guarantee legal certainty and transparency, rules regarding the deadlines within which a debit note is to be sent should be laid down.

(47) In order to secure the management of assets whilst also aiming at yielding a positive return, it is necessary to have amounts relating to fines, other penalties or sanctions imposed under the TFEU or the Euratom Treaty, such as competition fines which are being contested, provisionally collected and invested in financial assets, and to determine the assignment of the return on them. Since the Commission is not the only Union institution which is entitled to impose fines, other penalties or sanctions, it is necessary to lay down provisions concerning such fines, other penalties or sanctions imposed by other Union institutions and to lay down rules for their recovery which should be equivalent to those applicable to the Commission.

(48) In order to ensure that the Commission has all the necessary information for the adoption of financing decisions, it is necessary to lay down the minimum requirements for the contents of financing decisions on grants, procurement, Union trust funds for external actions (‘Union trust funds’), prizes, financial instruments, blending facilities or platforms and budgetary guarantees. At the same time, in order to give a longer-term perspective to the potential recipients, it is necessary to allow for financing decisions to be adopted for more than one financial year while specifying that the implementation is subject to the availability of budget appropriations for the respective financial years. Furthermore, it is necessary to reduce the number of the elements required for the financing decision. In line with the aim of simplification, the financing decision should at the same time constitute an annual or multiannual work programme. Since contributions to the Union bodies referred to in Articles 70 and 71 are already established in the budget, there should be no requirement to adopt a specific financing decision in that respect.

(49) As regards expenditure, the relationship between financing decisions, global budgetary commitments and individual budgetary commitments as well as the concepts of budgetary and legal commitment should be clarified in order to establish a clear framework for the different stages of budget implementation.

(50) In order to take into account in particular the number of legal commitments entered into by Union delegations and Union representations and the exchange-rate fluctuations experienced by them, provisional budgetary commitments should be possible also in cases where the final payee and the amount are known.

(51) As regards the typology of payments which it is possible for authorising officers to make, clarification of the various types of payments should be provided, in accordance with the principle of sound financial management. The rules for clearing of pre-financing payments should further be clarified, in particular for situations where no interim clearing is possible. To that effect, appropriate provisions should be included in legal commitments entered into.

(52) This Regulation should stipulate that payments are to be made within specified time limits and that, in the event of failure to respect such time limits, creditors will be entitled to default interests to be charged to the budget, except in the case of Member States, the European Investment Bank (EIB) and the European Investment Fund (EIF).

(53) It is appropriate to integrate the provisions concerning validation and authorisation of expenditure in one article and to introduce a definition of ‘decommitments’. Since the transactions are carried out in computerised systems, the signing of a ‘passed for payment’ voucher in order to express the validation decision should be replaced by an electronically secured signature, except in a limited number of cases. It is also necessary to clarify that the validation of expenditure applies to all eligible costs, including, as is the case for the clearing of pre-financing, costs which are not associated with a payment request.

(54) In order to reduce complexity, streamline existing rules and improve the readability of this Regulation, rules common to more than one budget implementation instrument should be established. For those reasons, certain provisions should be regrouped, the wording and scope of other provisions should be aligned and unnecessary repetitions and cross-referencing should be removed.

(55) Each Union institution should establish an internal audit progress committee tasked with ensuring the independence of the internal auditor, monitoring the quality of the internal audit work and ensuring that internal and external audit recommendations are properly taken into account and followed up by its services. The composition of that internal audit progress committee should be decided by each Union institution, taking into account its organisational autonomy and the importance of independent expert advice.

(56) More emphasis should be put on performance and results of projects financed from the budget. It is thus appropriate to define an additional form of financing not linked to costs of the relevant operations in addition to the forms of Union contribution already well established (reimbursement of the eligible costs actually incurred, unit cost, lump sums and flat-rate financing). The additional form of financing should be based on the fulfilment of certain conditions

ex ante

or on the achievement of results measured by reference to previously set milestones or through performance indicators.

(57) Where the Commission carries out assessments of the operational and financial capacity of recipients of Union funds or of their systems and procedures, it should be able to rely on the assessments already conducted by itself, other entities or donors such as national agencies and international organisations, in order to avoid duplicating assessments of the same recipients. The possibility for cross-reliance on assessments conducted by other entities should be used where such assessments were made in compliance with conditions equivalent to those set out in this Regulation for the applicable method of implementation. Therefore, in order to foster cross-reliance on assessments among donors, the Commission should promote the recognition of internationally accepted standards or international best practices.

(58) It is also important to avoid situations in which recipients of Union funds are audited several times by different entities on the use of those funds. It should therefore be possible to rely on audits already carried out by independent auditors provided that there is sufficient evidence of their competence and independence and provided that the audit work is based on internationally accepted audit standards providing reasonable assurance, and that they have been conducted on the financial statements and reports setting out the use of the Union contribution. Such audits should then form the basis of the overall assurance on the use of Union funds. To that end, it is important to ensure that the report of the independent auditor and the related audit documentation is made available on request to the European Parliament, the Commission, the Court of Auditors and the audit authorities of Member States.

(59) For the purpose of relying on assessments and audits and in order to reduce the administrative burden on persons and entities receiving Union funds, it is important to ensure that any information already available at Union institutions, managing authorities or other bodies and entities implementing Union funds, is reused to avoid multiple requests to recipients or beneficiaries.

(60) In order to provide for a long-term cooperation mechanism with recipients, the possibility of signing financial framework partnership agreements should be provided for. Financial framework partnerships should be implemented through grants or through contribution agreements with persons and entities implementing Union funds. For that purpose, the minimum content of such contribution agreements should be specified. Financial framework partnerships should not unduly restrict access to Union funding.

(61) The conditions and procedures for suspending, terminating or reducing a Union contribution should be harmonised across the different budget implementation instruments such as grants, procurement, indirect management, prizes, etc. The grounds for such suspension, termination or reduction should be defined.

(62) This Regulation should establish standard periods for which documents relating to Union contributions should be kept by recipients so as to avoid divergent or disproportionate contractual requirements while still providing the Commission, the Court of Auditors and the European Anti-Fraud Office (OLAF) with sufficient time to obtain access to such data and documents and perform the

ex post

checks and audits. In addition, any person or entity receiving Union funds should be obliged to cooperate in the protection of the financial interests of the Union.

(63) In order to provide adequate information to participants and recipients and to ensure that they have the possibility to exercise their right of defence, participants and recipients should be allowed to submit their observations before adoption of any measure adversely affecting their rights and they should be informed of the means of redress available to them for challenging such a measure.

(64) In order to protect the financial interests of the Union, a single early-detection and exclusion system should be set up by the Commission.

(65) The early-detection and exclusion system should apply to participants, recipients, entities on whose capacity the candidate or tenderer intends to rely, subcontractors of a contractor, any person or entity receiving Union funds where the budget is implemented under indirect management, any person or entity receiving Union funds under financial instruments implemented under direct management, participants or recipients on which entities implementing the budget under shared management have provided information, and sponsors.

(66) It should be clarified that, where a decision to register a person or entity in the early-detection and exclusion system database is taken on the basis of an exclusion situation relating to a natural or legal person that is a member of the administrative, management or supervisory body of that person or entity, or that has powers of representation, decision or control with regard to that person or entity, or to a natural or legal person that assumes unlimited liability for the debts of that person or entity or to a natural person who is essential for the award or for the implementation of the legal commitment, the information registered in the database is to include the information concerning those persons.

(67) The decision on the exclusion of a person or entity from participation in award procedures or the imposition of a financial penalty on a person or entity and the decision on the publication of the related information should be taken by the authorising officers responsible, in light of their autonomy in administrative matters. In the absence of a final judgment or final administrative decision and in cases related to a serious breach of contract, the authorising officers responsible should take their decision on the basis of a preliminary classification in law, having regard to the recommendation of the panel. The panel should also assess the duration of an exclusion in cases where the duration has not been set by the final judgment or the final administrative decision.

(68) The role of the panel should be to ensure the coherent operation of the exclusion system. The panel should be composed of a standing chair, two representatives of the Commission and a representative of the requesting authorising officer.

(69) The preliminary classification in law does not prejudge the final assessment of the conduct of the person or entity concerned by the competent authorities of Member States under national law. The recommendation of the panel, as well as the decision of the authorising officer responsible, should therefore be reviewed following the notification of such a final assessment.

(70) A person or entity should be excluded by the authorising officer responsible where it has been established by a final judgment or a final administrative decision that the person or entity is guilty of grave professional misconduct, of non-compliance, whether intentional or not, with the obligations relating to the payment of social security contributions or taxes, of the creation of an entity in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations, of fraud affecting the budget, of corruption, of conduct related to a criminal organisation, of money laundering or terrorist financing, of terrorist offences or offences linked to terrorist activities, of child labour or other offences concerning trafficking in human beings or of the commitment of an irregularity. A person or entity should also be excluded in the event of a serious breach of a legal commitment or of bankruptcy.

(71) When taking a decision on the exclusion of a person or entity, or the imposition of a financial penalty on a person or entity, and on the publication of the related information, the authorising officer responsible should ensure compliance with the principle of proportionality, in particular by taking into account the seriousness of the situation, its budgetary impact, the time which has elapsed since the relevant conduct, the duration of the conduct and its recurrence, whether the conduct was intentional or the degree of negligence shown and the degree of collaboration of the person or entity with the relevant competent authority and the contribution of that person or entity to the investigation.

(72) The authorising officer responsible should also be able to exclude a person or entity where a natural or legal person assuming unlimited liability for the debts of the economic operator is bankrupt or in a similar situation of insolvency or where that natural or legal person fails to comply with its obligations to pay social security contributions or taxes, where such situations have an impact on the financial situation of that economic operator.

(73) A person or entity should not be subject to a decision on exclusion when it has taken remedial measures, thus demonstrating its reliability. That possibility should not apply in cases of the most severe criminal activities.

(74) In light of the principle of proportionality, a distinction should be made between cases where it is possible to impose a financial penalty as an alternative to exclusion, on the one hand, and cases where the gravity of the conduct of the recipient concerned in respect of attempting to unduly obtain Union funds justifies the imposition of a financial penalty in addition to the exclusion so as to ensure a deterrent effect, on the other. The maximum amount of the financial penalty which can be imposed by the contracting authority should also be defined.

(75) A financial penalty should only be imposed on a recipient and not on a participant given that the amount of the financial penalty to be imposed is calculated on the basis of the value of the legal commitment at stake.

(76) The possibility to take decisions on exclusion or to impose financial penalties is independent from the possibility to apply contractual penalties, such as liquidated damages.

(77) The duration of an exclusion should be limited in time, as is the case under Directive 2014/24/EU, and should be in accordance with the principle of proportionality.

(78) It is necessary to determine the commencement date and the duration of the limitation period for taking decisions on exclusion or imposing financial penalties.

(79) It is important to be able to reinforce the deterrent effect achieved by the exclusion and the financial penalty. In that regard, the deterrent effect should be reinforced by the possibility to publish the information related to the exclusion and/or to the financial penalty in a manner that satisfies the data-protection requirements set out in Regulations (EC) No 45/2001 and (EU) No 2016/679. Such publication should contribute to ensuring that the same conduct is not repeated. For reasons of legal certainty and in accordance with the principle of proportionality it should be specified in which situations a publication should not take place. In its assessment, the authorising officer responsible should have regard to any recommendation of the panel. As far as natural persons are concerned, personal data should only be published in exceptional circumstances justified by the seriousness of the conduct or its impact on the financial interests of the Union.

(80) Information related to an exclusion or to a financial penalty should only be published in certain cases such as grave professional misconduct, fraud, a significant deficiency in complying with the main obligations of a legal commitment financed by the budget, or an irregularity, or where an entity is created in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations.

(81) The criteria for exclusion should be clearly separated from the criteria leading to a possible rejection from an award procedure.

(82) The information on the early detection of risks and on decisions on exclusion and the imposition of financial penalties on a person or entity should be centralised. For that purpose, related information should be stored in a database set up and operated by the Commission as the owner of the centralised system. That system should operate in compliance with the right to privacy and the protection of personal data.

(83) While the setting-up and the operation of the early-detection and exclusion system should be the responsibility of the Commission, other Union institutions and bodies, as well as all persons and entities implementing Union funds under direct, shared and indirect management, should participate in that system by transmitting relevant information to the Commission. The authorising officer responsible and the panel should guarantee the right of defence of the person or entity. The same right should be given to a person or entity, in the context of an early detection, where an act envisaged by an authorising officer could adversely affect the rights of the person or entity concerned. In cases of fraud, corruption or any other illegal activity affecting the financial interests of the Union which are not yet subject to a final judgment, it should be possible for the authorising officer responsible to defer the notification of the person or entity and for the panel to defer the right of the person or entity to submit its observations. Such deferral should only be justified where there are compelling legitimate grounds to preserve the confidentiality of the investigation or of national judicial proceedings.

(84) The Court of Justice of the European Union should be given unlimited jurisdiction with regard to decisions on exclusion and financial penalties imposed pursuant to this Regulation, in accordance with Article 261 TFEU.

(85) In order to facilitate the protection of the financial interests of the Union across all methods of budget implementation, it should be possible for the persons and entities involved in budget implementation under shared and indirect management to take into account, as appropriate, exclusions decided upon by the authorising officers at Union level.

(86) This Regulation should foster the objective of e-government, in particular the use of electronic data in the exchange of information between Union institutions and third parties.

(87) Progress towards the electronic exchange of information and the electronic submission of documents, including e-procurement, where appropriate, which constitute a major simplification measure, should be accompanied by clear conditions for the acceptance of the systems to be used, so as to establish a legally sound environment while preserving flexibility in the management of Union funds for the participants, recipients and the authorising officers as provided for in this Regulation.

(88) Rules on the composition and tasks of the committee in charge of evaluating application documents in procurement procedures, grant award procedures and in contests for prizes should be laid down. It should be possible for the committee to include external experts where that possibility is provided for in the basic act.

(89) In line with the principle of good administration, the authorising officer should request clarifications or missing documents while respecting the principle of equality of treatment and without substantially changing the application documents. The authorising officer should have the possibility to decide not to do so only in duly justified cases. In addition, the authorising officer should be able to correct an obvious clerical error or request the participant to correct it.

(90) Sound financial management should require that the Commission protects itself by requesting guarantees at the time of paying pre-financing. The requirement for contractors and beneficiaries to lodge guarantees should not be automatic, but should be based on a risk analysis. Where, in the course of implementation, the authorising officer discovers that a guarantor is not or is no longer authorised to issue guarantees in accordance with the applicable national law, the authorising officer should be able to require replacement of the guarantee.

(91) The different sets of rules for direct and indirect management, in particular as regards the concept of ‘budget implementation tasks’, have created confusion and entailed risks of errors of qualification both for the Commission and for its partners and should thus be simplified and harmonised.

(92) The provisions on the

ex ante

pillar assessment of persons and entities implementing Union funds under indirect management should be revised to enable the Commission to rely as much as possible on the systems, rules and procedures of those persons and entities which have been deemed equivalent to the ones used by the Commission. In addition, it is important to clarify that, where the assessment reveals areas in which the procedures in place are not sufficient to protect the financial interests of the Union, the Commission should be able to sign contribution agreements while taking appropriate supervisory measures. It is also important to clarify in which cases it is possible for the Commission to decide not to require an

ex ante

pillar assessment in order to sign contribution agreements.

(93) Remuneration of persons and entities implementing the budget should, where relevant and possible, be performance-based.

(94) The Commission enters into partnerships with third countries by means of financing agreements. It is important to clarify the content of such financing agreements, in particular for those parts of an action that are implemented by the third country under indirect management.

(95) It is important to recognise the specific nature of blending facilities or platforms where the Commission blends its contribution with that of finance institutions and to clarify the application of the provisions on financial instruments and budgetary guarantees.

(96) Procurement rules and principles applicable to public contracts awarded by Union institutions on their own account should be based on the rules set out in Directive 2014/23/EU of the European Parliament and of the Council (14) and Directive 2014/24/EU.

(97) In the case of mixed contracts, the methodology of the contracting authorities for determining the applicable rules should be clarified.

(98) The

ex ante

and

ex post

publicity measures necessary to launch a procurement procedure should be clarified for contracts equal to or greater than the thresholds set out in Directive 2014/24/EU, for contracts below those thresholds and for contracts falling outside the scope of that Directive.

(99) This Regulation should include an exhaustive list of all the procurement procedures available to Union institutions regardless of the thresholds.

(100) In the interests of administrative simplification and in order to encourage the participation of small and medium-sized enterprises (SMEs), negotiated procedures for middle-value contracts should be provided for.

(101) As is the case in Directive 2014/24/EU, this Regulation should allow for market consultation prior to the launch of a procurement procedure. In order to ensure that an innovation partnership is used only when the desired works, supplies and services do not exist on the market or as a near-to-market development activity, an obligation to carry out such preliminary market consultation before using an innovation partnership should be laid down in this Regulation.

(102) The contribution of contracting authorities to the protection of the environment and the promotion of sustainable development, while ensuring that they obtain the best value for money for their contracts, in particular through requiring specific labels or through the use of appropriate award methods, should be clarified.

(103) In order to ensure that, when executing contracts, economic operators comply with the applicable environmental, social and labour law obligations established by Union law, national law, collective agreements or the international social and environmental conventions listed in Annex X to Directive 2014/24/EU, such obligations should be part of the minimum requirements defined by the contracting authority and should be integrated in the contracts signed by the contracting authority.

(104) It is appropriate that different cases usually referred to as situations of conflict of interests be identified and treated distinctly. The notion of a ‘conflict of interests’ should be solely used for cases where a person or entity with responsibilities for budget implementation, audit or control, or an official or an agent of a Union institution or national authorities at any level, is in such a situation. Attempts to unduly influence an award procedure or obtain confidential information should be treated as grave professional misconduct which can lead to the rejection from the award procedure and/or exclusion from Union funds. In addition, economic operators might be in a situation where they should not be selected to implement a contract because of a professional conflicting interest. For instance, a company should not evaluate a project in which it has participated or an auditor should not be in a position to audit accounts it has previously certified.

(105) In accordance with Directive 2014/24/EU, it should be possible to verify whether an economic operator is excluded, to apply selection and award criteria, as well as to verify compliance with the procurement documents in any order. As a result, it should be possible to reject tenders on the basis of award criteria without a prior check of the corresponding tenderer with regard to exclusion or selection criteria.

(106) Contracts should be awarded on the basis of the most economically advantageous tender in line with Article 67 of Directive 2014/24/EU.

(107) In the interests of legal certainty, it is necessary to clarify that the selection criteria are strictly linked to the evaluation of candidates or tenderers and that the award criteria are strictly linked to the evaluation of the tenders. In particular, the qualifications and experience of staff assigned to perform the contract should only be used as a selection criterion and not as an award criterion, as this would introduce a risk of overlap and double evaluation of the same element. Furthermore, if such qualifications and experience were used as an award criterion, any change in the staff assigned to perform the contract, even where justified through illness or a change in position, would call into question the conditions under which the contract was awarded and thereby create legal uncertainty.

(108) Union procurement should ensure that Union funds are used in an effective, transparent and appropriate way, while reducing administrative burden on recipients of Union funds. In that regard, e-procurement should contribute to the better use of Union funds and enhance access to contracts for all economic operators. All Union institutions conducting procurement should publish clear rules on their websites regarding acquisition, expenditure and monitoring, as well as all contracts awarded, including the value thereof.

(109) The existence of an opening phase and an evaluation for any procedure should be clarified. An award decision should always be the outcome of an evaluation.

(110) When notified of the outcome of a procedure, candidates and tenderers should be informed of the grounds on which the decision was taken and should receive a detailed statement of reasons based on the content of the evaluation report.

(111) Given that criteria are applied in no particular order, rejected tenderers who submitted compliant tenders should receive information on the characteristics and the relative advantages of the successful tender if they so request.

(112) For framework contracts with reopening of competition, there should be no obligation to provide information on the characteristics and the relative advantages of the successful tender to an unsuccessful contractor, on the basis that the receipt of such information by parties to the same framework contract each time a competition is reopened might prejudice fair competition between them.

(113) A contracting authority should be able to cancel a procurement procedure before the contract is signed, without the candidates or tenderers being entitled to claim compensation. This should be without prejudice to situations where the contracting authority has acted in such a way that it is possible to hold it liable for damages in accordance with the general principles of Union law.

(114) As is the case in Directive 2014/24/EU, it is necessary to clarify the conditions under which it is possible to modify a contract during its performance without a new procurement procedure. In particular, a new procurement procedure should not be required in the event of administrative changes, universal succession and application of clear and unequivocal revision clauses or options that do not alter the minimum requirements of the initial procedure. A new procurement procedure should be required in the case of material modifications to the initial contract, in particular to the scope and content of the mutual rights and obligations of the parties, including as regards the distribution of intellectual property rights. Such modifications demonstrate the parties’ intention to renegotiate the essential terms or conditions of that contract, in particular if the modifications would have had an influence on the outcome of the procedure had the modified terms or conditions been part of the initial procedure.

(115) It is necessary to provide for the option of requiring a performance guarantee in relation to works, supplies and complex services in order to guarantee compliance with substantial contractual obligations and to ensure proper performance throughout the duration of the contract. It is also necessary to provide for the option of requiring a retention money guarantee to cover the contract liability period, in line with customary practice in the sectors concerned.

(116) In order to determine the applicable thresholds and procedures, it is necessary to clarify whether Union institutions, executive agencies and Union bodies are deemed to be contracting authorities. They should not be deemed to be contracting authorities in cases where they purchase from a central purchasing body. In addition, Union institutions form a single legal entity and their departments cannot conclude contracts, but only service-level agreements, between themselves.

(117) It is appropriate to include a reference in this Regulation to the two thresholds set out in Directive 2014/24/EU applicable to works and to supplies and services, respectively. Those thresholds should also be applicable to concession contracts for reasons of simplification, as well as sound financial management, considering the specificities of the contracting needs of Union institutions. The revision of those thresholds as provided for in Directive 2014/24/EU should therefore be directly applicable to procurement under this Regulation.

(118) For harmonisation and simplification purposes, the standard procedures applicable to procurement should also be applied to purchases provided for under the light regime for contracts for social and other specific services referred to in Article 74 of Directive 2014/24/EU. Therefore, the threshold for light regime purchases should be aligned with the threshold for service contracts.

(119) It is necessary to clarify the conditions of application of the standstill period to be observed before signing a contract or framework contract.

(120) The rules applicable to procurement in the field of external actions should be consistent with the principles laid down in Directives 2014/23/EU and 2014/24/EU.

(121) In order to reduce complexity, streamline existing rules and improve the readability of the procurement rules, it is necessary to regroup the general provisions on procurement and the specific provisions applicable to procurement in the field of external actions and to remove unnecessary repetitions and cross-referencing.

(122) It is necessary to clarify which economic operators have access to procurement under this Regulation depending on their place of establishment and to provide explicitly for the possibility of such access also for international organisations.

(123) In order to achieve a balance between the need for transparency and greater coherence of procurement rules on the one hand, and the need to provide flexibility on certain technical aspects of those rules on the other, the technical rules on procurement should be set out in an annex to this Regulation and the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of amendments to that Annex.

(124) It is necessary to clarify the scope of the Title on grants, particularly with regard to the type of action or body eligible for a grant, as well as with regard to legal commitments that can be used to cover grants. In particular, grant decisions should be phased out due to their limited use and the progressive introduction of e-grants. The structure should be simplified by moving the provisions on instruments which are not grants to other parts of this Regulation. The nature of bodies which can receive operating grants should be clarified by no longer referring to bodies pursuing an aim of general Union interest since those bodies are covered by the notion of bodies having an objective forming part of and supporting a Union policy.

(125) In order to simplify procedures and improve the readability of this Regulation, provisions related to the content of the grant application, of the call for proposals and of the grant agreement should be simplified and streamlined.

(126) In order to facilitate the implementation of actions financed by multiple donors where the overall financing of the action is not known at the time of commitment of the Union contribution, it is necessary to clarify the way the Union contribution is defined and the method of verifying its use.

(127) Experience gained in the use of lump sums, unit costs or flat-rate financing has shown that such forms of financing significantly simplify administrative procedures and substantially reduce the risk of error. Regardless of the field of Union intervention, lump sums, unit costs and flat rates are suitable forms of financing, in particular for standardised and recurrent actions, such as mobility or training activities. Moreover, as institutional cooperation between public administrations of Member States and of beneficiary or partner countries (institutional twinning) is implemented by Member State institutions, the use of simplified cost options is justified and should foster their engagement. In the interest of increased efficiency, Member States and other recipients of Union funds should be able to make more frequent use of simplified cost options. In this context, the conditions for using lump sums, unit costs and flat rates should be made more flexible. It is necessary to provide explicitly for the establishment of single lump sums covering the entire eligible costs of the action or the work programme. In addition, in order to foster focus on results, priority should be given to output-based funding. Input-based lump sums, unit costs and flat rates should remain an option where output-based ones are not possible or appropriate.

(128) The administrative procedures for authorising lump sums, unit costs and flat rates should be simplified by vesting the power for such authorisation in the authorising officers responsible. Where appropriate, such authorisation can be given by the Commission in light of the nature of the activities or of the expenditure or in light of the number of authorising officers concerned.

(129) In order to bridge the gap in the availability of data used to establish lump sums, unit costs and flat rates, the use of an expert judgement should be allowed.

(130) While the potential of more frequent use of simplified forms of financing should be realised, compliance with the principle of sound financial management, and in particular the principles of economy, efficiency and no double funding, should be ensured. For that purpose, simplified forms of financing should ensure that the resources employed are adequate to the objectives to be achieved, that the same costs are not financed more than once from the budget, that the co-financing principle is respected and that overall overcompensation of recipients is avoided. Therefore, simplified forms of financing should be based on statistical or accounting data, similar objective means or expert judgement. In addition, suitable checks, controls and periodic assessments should continue to apply.

(131) The scope of checks and controls as opposed to the periodic assessments of lump sums, unit costs or flat rates should be clarified. Those checks and controls should focus on the fulfilment of the conditions triggering the payment of lump sums, unit costs or flat-rates, including, where required, the achievement of outputs and/or results. Those conditions should not require reporting on the costs actually incurred by the beneficiary. Where the amounts of lump sums, unit costs or flat-rate financing have been determined

ex ante

by the authorising officer responsible or by the Commission they should not be challenged by

ex post

controls. This should not prevent the reduction of a grant in the event of poor, partial or late implementation or of irregularity, fraud or a breach of other obligations. In particular, a grant should be reduced where the conditions triggering the payment of lump sums, unit costs or flat rates have not been fulfilled. The frequency and scope of the periodic assessment should depend on the evolution and the nature of the costs, in particular taking into account substantial changes in market prices and other relevant circumstances. The periodic assessment could lead to adjustments of the lump sums, unit costs or flat rates applicable to future agreements, but should not be used for questioning the value of the lump sums, unit costs or flat rates already agreed upon. The periodic assessment of lump sums, unit costs or flat rates might require access to the accounts of the beneficiary for statistical and methodological purposes and such access is also necessary for fraud-prevention and detection purposes.

(132) In order to facilitate the participation of small organisations in the implementation of the Union policies in an environment of limited availability of resources, it is necessary to recognise the value of the work provided by volunteers as eligible costs. As a result, such organisations should be able to rely to a greater extent on volunteers’ work for the sake of providing co-financing to the action or the work programme. Without prejudice to the maximum co-financing rate specified in the basic act, in such cases, the Union grant should be limited to the estimated eligible costs other than those covering volunteers’ work. As volunteers’ work is a work provided by third parties without a remuneration being paid to them by the beneficiary, the limitation avoids reimbursing costs which the beneficiary did not incur. In addition, the value of the volunteers’ work should not exceed 50 % of the in-kind contributions and any other co-financing.

(133) In order to protect one of the fundamental principles of public finances, the no-profit principle should be retained in this Regulation.

(134) In principle, grants should be awarded following a call for proposals. Where exceptions are allowed, they should be interpreted and applied restrictively in terms of scope and duration. The exceptional possibility to award grants without a call for proposals to bodies with a de facto or de jure monopoly should only be used where the bodies concerned are the only ones capable of implementing the relevant types of activities or have been vested with such a monopoly by law or by a public authority.

(135) In the framework of moving towards e-grants and e-procurement, applicants and tenderers should be asked to provide a proof of their legal status and financial viability only once within a specific period and should not be required to resubmit supporting documents in each award procedure. It is therefore necessary to align the requirements for the number of years for which documents will be requested under grant award procedures and procurement procedures.

(136) As a valuable type of financial support not related to predictable costs, the use of prizes should be facilitated and the applicable rules should be clarified. Prizes should be seen as complementing, not substituting, other funding instruments such as grants.

(137) In order to allow for the more flexible implementation of prizes, the obligation under Regulation (EU, Euratom) No 966/2012 to publish contests for prizes with a unit value of EUR 1 000 000 or more in the statements accompanying the draft budget should be replaced by an obligation to submit prior information to the European Parliament and to the Council and to explicitly mention such prizes in the financing decision.

(138) Prizes should be awarded in accordance with the principles of transparency and equal treatment. In that context, the minimum characteristics of contests should be laid down, in particular the arrangements for paying the prize to the winners after its award, and the appropriate means of publication It is also necessary to establish a clearly defined award procedure, from submission of the applications to the provision of information to applicants and notification of the winning applicant, which mirrors the grant award procedure.

(139) This Regulation should lay down the principles and conditions applicable to financial instruments, budgetary guarantees and financial assistance and the rules on the limitation of the financial liability of the Union, the fight against fraud and money laundering, the winding down of financial instruments and reporting.

(140) In recent years the Union has increasingly used financial instruments that allow a higher leverage of the budget to be achieved but, at the same time, they generate a financial risk for the budget. Those financial instruments include not only the financial instruments covered by Regulation (EU, Euratom) No 966/2012, but also other instruments, such as budgetary guarantees and financial assistance, that previously have been governed only by the rules established in their respective basic acts. It is important to establish a common framework to ensure the homogeneity of the principles applicable to that set of instruments and to regroup them under a new Title in this Regulation, comprising sections on budgetary guarantees and on financial assistance to Member States or third countries in addition to the existing rules applicable to financial instruments.

(141) Financial instruments and budgetary guarantees can be valuable in multiplying the effect of Union funds when those funds are pooled with other funds and include a leverage effect. Financial instruments and budgetary guarantees should only be implemented if there is no risk of distortion of competition in the internal market or inconsistency with State aid rules.

(142) Within the framework of the annual appropriations authorised by the European Parliament and by the Council for a given programme, financial instruments and budgetary guarantees should be used on the basis of an

ex ante

evaluation demonstrating that they are effective for the achievement of the policy objectives of the Union.

(143) Financial instruments, budgetary guarantees and financial assistance should be authorised by means of a basic act. Where in duly justified cases financial instruments are established without a basic act, they should be authorised by the European Parliament and by the Council in the budget.

(144) The instruments that potentially fall under Title X, such as loans, guarantees, equity investments, quasi-equity investment and risk-sharing instruments, should be defined. The definition of ‘risk-sharing instruments’ should allow for the inclusion of credit enhancements for project bonds, covering the debt service risk of a project and mitigating the credit risk of bond holders through credit enhancements in the form of a loan or a guarantee.

(145) Any repayment from a financial instrument or budgetary guarantee should be used for the instrument or guarantee which produced the repayment with a view to enhancing the efficiency of that instrument or guarantee, unless otherwise specified in the basic act, and should be taken into account when proposing future appropriations to that instrument or guarantee.

(146) It is appropriate to recognise the alignment of interests in pursuing policy objectives of the Union and, in particular, that the EIB and the EIF have the specific expertise to implement financial instruments and budgetary guarantees.

(147) The EIB and the EIF, acting as a group, should have the possibility to transfer part of the implementation to each other, where such transfer might benefit the implementation of a given action and as further defined in the relevant agreement with the Commission.

(148) It should be clarified that, where financial instruments or budgetary guarantees are combined with ancillary forms of support from the budget, the rules on financial instruments and budgetary guarantees should apply to the whole measure. Such rules should be complemented, where applicable, by specific requirements set out in the sector-specific rules.

(149) The implementation of financial instruments and budgetary guarantees financed by the budget should adhere to the Union policy on non-cooperative jurisdictions for tax purposes, and updates thereto, as laid down in relevant legal acts of the Union and in Council conclusions, in particular the Council conclusions of 8 November 2016 on the criteria for and process leading to the establishment of the EU list of non-cooperative jurisdictions for tax purposes (15) and the Annex thereto, as well as the Council conclusions of 5 December 2017 on the EU list of non-cooperative jurisdictions for tax purposes (16) and the Annexes thereto.

(150) Budgetary guarantees and financial assistance to Member States or third countries are generally off-budget operations that have a significant impact on the balance sheet of the Union. While remaining generally off-budget operations, their inclusion in this Regulation provides a stronger protection of the financial interests of the Union and a clearer framework for their authorisation, management and accounting.

(151) The Union has recently launched important initiatives based on budgetary guarantees such as the European Fund for Strategic Investments (EFSI) or the European Fund for Sustainable Development (EFSD). The characteristics of those instruments are that they generate a contingent liability for the Union and imply the provisioning of funds to make available a liquidity cushion that allows the budget to respond in an orderly manner to the payment obligations that might arise from those contingent liabilities. In order to guarantee the credit rating of the Union and, hence, its capacity to deliver effective financing, it is essential that the authorisation, provisioning and monitoring of contingent liabilities follow a robust set of rules that should be applied to all budgetary guarantees.

(152) The contingent liabilities arising from budgetary guarantees can cover a wide range of financing and investment operations. The possibility of a budgetary guarantee being called cannot be scheduled with full certainty on a yearly basis as in the case of loans that have a defined schedule for repayment. It is, therefore, indispensable to set up a framework for the authorisation and monitoring of contingent liabilities ensuring full respect, at any moment, for the ceiling for annual payment appropriations set out in Council Decision 2014/335/EU, Euratom (17).

(153) That framework should also provide for management and control, including regular reporting on the financial exposure of the Union. The rate of provisioning of financial liabilities should be set on the basis of a proper risk assessment of the financial risks arising from the related instrument. The sustainability of the contingent liabilities should be assessed annually in the context of the budgetary procedure. An early warning mechanism should be established to avoid a shortage of provisions to cover financial liabilities.

(154) The increasing use of financial instruments, budgetary guarantees and financial assistance requires a significant volume of payment appropriations to be mobilised and provisioned. In order to deliver leverage while ensuring an adequate level of protection against financial liabilities, it is important to optimise the amount of provisioning required and to achieve efficiency gains by pooling those provisions into a common provisioning fund. In addition, the more flexible use of those pooled provisions permits an effective global provisioning rate that delivers the protection requested with an optimised amount of resources.

(155) In order to ensure the proper functioning of the common provisioning fund for the post-2020 programming period, the Commission should, by 30 June 2019, submit an independent external evaluation of the advantages and disadvantages of entrusting the financial management of the assets of the common provisioning fund to the Commission, to the EIB, or to a combination of the two, taking into account the relevant technical and institutional criteria used in comparing asset management services, including the technical infrastructure, comparison of costs for the services given, institutional set-up, reporting, performance, accountability and expertise of each institution and the other asset management mandates for the budget. The evaluation should be accompanied, where appropriate, by a legislative proposal.

(156) The rules applicable to provisioning and to the common provisioning fund should provide a solid internal control framework. The guidelines applicable to the management of the resources in the common provisioning fund should be established by the Commission after having consulted the accounting officer of the Commission. The authorising officers of the financial instruments, budgetary guarantees or financial assistance should actively monitor the financial liabilities under their responsibility and the financial manager of the resources of the common provisioning fund should manage the cash and the assets in the fund following the rules and procedures set out by the accounting officer of the Commission.

(157) Budgetary guarantees and financial assistance should follow the same set of principles established for financial instruments. Budgetary guarantees, in particular, should be irrevocable, unconditional and on demand. They should be implemented under indirect management or, only in exceptional cases, under direct management. They should only cover financing and investment operations and their counterparts should contribute their own resources to the operations covered.

(158) Financial assistance to Member States or third countries should take the form of a loan, of a credit line or any other instrument deemed appropriate to ensure the effectiveness of the support. To that end, the Commission should be empowered in the relevant basic act to borrow the necessary funds on the capital markets or from financial institutions, avoiding the involvement of the Union in any transformation of maturities that would expose it to an interest risk or to any other commercial risk.

(159) The provisions related to financial instruments should apply as soon as possible in order to achieve the simplification and effectiveness sought. The provisions related to the budgetary guarantees and to financial assistance, as well as to the common provisioning fund, should apply as from the post-2020 multiannual financial framework. That calendar will allow a thorough preparation of the new tools for managing contingent liabilities. It will also permit an alignment between the principles set out in Title X and, on the one hand, the proposal for the post-2020 multiannual financial framework and, on the other hand, the specific programmes related to that framework.

(160) Regulation (EU, Euratom) No 1141/2014 of the European Parliament and of the Council (18) lays down rules for, inter alia, the funding of political parties and political foundations at European level, in particular with regard to funding conditions, the award and distribution of funding, donations and contributions, financing of campaigns for elections to the European Parliament, reimbursable expenditure, the prohibition of certain funding, accounts, reporting and audit, implementation and control, penalties, cooperation between the Authority for European political parties and foundations, the Authorising Officer of the European Parliament and Member States, and transparency.

(161) Rules should be included in this Regulation on contributions from the budget to European political parties as envisaged by Regulation (EU, Euratom) No 1141/2014.

(162) The financial support given to European political parties should take the form of a specific contribution, to match the specific needs of those parties.

(163) Although financial support is awarded without an annual work programme being required, European political parties should justify

ex post

the sound use of Union funding. In particular, the authorising officer responsible should verify if the funding has been used to pay reimbursable expenditure as established in the call for contributions within the time limits laid down in this Regulation. Contributions to European political parties should be spent by the end of the financial year following that of their award, after which, any unspent funding should be recovered by the authorising officer responsible.

(164) Union funding awarded to finance the operating costs of European political parties should not be used for other purposes than those established in Regulation (EU, Euratom) No 1141/2014, in particular to directly or indirectly finance third parties such as national political parties. European political parties should use the contributions to pay a percentage of current and future expenditure and not expenditure or debts incurred before the submission of their applications for contributions.

(165) The award of contributions should also be simplified and adapted to the specificities of European political parties, in particular by the absence of selection criteria, the establishment of a single full pre-financing payment as a general rule, and by the possibility to use lump sums, flat-rate financing and unit costs.

(166) The contributions from the budget should be suspended, reduced or terminated if European political parties infringe Regulation (EU, Euratom) No 1141/2014.

(167) Penalties that are based both on this Regulation and on Regulation (EU, Euratom) No 1141/2014 should be imposed in a coherent way and should respect the principle of

ne bis in idem

. In accordance with Regulation (EU, Euratom) No 1141/2014, administrative and/or financial penalties provided for by this Regulation are not to be imposed in one of the cases for which penalties have already been imposed on the basis of Regulation (EU, Euratom) No 1141/2014.

(168) This Regulation should establish a general framework under which budget support can be used as an instrument in the field of external actions including the obligation for the third country to provide the Commission with adequate and timely information to evaluate the fulfilment of the agreed conditions and provisions ensuring the protection of the financial interests of the Union.

(169) In order to reinforce the role of the European Parliament and of the Council, the procedure for establishing Union trust funds should be clarified. It is also necessary to specify the principles applicable to the contributions to Union trust funds, in particular the importance of securing contributions from other donors which justify their establishment with regard to added value. It is also necessary to clarify the responsibilities of the financial actors and of the board of the Union trust fund and to define rules ensuring a fair representation of the participating donors on the board of the Union trust fund and a mandatory vote in favour by the Commission for the use of the funds. It is also important to set out in more detail the reporting requirements applicable to Union trust funds.

(170) In line with the streamlining of the existing rules and in order to avoid undue repetition, the special provisions set out in Part Two of Regulation (EU, Euratom) No 966/2012, applicable to the EAGF, to research, to external actions and to specific Union funds, should only be introduced in the relevant parts of this Regulation, provided that the provisions are still used and relevant.

(171) The provisions on the presentation of accounts and accounting should be simplified and clarified. It is therefore appropriate to group together all provisions on annual accounts and other financial reporting.

(172) The manner in which Union institutions currently report on building projects to the European Parliament and to the Council should be improved. Union institutions should be allowed to finance new building projects with the revenue received for buildings already sold. Consequently, a reference to the provisions on internal assigned revenue should be introduced in the provisions on building projects. This would allow meeting the changing needs in the building policy of Union institutions, while saving costs and introducing more flexibility.

(173) In order to adapt the rules applicable to certain Union bodies, the detailed rules on procurement and the detailed conditions and the minimum ratio for the effective provisioning rate, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of the framework financial regulation for bodies set up under the TFEU and the Euratom Treaty, the model financial regulation for public-private partnership bodies, amendments to Annex I to this Regulation, the detailed conditions and methodology for the calculation of the effective provisioning rate and the amendment of the defined minimum ratio of the effective provisioning rate, which should not be set at a level lower than 85 %. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(174) In order to ensure that the European Union Programme for Employment and Social Innovation (EaSI), established by Regulation (EU) No 1296/2013 of the European Parliament and of the Council (19), swiftly provides adequate resources to support changing political priorities, the indicative shares for each of the three axes and the minimum percentages for each of the thematic priorities within each axis should allow for a greater flexibility, while maintaining an ambitious deployment rate for EURES cross-border partnerships. This should improve the management of EaSI and allow for the focusing of budgetary resources on actions that produce better employment and social results.

(175) In order to facilitate investments in cultural and sustainable tourism infrastructure, without prejudice to the application of legal acts of the Union in the environmental field, in particular Directives 2001/42/EC (20) and 2011/92/EU (21) of the European Parliament and of the Council, as appropriate, certain restrictions as regards the scope of support under Regulation (EU) No 1301/2013 of the European Parliament and of the Council (22) for such investments should be clarified. It is therefore necessary to introduce clear restrictions as regards limiting the scale of the contribution of the ERDF to such investments from 2 August 2018.

(176) In order to respond to the challenges posed by increasing flows of migrants and refugees, the objectives to which the ERDF can contribute in its support of migrants and refugees should be spelled out with a view to enabling Member States to provide investments focusing on legally staying third-country nationals, including applicants for asylum and beneficiaries of international protection.

(177) With a view to facilitating the implementation of operations under Regulation (EU) No 1303/2013 of the European Parliament and of the Council (23), the scope of potential beneficiaries should be enlarged. Therefore, it should be allowed for managing authorities to consider natural persons as beneficiaries and a more flexible definition of beneficiaries in the context of State aid should be set out.

(178) As a matter of practice, macroregional strategies are agreed upon the adoption of Council conclusions. As the case has been since the entry into force of Regulation (EU) No 1303/2013, such conclusions can, where appropriate, be endorsed by the European Council, taking into account the powers of that institution laid down in Article 15 TEU. The definition of ‘macroregional strategies’ set out in that Regulation should therefore be amended accordingly.

(179) With a view to ensuring sound financial management of the ERDF, the ESF, the Cohesion Fund, the EAFRD and the EMFF (‘the European Structural and Investment Funds’ – ‘ESI Funds’) which are implemented under shared management, and to clarify Member States’ obligations, the general principles set out in Article 4 of Regulation (EU) No 1303/2013 should refer to the principles set out in this Regulation concerning internal control of budget implementation and avoidance of conflicts of interests.

(180) With a view to maximising the synergies between all Union funds to address the challenges of migration and asylum in an effective way, it should be ensured that, when the thematic objectives are translated into priorities in the Fund-specific rules, such priorities cover the appropriate use of each ESI Fund for those areas. Where appropriate, coordination with the Asylum, Migration and Integration Fund should be ensured.

(181) In order to ensure coherence of programming arrangements, an alignment between Partnership Agreements and the amendments of programmes approved by the Commission in the preceding calendar year should be carried out once per year.

(182) In order to facilitate the preparation and implementation of community-led local development strategies, the lead Fund should be allowed to cover preparatory, running and animation costs.

(183) In order to facilitate the implementation of community-led local development and integrated territorial investments, the roles and responsibilities of local action groups as regards community-led local development strategies, and of local authorities, regional development bodies or non-governmental organisations as regards integrated territorial investments (ITIs), in relation to other programme bodies should be clarified. Designation as an intermediate body in accordance with the Fund-specific rules should only be required in cases where the relevant bodies carry out additional tasks that fall under the responsibility of the managing or certifying authority or of the paying agency.

(184) Managing authorities should have the possibility to implement financial instruments through a direct award of a contract to the EIB and to international financial institutions.

(185) Many Member States have established publicly-owned banks or institutions that operate under a public policy mandate to promote economic development activities. Such publicly-owned banks or institutions have specific characteristics which differentiate them from private commercial banks in relation to their ownership, their development mandate and the fact that they do not primarily focus on maximising profits. The primary role of such publicly-owned banks or institutions is to mitigate market failures where in certain regions or for certain policy areas or sectors financial services are underprovided by commercial banks. Those publicly-owned banks or institutions are well-placed to promote access to the ESI Funds while maintaining competitive neutrality. Their specific role and characteristics can allow Member States to increase the use of financial instruments in order to maximise the impact of the ESI Funds in the real economy. Such an outcome would be in line with the Commission policy to facilitate the role of such publicly-owned banks or institutions as fund managers both in the implementation of ESI Funds as well as in the combination of the ESI Funds with EFSI financing, as set out in particular in the Investment Plan for Europe. Without prejudice to contracts already awarded for the implementation of financial instruments in compliance with applicable law, it is justified to clarify that it is possible for managing authorities to award contracts directly to such publicly-owned banks or institutions. Nevertheless, in order to ensure that the possibility of direct award remains consistent with the principles of the internal market, strict conditions to be fulfilled by publicly-owned banks or institutions should be laid down.

Such conditions should include that there is to be no direct private-capital participation, with the exception of non-controlling and non-blocking forms of private-capital participation in line with the requirements set out in Directive 2014/24/EU. Moreover, and strictly limited to the scope of application of Regulation (EU) No 1303/2013, a publicly-owned bank or institution should also be allowed to implement financial instruments where the private-capital participation confers no influence on decisions regarding the day-to-day management of the financial instrument supported by the ESI Funds.

(186) In order to maintain the possibility for the ERDF and EAFRD to contribute to joint uncapped guarantee and securitisation financial instruments in favour of SMEs, it is necessary to provide that it is possible for Member States to use the ERDF and EAFRD to contribute to such instruments during the entire programming period and to update relevant provisions relating to that option, such as those on

ex ante

assessments and evaluations and to introduce for the ERDF the possibility of programming at priority axis level.

(187) The adoption of Regulation (EU) 2015/1017 of the European Parliament and of the Council (24), was intended to enable Member States to use the ESI Funds to contribute to the financing of eligible projects supported under the EFSI. A specific provision should be inserted in Regulation (EU) No 1303/2013 setting out the terms and conditions to allow for better interaction and complementarity that will facilitate the possibility to combine the ESI Funds with EIB financial products under the EFSI’s EU Guarantee.

(188) In carrying out their operations, the bodies implementing financial instruments should adhere to the Union policy on non-cooperative jurisdictions for tax purposes, and updates thereto, as laid down in relevant legal acts of the Union and in Council conclusions, in particular the Council conclusions of 8 November 2016 and the Annex thereto, as well as the Council conclusions of 5 December 2017 and the Annexes thereto.

(189) In order to simplify and harmonise the control and audit requirements and to improve the accountability of the financial instruments implemented by the EIB and other international financial institutions, it is necessary to amend the provisions on management and control of financial instruments to facilitate the assurance process. That amendment should not apply to financial instruments referred to in point (a) of Article 38(1) and Article 39 of Regulation (EU) No 1303/2013 which were established by a funding agreement signed before 2 August 2018. For such financial instruments, Article 40 of that Regulation as applicable at the moment of the signature of the funding agreement should continue to apply.

(190) In order to ensure uniform conditions for the implementation of Regulation (EU) No 1303/2013 in respect of the models for the control reports and the annual audit reports referred to in Article 40(1) of that Regulation, implementing powers should be conferred on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council (25).

(191) In order to ensure consistency with the treatment of financial corrections during the 2007-2013 programming period, it is necessary to clarify that, in the case of financial instruments, it should be possible to allow for a contribution cancelled as a result of an individual irregularity to be reused for regular expenditure within the same operation so that the related financial correction will not have the consequence of a net loss for the financial instrument operation.

(192) In order to provide more time for the signature of funding agreements allowing for use of escrow accounts for payments for investments in final recipients after the end of the eligibility period for equity-based instruments, the deadline for signature of such funding agreements should be extended until 31 December 2018.

(193) In order to incentivise investors operating under the market economy principle to co-invest in public policy projects, the concept of differentiated treatment of investors, which allows under specific conditions for the ESI Funds to take a subordinated position to an investor operating under the market economy principle and to EIB financial products under the EFSI’s EU Guarantee, should be introduced. At the same time, the conditions for application of such a differentiated treatment when implementing the ESI Funds should be laid down.

(194) Given the protracted low-interest environment and in order not to unduly penalise bodies implementing financial instruments, it is necessary, subject to active treasury management, to enable financing of negative interest generated as a result of investments of the ESI Funds pursuant to Article 43 of Regulation (EU) No 1303/2013 from resources paid back into the financial instrument.

(195) In order to align reporting requirements with the new provisions on differentiated treatment of investors and to avoid duplication of certain requirements, Article 46(2) of Regulation (EU) No 1303/2013 should be amended.

(196) In order to facilitate the implementation of the ESI Funds, it is necessary to grant Member States the possibility to implement technical assistance actions through the direct award of a contract to the EIB, other international financial institutions and publicly-owned banks or institutions.

(197) In order to further harmonise the conditions for operations generating net revenue after their completion, the relevant provisions of this Regulation should apply to already selected but still ongoing operations and to operations which are still to be selected under that programming period.

(198) In order to give a strong incentive for the implementation of energy-efficiency measures, cost-savings that result from improved energy efficiency by an operation should not be treated as net revenue.

(199) With a view to facilitating the implementation of revenue-generating operations, the reduction of the co-financing rate should be allowed at any time during the implementation of the programme, and possibilities for the establishment of flat-rate net-revenue percentages at national level should be provided for.

(200) Due to the late adoption of Regulation (EU) No 508/2014 of the European Parliament and of the Council (26) and the fact that aid intensity levels have been established by that Regulation, it is necessary to set out certain exemptions in Regulation (EU) No 1303/2013 for the EMFF as regards revenue-generating operations. As those exemptions provide more favourable conditions for certain revenue-generating operations for which amounts or rates of support are defined in Regulation (EU) No 508/2014, it is necessary to establish a different date of application for those exemptions to ensure equal treatment of operations supported on the basis of Regulation (EU) No 1303/2013.

(201) In order to reduce administrative burden for beneficiaries, the threshold which exempts certain operations from the requirement to calculate and take into account revenue generated during their implementation should be raised.

(202) In order to facilitate synergies between the ESI Funds and other Union instruments, it should be possible for expenditure incurred to be reimbursed from different ESI Funds and Union instruments based on a proportion agreed in advance.

(203) In order to promote the use of lump sums, and given the fact that lump sums are to be based on a fair, equitable and verifiable calculation method which ensures sound financial management, the applicable upper limit for their use should be removed.

(204) In order to reduce the administrative burden of the implementation of projects by beneficiaries, a new simplified cost option for financing based on conditions others than the costs of the operations should be introduced.

(205) In order to simplify the rules governing the use of funds and to reduce the associated administrative burden, Member States should increasingly make use of simplified cost options.

(206) Taking into account the fact that, in accordance with Article 71 of Regulation (EU) No 1303/2013, the obligation to ensure the durability of investment operations applies from the final payment to the beneficiary, and that, when the investment consists in the lease purchase of a new machinery and equipment, the final payment occurs at the end of the contract period, that obligation should not apply to that type of investment.

(207) In order to ensure a broad application of simplified cost options, an obligatory use of standard scales of unit costs, lump sums or flat rates should be set out for operations or projects forming part of an operation receiving support from the ERDF and the ESF below a certain threshold, subject to relevant transitional provisions. The managing authority, or the monitoring committee for the programmes under the European territorial cooperation goal, should be given the possibility to extend the transitional period for a period it considers appropriate if it considers that such obligation creates a disproportionate administrative burden. Such obligation should not apply to operations receiving support within the framework of State aid that does not constitute

de minimis

aid. For such operations, all forms of grants and repayable assistance should continue to be an option. At the same time, the use of draft budgets as an additional methodology for determining simplified costs should be introduced for all ESI Funds.

(208) In order to facilitate earlier and more targeted application of simplified cost options, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of supplementing Regulation (EU) No 1303/2013 with additional specific rules on the role, liabilities and responsibility of bodies implementing financial instruments, related selection criteria and products that it is possible to deliver through financial instruments, supplementing the provisions of Regulation (EU) No 1303/2013 on the standard scales of unit costs or the flat-rate financing, the fair, equitable and verifiable calculation method on which they might be established, and by specifying detailed modalities concerning the financing based on the fulfilment of conditions related to the realisation of progress in implementation or the achievement of objectives of programmes rather than on costs and their application. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(209) In order to reduce the administrative burden, the use of flat rates which do not require a methodology to be established by Member States should be increased. Two additional flat rates should therefore be introduced: one for calculating direct staff costs and the other one for calculating the remaining eligible costs based on staff costs. In addition, further clarification should be provided on the methods to calculate staff costs.

(210) With a view to improving the effectiveness and impact of operations, implementation of operations which cover the whole territory of a Member State or operations covering different programme areas should be facilitated and possibilities for expenditure outside the Union for certain investments should be increased.

(211) In order to encourage Member States to make use of appraisals of major projects by independent experts, the declaration of expenditure relating to the major project to the Commission prior to the positive appraisal by the independent expert should be allowed once the Commission has been informed about the submission of the relevant information to the independent expert.

(212) In order to promote the use of joint action plans which will reduce administrative burden for beneficiaries, it is necessary to reduce regulatory requirements linked to the setting-up of a joint action plan while maintaining an appropriate focus on horizontal principles, including gender equality and sustainable development, which have generated important contributions to the effective implementation of the ESI Funds.

(213) In order to avoid unnecessary administrative burden for beneficiaries, the rules on information, communication and visibility should respect the principle of proportionality. Accordingly, it is important to clarify the scope of application of those rules.

(214) With a view to reducing the administrative burden and ensuring the effective use of technical assistance across the ERDF, the ESF and the Cohesion Fund and across categories of regions, flexibility for the calculation and monitoring of the respective limits applicable to technical assistance of Member States should be increased.

(215) With a view to streamlining implementation structures, it should be clarified that the possibility for the managing authority, certifying authority and the audit authority to be part of the same public body is also available to programmes under the European territorial cooperation goal.

(216) The responsibilities of the managing authorities regarding the verification of expenditure when simplified cost options are being used should be specified in more detail.

(217) In order to ensure that beneficiaries can fully benefit from the simplification potential of e-governance solutions in the implementation of the ESI Funds and the Fund for European Aid to the Most Deprived (FEAD), especially with a view to facilitating full electronic document management, it is necessary to clarify that a paper trail is not necessary if certain conditions are met.

(218) In order to increase proportionality of controls and to ease the administrative burden resulting from overlapping controls, especially for small beneficiaries, without undermining the principle of sound financial management, the single audit principle for the ERDF, the ESF, the Cohesion Fund and the EMFF should prevail and the thresholds below which an operation is not to be subject to more than one audit should be doubled.

(219) It is important to enhance the visibility of the ESI Funds and to raise awareness of their results and achievements with the public. Information and communication activities and measures to enhance visibility for the public remain essential in publicising the achievements of the ESI Funds and in demonstrating how the Union’s financial resources are invested.

(220) With a view to facilitating access of certain target groups to the ESF, the collection of data for certain indicators referred to in Annex I to Regulation (EU) No 1304/2013 of the European Parliament and of the Council (27) should not be required.

(221) In order to ensure equal treatment of operations supported on the basis of this Regulation, it is necessary to establish the date of application of certain amendments to Regulation (EU) No 1303/2013.

(222) In order to ensure that the entire programming period for Regulations (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013 and Regulation (EU) No 223/2014 of the European Parliament and of the Council (28) is governed by a coherent set of rules, it is necessary for some of the amendments to those Regulations to apply from 1 January 2014. By providing for a retroactive application of those amendments, legitimate expectations are taken into account.

(223) In order to expedite implementation of financial instruments combining support from the ESI Funds with EIB financial products under the EFSI’s EU guarantee and to provide a continuous legal basis for the signature of funding agreements allowing for use of escrow accounts for equity-based instruments, it is necessary for some of the amendments to this Regulation to apply with effect from 1 January 2018. By providing for a retroactive application of those amendments, the advanced facilitation of the financing of projects through combined support from the ESI Funds and the EFSI is ensured and a legal gap between the expiry date of certain provisions in Regulation (EU) No 1303/2013 and the date of entry into force of their extension by virtue of this Regulation is avoided.

(224) The simplifications and changes made to sector-specific rules should apply as soon as possible in order to facilitate an acceleration of implementation during the current programming period and should therefore apply from 2 August 2018.

(225) The European Globalisation Adjustment Fund (EGF) should continue, after 31 December 2017, to temporarily provide assistance to young people not in employment, education or training (NEETs) who reside in regions disproportionately impacted by major redundancies. In order to allow for continued assistance to NEETs, the amendment to Regulation (EU) No 1309/2013 of the European Parliament and of the Council (29) ensuring such continued assistance should apply with effect from 1 January 2018.

(226) It should be possible to establish blending facilities under Regulation (EU) No 1316/2013 of the European Parliament and of the Council (30) for one or more of the Connecting Europe Facility (CEF) sectors. Such blending facilities could finance blending operations which are actions combining non-reimbursable forms of support, such as support from Member States’ budgets, CEF grants, the ESI Funds and financial instruments from the Union budget, including combinations of CEF equity and CEF debt financial instruments and financing from the EIB Group, from national promotional banks, from development or other finance institutions, from investors and private financial support. Financing from the EIB Group should include EIB financing under the EFSI and private financial support should include both direct and indirect financial contributions as well as support received through public-private partnerships.

(227) The design and set up of blending facilities should be based on an

ex ante

assessment carried out in accordance with this Regulation and should reflect the results of lessons learned from the implementation of the CEF ‘Blending Call’ referred to in the Commission Implementing Decision of 20 January 2017 amending Commission Implementing Decision C(2014)1921 establishing a Multi-Annual Work Programme 2014-2020 for financial assistance in the field of Connecting Europe Facility (CEF) – Transport sector. CEF blending facilities should be established by the multiannual and/or annual work programmes and adopted in accordance with Articles 17 and 25 of Regulation (EU) No 1316/2013. The Commission should ensure transparent and timely reporting to the European Parliament and to the Council on the implementation of any CEF blending facility.

(228) The objective of CEF blending facilities should be to facilitate and streamline one application for all forms of support, including Union grants from the CEF and private-sector finance. Such blending facilities should aim to optimise the application process for project promoters by providing a single evaluation process, from the technical and financial points of view.

(229) CEF blending facilities should increase flexibility for submitting projects and simplify and streamline the process of project identification and financing. They should also increase the ownership and commitment of the financial institutions involved, thereby mitigating risks associated with the projects.

(230) CEF blending facilities should result in enhanced coordination, exchange of information and cooperation between Member States, the Commission, the EIB, national promotional banks and private investors with the aim of generating and supporting a healthy pipeline of projects pursuing CEF policy objectives.

(231) CEF blending facilities should aim to enhance the multiplier effect of Union spending by attracting additional resources from private investors, thus ensuring a maximum degree of private investor involvement. In addition, they should ensure that the actions supported become economically and financially viable and help to avoid a lack of investment leverage. They should contribute to the achievement of the Union objectives on meeting the targets set at the Paris Climate Conference (COP 21), job creation and cross-border connectivity. It is important that, when the CEF and the EFSI are both used for financing actions, the Court of Auditors examine whether the financial management has been sound in accordance with Article 287 TFEU and with Article 24(2) of Regulation (EU) No 1316/2013.

(232) In most cases, grants in the transport sector are expected to remain the primary means of supporting policy objectives of the Union. The application of CEF blending facilities should therefore not reduce the availability of such grants.

(233) Participation of private co-investors in the transport projects could be facilitated by mitigating the financial risk. First-loss guarantees provided by the EIB under the joint financial mechanisms supported by the budget such as blending facilities can be appropriate to that end.

(234) Funding from the CEF should be based on the selection and award criteria established in the multiannual and the annual work programmes pursuant to Article 17(5) of Regulation (EU) No 1316/2013 regardless of the form of funding used, or combination thereof.

(235) The experience gained with blending facilities should be taken into consideration in the evaluations of Regulation (EU) No 1316/2013.

(236) The introduction of CEF blending facilities by this Regulation should not be understood to prejudge the outcome of the negotiations on the post-2020 multiannual financial framework.

(237) Taking into account the very high rate of execution of the CEF in the transport sector and in order to support the implementation of projects with most value added for the Trans-European Transport Network concerning the core network corridors, cross-border projects, projects on the other section of the core network and projects eligible under the horizontal priorities as listed in Annex I to Regulation (EU) No 1316/2013, it is necessary to exceptionally allow for additional flexibility in the use of the multiannual work programme allowing the amount of the financial envelope to reach up to 95 % of the financial budgetary resources referred to in Regulation (EU) No 1316/2013. It is, however, important that further support be provided in the remaining CEF implementing period to priorities covered by annual work programmes.

(238) Due to the different nature of the CEF telecom sector as compared to the CEF transport and CEF energy sectors, namely the smaller average size of grants and differences in the type of costs and the type of projects, unnecessary burden on beneficiaries and Member States participating in related actions should be avoided through a less burdensome certification obligation, without weakening the principle of sound financial management.

(239) Under Regulation (EU) No 283/2014 of the European Parliament and of the Council (31), it is currently only possible to use grants and procurement to support actions in the area of digital service infrastructures. In order to ensure that digital service infrastructures function as efficiently as possible, other financial instruments which are currently used under the CEF, including innovative financial instruments, should also be made available to support such actions.

(240) In order to avoid unnecessary administrative burden for managing authorities that could hinder efficient implementation of the FEAD, it is appropriate to simplify and facilitate the procedure for amendment of non-essential elements of operational programmes.

(241) With a view to further simplifying the use of the FEAD, it is appropriate to establish additional provisions as regards eligibility of expenditure, in particular as regards the use of standard scales of unit costs, lump sums and flat rates.

(242) In order to avoid unfair treatment of partner organisations, irregularities that are imputable only to the body in charge of purchasing the assistance should not affect the eligibility of expenditure of partner organisations.

(243) In order to simplify the implementation of the ESI Funds and the FEAD and avoid legal uncertainty, certain responsibilities of Member States with regard to management and control should be clarified.

(244) Considering the need for the coherent application of the relevant financial rules within the financial year, it is in principle advisable that Part One of this Regulation (the Financial Regulation) starts applying at the beginning of a financial year. However, in order to ensure that important simplification provided for in this Regulation, both as regards the Financial Regulation and the amendments to sector-specific rules, benefit the recipients of Union funds as early as possible, it is appropriate to provide, exceptionally, for the application of this Regulation from its entry into force. At the same time, in order to allow additional time for adaptation to the new rules, Union institutions should continue to apply Regulation (EU, Euratom) No 966/2012 until the end of the financial year 2018 with regard to the implementation of their respective administrative appropriations.

(245) Some modifications regarding financial instruments, budgetary guarantees and financial assistance should only apply from the date of application of the post-2020 multiannual financial framework in order to allow sufficient time to adapt the applicable legal bases and programmes to the new rules.

(246) The information on the annual average of full-time equivalents and on the estimated amount of assigned revenue carried over from preceding years should be provided for the first time together with the draft budget to be presented in 2021 in order to allow sufficient time for the Commission to adapt to the new obligation,

HAVE ADOPTED THIS REGULATION:

PART ONE

FINANCIAL REGULATION

TITLE I

SUBJECT MATTER, DEFINITIONS AND GENERAL PRINCIPLES

Article 1

Subject matter

This Regulation lays down the rules for the establishment and the implementation of the general budget of the European Union and of the European Atomic Energy Community (‘the budget’) and the presentation and auditing of their accounts.

Article 2

Definitions

For the purposes of this Regulation, the following definitions apply:

(1) ‘applicant’ means a natural person or an entity with or without legal personality who has submitted an application in a grant award procedure or in a contest for prizes;

(2) ‘application document’ means a tender, a request to participate, a grant application or an application in a contest for prizes;

(3) ‘award procedure’ means a procurement procedure, a grant award procedure, a contest for prizes, or a procedure for the selection of experts or persons or entities implementing the budget pursuant to point (c) of the first subparagraph of Article 62(1);

(4) ‘basic act’ means a legal act, other than a recommendation or an opinion, which provides a legal basis for an action and for the implementation of the corresponding expenditure entered in the budget or of the budgetary guarantee or financial assistance backed by the budget, and which may take any of the following forms:

(a) in implementation of the Treaty on the Functioning of the European Union (TFEU) and the Treaty establishing the European Atomic Energy Community (the Euratom Treaty), the form of a regulation, a directive or a decision within the meaning of Article 288 TFEU; or

(b) in implementation of Title V of the Treaty on European Union (TEU), one of the forms specified in Articles 28(1) and 31(2), Article 33, and Articles 42(4) and 43(2) TEU;

(5) ‘beneficiary’ means a natural person or an entity with or without legal personality with whom a grant agreement has been signed;

(6) ‘blending facility or platform’ means a cooperation framework established between the Commission and development or other public finance institutions with a view to combining non-repayable forms of support and/or financial instruments and/or budgetary guarantees from the budget and repayable forms of support from development or other public finance institutions, as well as from private-sector finance institutions and private-sector investors;

(7) ‘budget implementation’ means the carrying out of activities relating to the management, monitoring, control and auditing of budget appropriations in accordance with the methods provided for in Article 62;

(8) ‘budgetary commitment’ means the operation by which the authorising officer responsible reserves the budget appropriations necessary to cover subsequent payments to honour legal commitments;

(9) ‘budgetary guarantee’ means a legal commitment of the Union to support a programme of actions by taking on the budget a financial obligation that can be called upon should a specified event materialise during the implementation of the programme, and that remains valid for the duration of the maturity of the commitments made under the supported programme;

(10) ‘building contract’ means a contract covering the purchase, exchange, long lease, usufruct, leasing, rental or hire purchase, with or without option to buy, of land, buildings or other immovable property. It covers both existing buildings and buildings before completion provided that the candidate has obtained a valid building permit for it. It does not cover buildings designed in accordance with the specifications of the contracting authority that are covered by works contracts;

(11) ‘candidate’ means an economic operator that has sought an invitation or has been invited to take part in a restricted procedure, a competitive procedure with negotiation, a competitive dialogue, an innovation partnership, a design contest or a negotiated procedure;

(12) ‘central purchasing body’ means a contracting authority providing centralised purchasing activities and, where applicable, ancillary purchasing activities;

(13) ‘check’ means the verification of a specific aspect of a revenue or expenditure operation;

(14) ‘concession contract’ means a contract for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities within the meaning of Articles 174 and 178, in order to entrust the execution of works or the provision and management of services to an economic operator (the ‘concession’), and where:

(a) the remuneration consists either solely in the right to exploit the works or services or in that right together with payment;

(b) the award of the concession contract involves the transfer to the concessionaire of an operating risk in exploiting those works or services encompassing demand risk or supply risk, or both. The concessionaire shall be deemed to assume an operating risk where, under normal operating conditions, there is no guarantee of recouping the investments made or the costs incurred in operating the works or the services concerned;

(15) ‘contingent liability’ means a potential financial obligation that could be incurred depending on the outcome of a future event;

(16) ‘contract’ means a public contract or a concession contract;

(17) ‘contractor’ means an economic operator with whom a public contract has been signed;

(18) ‘contribution agreement’ means an agreement concluded with persons or entities implementing Union funds pursuant to points (c)(ii) to (viii) of the first subparagraph of Article 62(1);

(19) ‘control’ means any measure taken to provide reasonable assurance regarding the effectiveness, efficiency and economy of operations, the reliability of reporting, the safeguarding of assets and information, the prevention and detection and correction of fraud and irregularities and their follow-up, and the adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the nature of the payments concerned. Controls may involve various checks, as well as the implementation of any policies and procedures to achieve the objectives referred to in the first sentence;

(20) ‘counterpart’ means the party that is granted a budgetary guarantee;

(21) ‘crisis’ means:

(a) a situation of immediate or imminent danger threatening to escalate into an armed conflict or to destabilise a country or its neighbourhood;

(b) a situation caused by natural disasters, man-made crisis such as wars and other conflicts or extraordinary circumstances having comparable effects related, inter alia, to climate change, environmental degradation, privation of access to energy and natural resources or extreme poverty;

(22) ‘decommitment’ means an operation whereby the authorising officer responsible cancels wholly or partly the reservation of appropriations previously made by means of a budgetary commitment;

(23) ‘dynamic purchasing system’ means a completely electronic process for making commonly used purchases of items generally available on the market;

(24) ‘economic operator’ means any natural or legal person, including a public entity, or a group of such persons, who offers to supply products, execute works or provide services or supply immovable property;

(25) ‘equity investment’ means the provision of capital to a company, invested directly or indirectly in return for total or partial ownership of that company and where the equity investor may assume some management control of the company and may share the company’s profits;

(26) ‘European office’ means an administrative structure set up by the Commission, or by the Commission with one or more other Union institutions, to perform specific cross-cutting tasks;

(27) ‘final administrative decision’ means a decision of an administrative authority having final and binding effect in accordance with the applicable law;

(28) ‘financial asset’ means any asset in the form of cash, an equity instrument of a publicly or privately held entity or a contractual right to receive cash or another financial asset from such entity;

(29) ‘financial instrument’ means a Union measure of financial support provided from the budget to address one or more specific policy objectives of the Union which may take the form of equity or quasi-equity investments, loans or guarantees, or other risk-sharing instruments, and which may, where appropriate, be combined with other forms of financial support or with funds under shared management or funds of the European Development Fund (EDF);

(30) ‘financial liability’ means a contractual obligation to deliver cash or another financial asset to another entity;

(31) ‘framework contract’ means a public contract concluded between one or more economic operators and one or more contracting authorities, the purpose of which is to establish the terms governing specific contracts under it to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged;

(32) ‘global provisioning’ means the total amount of resources deemed necessary over the entire lifetime of a budgetary guarantee as a result of applying the provisioning rate referred to in Article 211(1) to the amount of the budgetary guarantee authorised by the basic act referred to in point (b) of Article 210(1);

(33) ‘grant’ means a financial contribution by way of donation. Where such a contribution is provided under direct management, it shall be governed by Title VIII;

(34) ‘guarantee’ means a written commitment to assume responsibility for all or part of a third party’s debt or obligation or for the successful performance by that third party of its obligations if an event occurs which triggers such guarantee, such as a loan default;

(35) ‘guarantee on demand’ means a guarantee that must be honoured by the guarantor upon the counterpart’s demand, notwithstanding any deficiencies in the enforceability of the underlying obligation;

(36) ‘in-kind contribution’ means non-financial resources made available free of charge by third parties to a beneficiary;

(37) ‘legal commitment’ means an act whereby the authorising officer responsible enters into or establishes an obligation which results in subsequent payment or payments and the recognition of expenditure charged to the budget, and which includes specific agreements and contracts concluded under financial framework partnership agreements and framework contracts;

(38) ‘leverage effect’ means the amount of reimbursable financing provided to eligible final recipients divided by the amount of the Union contribution;

(39) ‘liquidity risk’ means the risk that a financial asset held in the common provisioning fund might not be sold during a certain period of time without incurring a significant loss;

(40) ‘loan’ means an agreement which obliges the lender to make available to the borrower an agreed amount of money for an agreed period and under which the borrower is obliged to repay that amount within the agreed period;

(41) ‘low value grant’ means a grant lower than or equal to EUR 60 000;

(42) ‘Member State organisation’ means an entity established in a Member State as a public law body, or as a body governed by private law entrusted with a public service mission and provided with adequate financial guarantees from the Member State;

(43) ‘method of implementation’ means any of the methods of budget implementation referred to in Article 62, that is direct management, indirect management and shared management;

(44) ‘multi-donor action’ means any action where Union funds are pooled with at least one other donor;

(45) ‘multiplier effect’ means the investment by eligible final recipients divided by the amount of the Union contribution;

(46) ‘output’ means the deliverables generated by the action determined in accordance with sector-specific rules;

(47) ‘participant’ means a candidate or tenderer in a procurement procedure, an applicant in a grant award procedure, an expert in a procedure for selection of experts, an applicant in a contest for prizes or a person or entity participating in a procedure for implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1);

(48) ‘prize’ means a financial contribution given as a reward following a contest. Where such a contribution is provided under direct management, it shall be governed by Title IX;

(49) ‘procurement’ means the acquisition by means of a contract of works, supplies or services and the acquisition or rental of land, buildings or other immovable property, by one or more contracting authorities from economic operators chosen by those contracting authorities;

(50) ‘procurement document’ means any document produced or referred to by the contracting authority to describe or determine elements of the procurement procedure, including:

(a) the publicity measures set out in Article 163;

(b) the invitation to tender;

(c) the tender specifications, including the technical specifications and the relevant criteria, or the descriptive documents in the case of a competitive dialogue;

(d) the draft contract;

(51) ‘public contract’ means a contract for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities within the meaning of Articles 174 and 178, in order to obtain, against payment of a price paid in whole or in part from the budget, the supply of movable or immovable assets, the execution of works or the provision of services, comprising:

(a) building contracts;

(b) supply contracts;

(c) works contracts;

(d) service contracts;

(52) ‘quasi-equity investment’ means a type of financing that ranks between equity and debt, having a higher risk than senior debt and a lower risk than common equity and which can be structured as debt, typically unsecured and subordinated and in some cases convertible into equity, or into preferred equity;

(53) ‘recipient’ means a beneficiary, a contractor, a remunerated external expert or a person or entity receiving prizes or funds under a financial instrument or implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1);

(54) ‘repurchase agreement’ means the sale of securities for cash with an agreement to repurchase them on a specified future date, or on demand;

(55) ‘research and technological development appropriation’ means an appropriation entered either in one of the titles of the budget relating to the policy areas linked to ‘Indirect research’ or ‘Direct research’ or in a chapter relating to research activities in another title;

(56) ‘result’ means the effects of the implementation of an action determined in accordance with sector-specific rules;

(57) ‘risk-sharing instrument’ means a financial instrument which allows for the sharing of a defined risk between two or more entities, where appropriate in exchange for an agreed remuneration;

(58) ‘service contract’ means a contract covering all intellectual and non-intellectual services other than those covered by supply contracts, works contracts and building contracts;

(59) ‘sound financial management’ means implementation of the budget in accordance with the principles of economy, efficiency and effectiveness;

(60) ‘Staff Regulations’ means the Staff Regulations of Officials of the European Union and the Conditions of Employment of Other Servants of the European Union laid down in Regulation (EEC, Euratom, ECSC) No 259/68;

(61) ‘subcontractor’ means an economic operator that is proposed by a candidate or tenderer or contractor to perform part of a contract or by a beneficiary to perform part of the tasks co-financed by a grant;

(62) ‘subscription’ means sums paid to bodies of which the Union is member, in accordance with the budgetary decisions and the conditions of payment established by the body concerned;

(63) ‘supply contract’ means a contract covering the purchase, leasing, rental or hire purchase, with or without option to buy, of products, and which may include, as an incidental matter, siting and installation operations;

(64) ‘technical assistance’ means, without prejudice to sector-specific rules, support and capacity-building activities necessary for the implementation of a programme or an action, in particular preparatory, management, monitoring, evaluation, audit and control activities;

(65) ‘tenderer’ means an economic operator that has submitted a tender;

(66) ‘Union’ means the European Union, the European Atomic Energy Community, or both, as the context may require;

(67) ‘Union institution’ means the European Parliament, the European Council, the Council, the Commission, the Court of Justice of the European Union, the Court of Auditors, the European Economic and Social Committee, the Committee of the Regions, the European Ombudsman, the European Data Protection Supervisor or the European External Action Service (the ‘EEAS’); the European Central Bank shall not be considered to be a Union institution;

(68) ‘vendor’ means an economic operator registered in a list of vendors to be invited to submit requests to participate in or submit tenders;

(69) ‘volunteer’ means a person working on a non-compulsory basis for an organisation without being paid;

(70) ‘work’ means the outcome of building or civil engineering works taken as a whole that is sufficient in itself to fulfil an economic or technical function;

(71) ‘works contract’ means a contract covering either:

(a) the execution or both the execution and design of a work;

(b) the execution or both the execution and design of a work related to one of the activities referred to in Annex II to Directive 2014/24/EU; or

(c) the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work.

Article 3

Compliance of secondary legislation with this Regulation

1.   Provisions concerning the implementation of the revenue and expenditure of the budget, and contained in a basic act, shall comply with the budgetary principles set out in Title II.

2.   Without prejudice to paragraph 1, any proposal or amendment to a proposal submitted to the legislative authority containing derogations from the provisions of this Regulation other than those set out in Title II, or from delegated acts adopted pursuant to this Regulation, shall clearly indicate such derogations and shall state the specific reasons justifying them in the recitals and in the explanatory memorandum of such proposals or amendments.

Article 4

Periods, dates and time limits

Unless otherwise provided in this Regulation, Council Regulation (EEC, Euratom) No 1182/71 (32) shall apply to the deadlines set out in this Regulation.

Article 5

Protection of personal data

This Regulation is without prejudice to Regulations (EC) No 45/2001 and (EU) No 2016/679.

TITLE II

BUDGET AND BUDGETARY PRINCIPLES

Article 6

Respect for budgetary principles

The budget shall be established and implemented in accordance with the principles of unity, budgetary accuracy, annuality, equilibrium, unit of account, universality, specification, sound financial management and transparency as set out in this Regulation.

CHAPTER 1

Principles of unity and of budgetary accuracy

Article 7

Scope of the budget

1.   For each financial year, the budget shall forecast and authorise all revenue and expenditure considered necessary for the Union. It shall comprise:

(a) the revenue and expenditure of the Union, including administrative expenditure resulting from the implementation of the provisions of the TEU relating to the common foreign and security policy (CFSP), and operational expenditure occasioned by implementation of those provisions where it is charged to the budget;

(b) the revenue and expenditure of the European Atomic Energy Community.

2.   The budget shall contain differentiated appropriations, which consist of commitment appropriations and payment appropriations, and non-differentiated appropriations.

The appropriations authorised for the financial year shall consist of:

(a) appropriations provided in the budget, including by amending budgets;

(b) appropriations carried over from preceding financial years;

(c) appropriations made available again in accordance with Article 15;

(d) appropriations arising from pre-financing payments which have been repaid in accordance with point (b) of Article 12(4);

(e) appropriations provided following the receipt of revenue assigned during the financial year or carried over from preceding financial years.

3.   Commitment appropriations shall cover the total cost of the legal commitments entered into during the financial year, subject to Article 114(2).

4.   Payment appropriations shall cover payments made to honour the legal commitments entered into in the financial year or preceding financial years.

5.   Paragraphs 2 and 3 of this Article shall not prevent appropriations being committed globally or budgetary commitments being made in annual instalments as respectively provided for in point (b) of the first subparagraph of Article 112(1) and in Article 112(2).

Article 8

Specific rules on the principles of unity and budgetary accuracy

1.   All revenue and expenditure shall be booked to a budget line.

2.   Without prejudice to authorised expenditure arising from contingent liabilities as provided for in Article 210(2), no expenditure may be committed or authorised in excess of the authorised appropriations.

3.   An appropriation shall be entered in the budget only if it is for an item of expenditure considered necessary.

4.   Interest generated by pre-financing payments made from the budget shall not be due to the Union except as otherwise provided in the contribution agreements or the financing agreements concerned.

CHAPTER 2

Principle of annuality

Article 9

Definition

The appropriations entered in the budget shall be authorised for a financial year which shall run from 1 January to 31 December.

Article 10

Budgetary accounting for revenue and appropriations

1.   The revenue of a financial year shall be entered in the accounts for that year on the basis of the amounts collected during it. However, the own resources for the month of January of the following financial year may be made available in advance pursuant to Regulation (EU, Euratom) No 609/2014.

2.   The entries in respect of the Value Added Tax (VAT) and Gross National Income-based own resources may be adjusted in accordance with Regulation (EU, Euratom) No 609/2014.

3.   Commitments shall be entered in the accounts for a financial year on the basis of the legal commitments entered into up to 31 December of that year. However, the global budgetary commitments referred to in Article 112(4) shall be entered in the accounts for a financial year on the basis of the budgetary commitments up to 31 December of that year.

4.   Payments shall be entered in the accounts for a financial year on the basis of the payments made by the accounting officer by 31 December of that year.

5.   By way of derogation from paragraphs 3 and 4:

(a) the expenditure of the European Agricultural Guarantee Fund (EAGF) shall be entered in the accounts for a financial year on the basis of the repayments made by the Commission to Member States by 31 December of that year, provided that the payment order has reached the accounting officer by 31 January of the following financial year;

(b) expenditure implemented under shared management with the exception of the EAGF shall be entered in the accounts for a financial year on the basis of the reimbursements made by the Commission to Member States by 31 December of that year, including the expenditure charged by 31 January of the following financial year as laid down in Articles 30 and 31.

Article 11

Commitment of appropriations

1.   The appropriations entered in the budget may be committed with effect from 1 January, once the budget has been definitively adopted.

2.   As of 15 October of the financial year, the following expenditure may be committed in advance against the appropriations provided for the following financial year:

(a) routine administrative expenditure, provided that such expenditure has been approved in the last budget duly adopted, and only up to a maximum of one quarter of the total corresponding appropriations decided upon by the European Parliament and by the Council for the current financial year;

(b) routine management expenditure for the EAGF, provided that the basis for such expenditure is laid down in an existing basic act, and only up to a maximum of three quarters of the total corresponding appropriations decided upon by the European Parliament and by the Council for the current financial year.

Article 12

Cancellation and carry-over of appropriations

1.   Appropriations which have not been used by the end of the financial year for which they were entered shall be cancelled, unless they are carried over in accordance with paragraphs 2 to 8.

2.   The following appropriations may be carried over by a decision taken pursuant to paragraph 3, but only to the following financial year:

(a) commitment appropriations and non-differentiated appropriations, for which most of the preparatory stages of the commitment procedure have been completed by 31 December of the financial year. Such appropriations may be committed up to 31 March of the following financial year, with the exception of non-differentiated appropriations related to building projects which may be committed up to 31 December of the following financial year;

(b) appropriations which are necessary when the legislative authority has adopted a basic act in the final quarter of the financial year and the Commission has been unable to commit the appropriations provided for that purpose by 31 December of that year. Such appropriations may be committed up to 31 December of the following financial year;

(c) payment appropriations which are needed to cover existing commitments or commitments linked to commitment appropriations carried over, where the payment appropriations provided for in the relevant budget lines for the following financial year are insufficient;

(d) non-committed appropriations relating to the actions referred to in Article 4(1) of Regulation (EU) No 1306/2013 of the European Parliament and of the Council (33).

With regard to point (c) of the first subparagraph, the Union institution concerned shall first use the appropriations authorised for the current financial year and shall not use the appropriations carried over until the former are exhausted.

Carry-overs of non-committed appropriations as referred to in point (d) of the first subparagraph of this paragraph shall not exceed, within a limit of 2 % of the initial appropriations voted by the European Parliament and by the Council, the amount of the adjustment of direct payments applied in accordance with Article 26 of Regulation (EU) No 1306/2013 during the preceding financial year. Appropriations which are carried over shall be returned to the budget lines which cover the actions referred to in point (b) of Article 4(1) of Regulation (EU) No 1306/2013.

3.   The Union institution concerned shall take its decision on carry-overs as referred to in paragraph 2 by 15 February of the following financial year. It shall inform the European Parliament and the Council by 15 March of that year of the carry-over decision it has taken. It shall also state, for each budget line, how the criteria in points (a), (b) and (c) of the first subparagraph of paragraph 2 have been applied to each carry-over.

4.   Appropriations shall be automatically carried over in respect of:

(a) commitment appropriations for the Emergency Aid Reserve and for the European Union Solidarity Fund. Such appropriations may be carried over only to the following financial year and may be committed up to 31 December of that year;

(b) appropriations corresponding to internal assigned revenue. Such appropriations may be carried over only to the following financial year and may be committed up to 31 December of that year, with the exception of the internal assigned revenue from lettings and the sale of buildings and land which may be carried over until it is fully used. Commitment appropriations, as referred to in Regulation (EU) No 1303/2013 and in Regulation (EU) No 514/2014 of the European Parliament and of the Council (34), which are available on 31 December arising from repayments of pre-financing payments may be carried over until the closure of the programme and used when necessary, provided that other commitment appropriations are no longer available;

(c) appropriations corresponding to external assigned revenue. Such appropriations shall be fully used by the time all the operations relating to the programme or action to which they are assigned have been carried out or they may be carried over and used for the succeeding programme or action. This shall not apply to the revenue referred to in point (iii) of Article 21(2)(g) for which appropriations not committed within five years shall be cancelled;

(d) payment appropriations related to the EAGF resulting from suspensions in accordance with Article 41 of Regulation (EU) No 1306/2013.

5.   The treatment of external assigned revenue as referred to in point (c) of paragraph 4 of this Article resulting from the participation of European Free Trade Association (EFTA) States in certain Union programmes in accordance with point (e) of Article 21(2) shall be in line with Protocol No 32 annexed to the Agreement on the European Economic Area (EEA Agreement).

6.   In addition to the information provided for in paragraph 3, the Union institution concerned shall submit to the European Parliament and to the Council information on appropriations which were automatically carried over, including the amounts involved and the provision of this Article under which the appropriations were carried over.

7.   Non-differentiated appropriations legally committed at the end of the financial year shall be paid until the end of the following financial year.

8.   Without prejudice to paragraph 4, appropriations placed in reserve and appropriations for staff expenditure shall not be carried over. For the purposes of this Article, staff expenditure comprises remuneration and allowances for members and for staff of Union institutions who are subject to the Staff Regulations.

Article 13

Detailed provisions on cancellation and carry-over of appropriations

1.   The commitment appropriations and the non-differentiated appropriations referred to in point (a) of the first subparagraph of Article 12(2) may be carried over only if the commitments could not be made before 31 December of the financial year for reasons not attributable to the authorising officer and if the preparatory stages are sufficiently advanced to make it reasonable to expect that the commitment will be made by 31 March of the following financial year, or, in relation to building projects, by 31 December of the following financial year.

2.   The preparatory stages referred to in point (a) of the first subparagraph of Article 12(2), which shall be completed by 31 December of the financial year in order to allow a carry-over to the following financial year, are in particular:

(a) for individual budgetary commitments within the meaning of point (a) of the first subparagraph of Article 112(1), the completion of the selection of potential contractors, beneficiaries, prize winners or delegates;

(b) for global budgetary commitments within the meaning of point (b) of the first subparagraph of Article 112(1), the adoption of a financing decision or the closing of the consultation of the departments concerned within each Union institution on the adoption of the financing decision.

3.   Appropriations carried over in accordance with point (a) of the first subparagraph of Article 12(2) which have not been committed by 31 March of the following financial year, or by 31 December of the following financial year for amounts relating to building projects, shall be automatically cancelled.

The Commission shall inform the European Parliament and the Council of the appropriations cancelled in accordance with the first subparagraph within one month following the cancellation.

Article 14

Decommitments

1.   Where budgetary commitments are decommitted in any financial year after the year in which they were made as a result of the total or partial non-implementation of the actions for which they were earmarked, the appropriations corresponding to such decommitments shall be cancelled, unless otherwise provided in Regulations (EU) No 1303/2013 and (EU) No 514/2014 and without prejudice to Article 15 of this Regulation.

2.   Commitment appropriations referred to in Regulations (EU) No 1303/2013 and (EU) No 514/2014 shall be decommitted automatically in accordance with those Regulations.

3.   This Article does not apply to external assigned revenue referred to in Article 21(2).

Article 15

Making appropriations corresponding to decommitments available again

1.   The appropriations corresponding to decommitments referred to in Regulations (EU) No 1303/2013, (EU) No 223/2014 and (EU) No 514/2014 may be made available again in the event of a manifest error attributable solely to the Commission.

To that end, the Commission shall examine decommitments made during the preceding financial year and shall decide, by 15 February of the current financial year, on the basis of requirements, whether it is necessary to make the corresponding appropriations available again.

2.   In addition to the case referred to in paragraph 1 of this Article, the appropriations corresponding to decommitments shall be made available again in the event of:

(a) the decommitment from a programme under the arrangements for the implementation of the performance reserve established in Article 20 of Regulation (EU) No 1303/2013;

(b) the decommitment from a programme dedicated to a specific financial instrument in favour of small and medium-sized enterprises (SMEs) following the discontinuance of the participation of a Member State in the financial instrument, as referred to in the seventh subparagraph of Article 39(2) of Regulation (EU) No 1303/2013.

3.   Commitment appropriations corresponding to the amount of decommitments made as a result of total or partial non-implementation of corresponding research projects may also be made available again to the benefit of the research programme the projects belong to or its successor in the context of the budgetary procedure.

Article 16

Rules applicable in the event of late adoption of the budget

1.   If the budget has not been definitively adopted at the beginning of the financial year, the procedure set out in the first paragraph of Article 315 TFEU (the provisional twelfths regime) shall apply. Commitments and payments may be made within the limits laid down in paragraph 2 of this Article.

2.   Commitments may be made per chapter up to a maximum of one quarter of the total appropriations authorised in the relevant chapter of the budget for the preceding financial year plus one twelfth for each month which has elapsed.

The limit of the appropriations provided for in the draft budget shall not be exceeded.

Payments may be made monthly per chapter up to a maximum of one twelfth of the appropriations authorised in the relevant chapter of the budget for the preceding financial year. That sum shall not, however, exceed one twelfth of the appropriations provided for in the same chapter of the draft budget.

3.   The appropriations authorised in the relevant chapter of the budget for the preceding financial year, as referred to in paragraphs 1 and 2, shall be understood as referring to the appropriations voted in the budget, including by amending budgets, and after adjustment for the transfers made during that financial year.

4.   If the continuity of Union action and management needs so require, the Council, acting by qualified majority on a proposal from the Commission, may authorise expenditure in excess of one provisional twelfth but not exceeding a total of four provisional twelfths, except in duly justified cases, both for commitments and for payments over and above those automatically made available in accordance with paragraphs 1 and 2. The Council shall without delay forward its decision on authorisation to the European Parliament.

The decision referred to in the first subparagraph shall enter into force 30 days after its adoption unless the European Parliament takes any of the following actions:

(a) acting by a majority of its component members, decides to reduce the expenditure before the expiry of the 30 days, in which case the Commission shall submit a new proposal;

(b) informs the Council and the Commission that it does not wish to reduce the expenditure, in which case the decision shall enter into force before the expiry of the 30 days.

The additional twelfths shall be authorised in full and shall not be divisible.

5.   If, for a given chapter, the authorisation of four provisional twelfths granted in accordance with paragraph 4 is not sufficient to cover the expenditure necessary to avoid a break in continuity of Union action in the area covered by the chapter in question, authorisation may exceptionally be given to exceed the amount of the appropriations entered in the corresponding chapter of the budget for the preceding financial year. The European Parliament and the Council shall act in accordance with the procedures provided for in paragraph 4. However, the overall total of the appropriations available in the budget of the preceding financial year or in the draft budget, as proposed, shall in no circumstances be exceeded.

CHAPTER 3

Principle of equilibrium

Article 17

Definition and scope

1.   Revenue and payment appropriations shall be in balance.

2.   The Union and the Union bodies referred to in Articles 70 and 71 shall not raise loans within the framework of the budget.

Article 18

Balance from financial year

1.   The balance from each financial year shall be entered in the budget for the following financial year as revenue in the event of a surplus or as a payment appropriation in the event of a deficit.

2.   The estimates of the revenue or payment appropriations referred to in paragraph 1 of this Article shall be entered in the budget during the budgetary procedure and in a letter of amendment submitted pursuant to Article 42 of this Regulation. The estimates shall be drawn up in accordance with Article 1 of Council Regulation (EU, Euratom) No 608/2014 (35).

3.   After the presentation of the provisional accounts for each financial year, any discrepancy between those accounts and the estimates shall be entered in the budget for the following financial year through an amending budget devoted solely to that discrepancy. In such a case, the Commission shall submit the draft amending budget simultaneously to the European Parliament and to the Council within 15 days of submission of the provisional accounts.

CHAPTER 4

Principle of unit of account

Article 19

Use of euro

1.   The multiannual financial framework and the budget shall be drawn up and implemented in euro and the accounts shall be presented in euro. However, for the cash-flow purposes referred to in Article 77, the accounting officer and, in the case of imprest accounts, the imprest administrators, and, for the needs of the administrative management of the Commission and the EEAS, the authorising officer responsible, shall be authorised to carry out operations in other currencies.

2.   Without prejudice to specific provisions laid down in sector-specific rules, or in specific contracts, grant agreements, contribution agreements and financing agreements, conversion by the authorising officer responsible shall be made using the daily euro exchange rate published in the C series of the

Official Journal of the European Union

of the day on which the payment order or recovery order is drawn up by the authorising department.

If no such daily rate is published, the authorising officer responsible shall use the one referred to in paragraph 3.

3.   For the purposes of the accounts provided for in Articles 82, 83 and 84, conversion between the euro and another currency shall be made using the monthly accounting exchange rate of the euro. That accounting exchange rate shall be established by the accounting officer of the Commission by means of any source of information regarded as reliable, on the basis of the exchange rate on the penultimate working day of the month preceding that for which the rate is established.

4.   Currency conversion operations shall be carried out in such a way as to avoid having a significant impact on the level of the Union co-financing or a detrimental impact on the budget. Where appropriate, the rate of conversion between the euro and other currencies may be calculated using the average of the daily exchange rate in a given period.

CHAPTER 5

Principle of universality

Article 20

Scope

Without prejudice to Article 21, total revenue shall cover total payment appropriations. Without prejudice to Article 27, all revenue and expenditure shall be entered in the budget in full without any adjustment against each other.

Article 21

Assigned revenue

1.   External assigned revenue and internal assigned revenue shall be used to finance specific items of expenditure.

2.   The following shall constitute external assigned revenue:

(a) specific additional financial contributions from Member States to the following types of actions and programmes:

(i) certain supplementary research and technological development programmes;

(ii) certain external aid actions or programmes financed by the Union and managed by the Commission;

(b) appropriations relating to the revenue generated by the Research Fund for Coal and Steel established by Protocol No 37 on the financial consequences of the expiry of the ECSC Treaty and on the Research Fund for Coal and Steel, annexed to the TEU and to the TFEU.

(c) the interest on deposits and the fines provided for in Council Regulation (EC) No 1467/97 (36);

(d) revenue earmarked for a specific purpose, such as income from foundations, subsidies, gifts and bequests, including the earmarked revenue specific to each Union institution;

(e) financial contributions to Union activities from third countries or from bodies other than those set up under the TFEU or the Euratom Treaty;

(f) internal assigned revenue referred to in paragraph 3, to the extent that it is ancillary to external assigned revenue referred to in this paragraph;

(g) revenue from the activities of a competitive nature conducted by the Joint Research Centre (JRC) which consist of any of the following:

(i) grant and procurement procedures in which the JRC participates;

(ii) activities of the JRC on behalf of third parties;

(iii) activities undertaken under an administrative agreement with other Union institutions or other Commission departments, in accordance with Article 59, for the provision of technical-scientific services.

3.   The following shall constitute internal assigned revenue:

(a) revenue from third parties in respect of goods, services or work supplied at their request;

(b) revenue arising from the repayment, in accordance with Article 101, of amounts wrongly paid;

(c) proceeds from the supply of goods, services and works to other departments within an Union institution, or to other Union institutions or bodies, including refunds by other Union institutions or bodies of mission allowances paid on their behalf;

(d) insurance payments received;

(e) revenue from lettings and from the sale of buildings and land;

(f) repayments to financial instruments or budgetary guarantees pursuant to the second subparagraph of Article 209(3);

(g) revenue arising from subsequent reimbursement of taxes pursuant to point (b) of the first subparagraph of Article 27(3).

4.   Assigned revenue shall be carried over and transferred in accordance with points (b) and (c) of Article 12(4) and with Article 32.

5.   A basic act may assign the revenue for which it provides to specific items of expenditure. Unless otherwise specified in the basic act, such revenue shall constitute internal assigned revenue.

6.   The budget shall include lines to accommodate external assigned revenue and internal assigned revenue and shall, wherever possible, indicate the amount.

Article 22

Structure to accommodate assigned revenue and provision of corresponding appropriations

1.   Without prejudice to point (c) of the first subparagraph of paragraph 2 of this Article and to Article 24, the structure to accommodate assigned revenue in the budget shall comprise:

(a) in the statement of revenue of each Union institution’s section, a budget line to receive the revenue;

(b) in the statement of expenditure, the remarks, including general remarks, showing which budget lines may receive the appropriations corresponding to the assigned revenue which are made available.

In the case referred to in point (a) of the first subparagraph, a token entry

pro memoria

shall be made and the estimated revenue shall be shown for information in the remarks.

2.   The appropriations corresponding to assigned revenue shall be made available automatically, both as commitment appropriations and as payment appropriations, when the revenue has been received by the Union institution, save in any of the following cases:

(a) in the case provided for in point (a) of Article 21(2) for financial contributions from Member States and where the contribution agreement is expressed in euro, commitment appropriations may be made available upon signature of the contribution agreement by the Member State;

(b) in the cases provided for in point (b) of Article 21(2) and in points (i) and (iii) of Article 21(2)(g), the commitment appropriations shall be made available as soon as the amount receivable has been estimated;

(c) in the case provided for in point (c) of Article 21(2), the entry of the amounts in the statement of revenue shall give rise to the provision, in the statement of expenditure, of commitment and payment appropriations.

Appropriations referred to in point (c) of the first subparagraph of this paragraph shall be implemented in accordance with Article 20.

3.   The estimates of amounts receivable referred to in points (b) and (g) of Article 21(2) shall be sent to the accounting officer for registration.

Article 23

Contributions from Member States to research programmes

1.   The contributions from Member States to the financing of certain supplementary research programmes, provided for in Article 5 of Regulation (EU, Euratom) No 609/2014, shall be paid as follows:

(a) seven twelfths of the sum entered in the budget shall be paid by 31 January of the current financial year;

(b) the remaining five twelfths shall be paid by 15 July of the current financial year.

2.   Where the budget has not been definitively adopted before the start of a financial year, the contributions provided for in paragraph 1 shall be based on the sum entered in the budget for the preceding financial year.

3.   Any contribution or additional payment owed by Member States to the budget shall be entered in the Commission’s account or accounts within thirty calendar days of the call for funds.

4.   Payments made shall be entered in the account provided for in Regulation (EU, Euratom) No 609/2014 and shall be subject to the conditions laid down by that Regulation.

Article 24

Assigned revenue resulting from the participation of EFTA States in certain Union programmes

1.   The budget structure to accommodate the revenue from the participation of EFTA States in certain Union programmes shall be as follows:

(a) in the statement of revenue, a budget line with a token entry

pro memoria

shall be entered to accommodate the full amount of each EFTA State’s contribution for the financial year;

(b) in the statement of expenditure, an annex, forming an integral part of the budget, shall set out all the budget lines covering the Union activities in which EFTA States participate, and shall include information on the estimated amount of the participation of each EFTA State.

2.   Under Article 82 of the EEA Agreement, the amounts of the annual participation of EFTA States, as confirmed to the Commission by the Joint Committee of the European Economic Area in accordance with Article 1(5) of Protocol No 32 annexed to the EEA Agreement, shall give rise to the provision, at the start of the financial year, of the full amounts of the corresponding commitment appropriations and payment appropriations.

3.   The use of the revenue arising from the financial contribution of EFTA States shall be monitored separately.

Article 25

Donations

1.   Union institutions may accept any donation made to the Union, such as income from foundations, subsidies, gifts and bequests.

2.   Acceptance of a donation of a value of EUR 50 000 or more which involves a financial charge, including follow-up costs, exceeding 10 % of the value of the donation made, shall be subject to the authorisation of the European Parliament and of the Council. The European Parliament and the Council shall act on the matter within two months of receiving a request for such an authorisation from the Union institutions concerned. If no objection is made within that period, the Union institutions concerned shall take a final decision regarding the acceptance of the donation. The Union institutions concerned shall in their request to the European Parliament and to the Council explain the financial charges entailed by the acceptance of donations made to the Union.

Article 26

Corporate sponsorship

1.   ‘Corporate sponsorship’ means an agreement by which a legal person supports in-kind an event or an activity for promotional or corporate social responsibility purposes.

2.   On the basis of specific internal rules, which shall be published on their respective websites, Union institutions and bodies may exceptionally accept corporate sponsorship provided that:

(a) there is due regard to the principles of non-discrimination, proportionality, equal treatment and transparency at all stages of the procedure for accepting corporate sponsorship;

(b) it contributes to the positive image of the Union and is directly linked to the core objective of an event or of an activity;

(c) it does neither generate conflict of interests nor concern exclusively social events;

(d) the event or activity is not exclusively financed through corporate sponsorship;

(e) the service in return for the corporate sponsorship is limited to the public visibility of the trademark or name of the sponsor;

(f) the sponsor is not, at the time of the sponsorship procedure, in one of the situations referred to in Articles 136(1) and 141(1) and is not registered as excluded in the database referred to in Article 142(1).

3.   Where the value of the corporate sponsorship exceeds EUR 5 000, the sponsor shall be listed in a public register that includes information on the type of event or activity being sponsored.

Article 27

Rules on deductions and exchange rate adjustments

1.   The following deductions may be made from payment requests which shall then be passed for payment of the net amount:

(a) penalties imposed on parties to contracts or beneficiaries;

(b) discounts, refunds and rebates on individual invoices and cost statements;

(c) interest generated by pre-financing payments;

(d) adjustments for amounts unduly paid.

The adjustments referred to in point (d) of the first subparagraph may be made, by means of direct deduction, against a new interim payment or payment of a balance to the same payee under the chapter, article and financial year in respect of which the excess payment was made.

Union accounting rules shall apply to the deductions referred to in points (c) and (d) of the first subparagraph.

2.   The cost of products or services, provided to the Union, incorporating taxes refunded by Member States pursuant to Protocol No 7 on the privileges and immunities of the European Union, annexed to the TEU and to the TFEU, shall be charged to the budget for the ex-tax amount.

3.   The cost of products or services, provided to the Union, incorporating taxes refunded by third countries on the basis of relevant agreements, may be charged to the budget for any of the following amounts:

(a) the ex-tax amount;

(b) the tax-inclusive amount.

In the case referred to in point (b) of the first subparagraph, subsequently reimbursed taxes shall be treated as internal assigned revenue.

4.   Adjustments may be made in respect of exchange differences occurring in budget implementation. The final gain or loss shall be included in the balance for the financial year.

CHAPTER 6

Principle of specification

Article 28

General provisions

1.   Appropriations shall be earmarked for specific purposes by title and chapter. The chapters shall be further subdivided into articles and items.

2.   The Commission and the other Union institutions may transfer appropriations within the budget subject to the specific conditions laid down in Articles 29 to 32.

Appropriations may only be transferred to budget lines for which the budget has authorised appropriations or which carry a token entry

pro memoria

.

The limits referred to in Articles 29, 30 and 31 shall be calculated at the time the request for transfer is made and with reference to the appropriations provided in the budget, including amending budgets.

The amount to be taken into consideration for the purposes of calculating the limits referred to in Articles 29, 30 and 31 shall be the sum of the transfers to be made on the budget line from which transfers are being made, after adjustment for earlier transfers made. The amount corresponding to the transfers which are carried out autonomously by the Commission, or by any other Union institution concerned without a decision of the European Parliament and of the Council, shall not be taken into consideration.

Proposals for transfers and all information for the European Parliament and for the Council concerning transfers made under Articles 29, 30 and 31 shall be accompanied by appropriate and detailed supporting documents showing the most recent information available for the implementation of appropriations and estimates of requirements up to the end of the financial year, both for the budget lines to which the appropriations are to be transferred and for those from which they are to be taken.

Article 29

Transfers by Union institutions other than the Commission

1.   Any Union institution other than the Commission may, within its own section of the budget, transfer appropriations:

(a) from one title to another up to a maximum of 10 % of the appropriations for the financial year shown on the budget line from which the transfer is made;

(b) from one chapter to another without limit.

2.   Without prejudice to paragraph 4 of this Article, three weeks before making a transfer, as referred to in paragraph 1, the Union institution shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified objections are raised within that period by either the European Parliament or the Council, the procedure laid down in Article 31 shall apply.

3.   Any Union institution other than the Commission may propose to the European Parliament and to the Council, within its own section of the budget, transfers from one title to another exceeding the limit referred to in point (a) of paragraph 1 of this Article. Those transfers shall be subject to the procedure laid down in Article 31.

4.   Any Union institution other than the Commission may, within its own section of the budget, make transfers within articles without informing the European Parliament and the Council beforehand.

Article 30

Transfers by the Commission

1.   The Commission may, within its own section of the budget, autonomously:

(a) transfer appropriations within each chapter;

(b) with regard to expenditure on staff and administration which is common to several titles, transfer appropriations from one title to another up to a maximum of 10 % of the appropriations for the financial year shown on the budget line from which the transfer is made, and up to a maximum of 30 % of the appropriations for the financial year shown on the budget line to which the transfer is made;

(c) with regard to operational expenditure, transfer appropriations between chapters within the same title up to a maximum of 10 % of the appropriations for the financial year shown on the budget line from which the transfer is made;

(d) with regard to research and technological development appropriations implemented by the JRC, within the title of the budget relating to the ‘Direct research’ policy area, transfer appropriations between chapters of up to a maximum of 15 % of the appropriations on the budget line from which the transfer is made;

(e) with regard to research and technological development, transfer operational appropriations from one title to another, provided that the appropriations are used for the same purpose;

(f) with regard to operational expenditure of the funds implemented under shared management, with the exception of the EAGF, transfer appropriations from one title to another, provided that the appropriations concerned are for the same objective within the meaning of the Regulation establishing the fund concerned or constitute technical assistance expenditure;

(g) transfer appropriations from the budgetary item of a budgetary guarantee to the budgetary item of another budgetary guarantee, in the exceptional cases when the provisioned resources in the common provisioning fund of the latter are insufficient to pay a guarantee call and subject to the subsequent restoring of the amount transferred in accordance with the procedure set out in Article 212(4).

The expenditure referred to in point (b) of the first subparagraph of this paragraph shall cover, for each policy area, the items referred to in Article 47(4).

Where the Commission transfers EAGF appropriations pursuant to the first subparagraph after 31 December, it shall take its decision by 31 January of the following financial year. The Commission shall inform the European Parliament and the Council within two weeks after its decision on those transfers.

Three weeks before making the transfers referred to in point (b) of the first subparagraph of this paragraph, the Commission shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified objections are raised within that period by the European Parliament or by the Council, the procedure laid down in Article 31 shall apply.

By way of derogation from the fourth subparagraph, the Commission may, during the last two months of the financial year, autonomously transfer appropriations concerning expenditure on staff, external personnel and other agents from one title to another within the total limit of 5 % of the appropriations for that year. The Commission shall inform the European Parliament and the Council within two weeks after its decision on those transfers.

2.   The Commission may, within its own section of the budget, decide on the following transfers of appropriations from one title to another, provided it immediately informs the European Parliament and the Council of its decision:

(a) transfer of appropriations from the ‘provisions’ title referred to in Article 49 of this Regulation, where the only condition for lifting the reserve is the adoption of a basic act pursuant to Article 294 TFEU;

(b) in duly justified exceptional cases such as international humanitarian disasters and crises occurring after 1 December of the financial year, transfer of unused appropriations for that year still available in the titles falling under the heading of the multiannual financial framework dedicated to Union external action to the titles concerning crisis management aid and humanitarian aid operations.

Article 31

Transfer proposals submitted to the European Parliament and to the Council by Union institutions

1.   Each Union institution shall submit its transfer proposals simultaneously to the European Parliament and to the Council.

2.   The Commission may submit proposals for transfers of payment appropriations to the funds implemented under shared management with the exception of the EAGF to the European Parliament and to the Council by 10 January of the following financial year. The transfer of the payment appropriations may be made from any budgetary item. In such cases, the six-week period referred to in paragraph 4 shall be reduced to three weeks.

If the transfer is not approved or only partially approved by the European Parliament and by the Council, the corresponding part of the expenditure referred to in point (b) of Article 10(5) shall be charged to the payment appropriations of the following financial year.

3.   The European Parliament and the Council shall take decisions on transfers of appropriations in accordance with paragraphs 4 to 8.

4.   Except in urgent circumstances, the European Parliament and the Council, the latter acting by qualified majority, shall deliberate upon each transfer proposal within six weeks of its receipt by both institutions. In urgent circumstances, the European Parliament and the Council shall deliberate within three weeks of receipt of the proposal.

5.   Where the Commission intends to transfer EAGF appropriations in accordance with this Article, it shall submit transfer proposals to the European Parliament and to the Council by 10 January of the following financial year. In such cases, the six-week period referred to in paragraph 4 shall be reduced to three weeks.

6.   A transfer proposal shall be approved or considered to be approved, if, within the six-week period, any of the following occurs:

(a) the European Parliament and the Council approve it;

(b) either the European Parliament or the Council approves it and the other institution refrains from acting;

(c) neither the European Parliament nor the Council takes a decision to amend or refuse the transfer proposal.

7.   Unless either the European Parliament or the Council requests otherwise, the six-week period referred to in paragraph 4 shall be reduced to three weeks in the following cases:

(a) the transfer represents less than 10 % of the appropriations of the budget line from which the transfer is made and does not exceed EUR 5 000 000;

(b) the transfer concerns only payment appropriations and the overall amount of the transfer does not exceed EUR 100 000 000.

8.   If either the European Parliament or the Council has amended the amount of the transfer while the other institution has approved it or refrains from acting, or if the European Parliament and the Council have both amended the amount of the transfer, the lesser of the two amounts shall be deemed approved, unless the Union institution concerned withdraws its transfer proposal.

Article 32

Transfers subject to special provisions

1.   Appropriations corresponding to assigned revenue may be transferred only if such revenue is used for the purpose for which it is assigned.

2.   Decisions on transfers to allow the use of the Emergency Aid Reserve shall be taken by the European Parliament and by the Council on a proposal from the Commission.

For the purposes of this paragraph, the procedure set out in Article 31(3) and (4) shall apply. If the European Parliament and the Council do not agree to the Commission proposal and cannot reach a common position on the use of the Emergency Aid Reserve, they shall refrain from acting on that proposal.

Proposals for transfers from the Emergency Aid Reserve shall be accompanied by appropriate and detailed supporting documents demonstrating:

(a) the most recent information available for the implementation of appropriations and the estimate of requirements up to the end of the financial year for the budget line to which the transfer is to be made;

(b) an analysis of the possibilities of reallocating appropriations.

CHAPTER 7

Principle of sound financial management and performance

Article 33

Performance and principles of economy, efficiency and effectiveness

1.   Appropriations shall be used in accordance with the principle of sound financial management, and thus be implemented respecting the following principles:

(a) the principle of economy which requires that the resources used by the Union institution concerned in the pursuit of its activities shall be made available in due time, in appropriate quantity and quality, and at the best price;

(b) the principle of efficiency which concerns the best relationship between the resources employed, the activities undertaken and the achievement of objectives;

(c) the principle of effectiveness which concerns the extent to which the objectives pursued are achieved through the activities undertaken.

2.   In line with the principle of sound financial management, the use of appropriations shall focus on performance and for that purpose:

(a) objectives for programmes and activities shall be established

ex ante

;

(b) progress in the achievement of objectives shall be monitored with performance indicators;

(c) progress in, and problems with, the achievement of objectives shall be reported to the European Parliament and to the Council in accordance with point (h) of the first subparagraph of Article 41(3) and with point (e) of Article 247(1).

3.   Specific, measurable, attainable, relevant and time-bound objectives as referred to in paragraphs 1 and 2 and relevant, accepted, credible, easy and robust indicators shall be defined where relevant.

Article 34

Evaluations

1.   Programmes and activities which entail significant spending shall be subject to

ex ante

and retrospective evaluations, which shall be proportionate to the objectives and expenditure.

2.   Ex ante evaluations supporting the preparation of programmes and activities shall be based on evidence on the performance of related programmes or activities and shall identify and analyse the issues to be addressed, the added value of Union involvement, objectives, expected effects of different options and monitoring and evaluation arrangements.

For major programmes or activities that are expected to have significant economic, environmental or social impacts, the

ex ante

evaluation may take the form of an impact assessment that, in addition to meeting the requirements set out in the first subparagraph, analyses the various options concerning the methods of implementation.

3.   Retrospective evaluations shall assess the performance of the programme or activity, including aspects such as effectiveness, efficiency, coherence, relevance and EU added value. Retrospective evaluations shall be based on the information generated by the monitoring arrangements and indicators established for the action concerned. They shall be undertaken at least once during the term of every multiannual financial framework and where possible in sufficient time for the findings to be taken into account in

ex ante

evaluations or impact assessments which support the preparation of related programmes and activities.

Article 35

Compulsory financial statement

1.   Any proposal or initiative submitted to the legislative authority by the Commission, the High Representative of the Union for Foreign Affairs and Security Policy (the ‘High Representative’) or by a Member State, which may have an impact on the budget, including changes in the number of posts, shall be accompanied by a financial statement showing the estimates in terms of payment and commitment appropriations, by an assessment of the different financing options available, and by an

ex ante

evaluation or impact assessment as provided for in Article 34.

Any amendment to a proposal or initiative submitted to the legislative authority which may have an appreciable impact on the budget, including changes in the number of posts, shall be accompanied by a financial statement prepared by the Union institution proposing the amendment.

The financial statement shall contain the financial and economic data necessary for the assessment by the legislative authority of the need for Union action. It shall provide appropriate information as regards coherence with other activities of the Union and any possible synergy.

In the case of multiannual operations, the financial statement shall contain the foreseeable schedule of annual requirements in terms of commitment and payment appropriations and posts, including for external personnel, and an evaluation of their medium-term and, where possible, long-term financial impact.

2.   During the budgetary procedure, the Commission shall provide the necessary information for a comparison between changes in the appropriations required and the initial forecasts made in the financial statement in the light of the progress of deliberations on the proposal or initiative submitted to the legislative authority.

3.   In order to reduce the risk of fraud, irregularities and non-achievement of objectives, the financial statement shall provide information on the internal control system set up, an estimate of the costs and benefits of the controls implied by such a system and an assessment of the expected level of risk of error, as well as information on existing and planned fraud prevention and protection measures.

Such assessment shall take into account the likely scale and type of errors, as well as the specific conditions of the policy area concerned and the rules applicable thereto.

4.   When presenting revised or new spending proposals, the Commission shall estimate the costs and benefits of control systems, as well as the expected level of risk of error as referred to in paragraph 3.

Article 36

Internal control of budget implementation

1.   Pursuant to the principle of sound financial management, the budget shall be implemented in compliance with the effective and efficient internal control appropriate to each method of implementation, and in accordance with the relevant sector-specific rules.

2.   For the purposes of budget implementation, internal control shall be applied at all levels of management and shall be designed to provide reasonable assurance of achieving the following objectives:

(a) effectiveness, efficiency and economy of operations;

(b) reliability of reporting;

(c) safeguarding of assets and information;

(d) prevention, detection, correction and follow-up of fraud and irregularities;

(e) adequate management of the risks relating to the legality and regularity of the underlying transactions, taking into account the multiannual character of programmes as well as the nature of the payments concerned.

3.   Effective internal control shall be based on best international practices and include, in particular, the following elements:

(a) segregation of tasks;

(b) an appropriate risk management and control strategy that includes control at recipient level;

(c) avoidance of conflict of interests;

(d) adequate audit trails and data integrity in data systems;

(e) procedures for monitoring effectiveness and efficiency;

(f) procedures for follow-up of identified internal control weaknesses and exceptions;

(g) periodic assessment of the sound functioning of the internal control system.

4.   Efficient internal control shall be based on the following elements:

(a) the implementation of an appropriate risk management and control strategy coordinated among appropriate actors involved in the control chain;

(b) the accessibility for all appropriate actors in the control chain of the results of controls carried out;

(c) reliance, where appropriate, on management declarations of implementation partners and on independent audit opinions, provided that the quality of the underlying work is adequate and acceptable and that it was performed in accordance with agreed standards;

(d) the timely application of corrective measures including, where appropriate, dissuasive penalties;

(e) clear and unambiguous legislation underlying the policies concerned, including basic acts on the elements of the internal control;

(f) the elimination of multiple controls;

(g) the improvement of the cost benefit ratio of controls.

5.   If, during implementation, the level of error is persistently high, the Commission shall identify the weaknesses in the control systems, analyse the costs and benefits of possible corrective measures and take or propose appropriate action, such as simplification of the applicable provisions, improvement of the control systems and redesign of the programme or delivery systems.

CHAPTER 8

Principle of transparency

Article 37

Publication of accounts and budgets

1.   The budget shall be established and implemented and the accounts presented in accordance with the principle of transparency.

2.   The President of the European Parliament shall have the budget and any amending budget, as definitively adopted, published in the

Official Journal of the European Union

.

The budgets shall be published within three months of the date on which they are declared definitively adopted.

Pending official publication in the

Official Journal of the European Union

, the final detailed budget figures shall be published in all languages on the website of Union institutions, on the Commission’s initiative, as soon as possible and no later than four weeks after the definitive adoption of the budget.

The consolidated annual accounts shall be published in the

Official Journal of the European Union

and on the website of Union institutions.

Article 38

Publication of information on recipients and other information

1.   The Commission shall make available, in an appropriate and timely manner, information on recipients of funds financed from the budget, where the budget is implemented by it in accordance with point (a) of the first subparagraph of Article 62(1).

The first subparagraph of this paragraph shall also apply to other Union institutions when they implement the budget pursuant to Article 59(1).

2.   Save in the cases referred to in paragraphs 3 and 4, the following information shall be published, having due regard for the requirements of confidentiality and security, in particular the protection of personal data:

(a) the name of the recipient;

(b) the locality of the recipient, namely:

(i) the address of the recipient when the recipient is a legal person;

(ii) the region on NUTS 2 level when the recipient is a natural person;

(c) the amount legally committed;

(d) the nature and purpose of the measure.

The information referred to in the first subparagraph of this paragraph shall only be published for prizes, grants and contracts which have been awarded as a result of contests, grant award procedures or procurement procedures, and for experts selected pursuant to Article 237(2).

3.   The information referred to in the first subparagraph of paragraph 2 shall not be published for:

(a) education supports paid to natural persons and other direct support paid to natural persons most in need as referred to in point (b) of Article 191(4);

(b) very low value contracts awarded to experts selected pursuant to Article 237(2) as well as very low value contracts below the amount referred to in point 14.4 of Annex I;

(c) financial support provided through financial instruments for an amount lower than EUR 500 000;

(d) where disclosure risks threatening the rights and freedoms of the persons or entities concerned as protected by the Charter of Fundamental Rights of the European Union or harming the commercial interests of the recipients.

In the cases referred to in point (c) of the first subparagraph, the information made available shall be limited to statistical data, aggregated in accordance with relevant criteria, such as geographical situation, economic typology of recipients, type of support received and the Union policy area under which such support was provided.

Where natural persons are concerned, the disclosure of the information referred to in the first subparagraph of paragraph 2 shall be based on relevant criteria such as the frequency or the type of the measure and the amounts involved.

4.   Persons or entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) shall publish information on recipients in accordance with their rules and procedures, to the extent that those rules are deemed equivalent following the assessment carried out by the Commission pursuant to point (e) of the first subparagraph of Article 154(4), and provided that any publication of personal data is subject to safeguards equivalent to those set out in this Article.

Bodies designated pursuant to Article 63(3) shall publish information in accordance with sector-specific rules. Those sector-specific rules may, in accordance with the relevant legal basis, derogate from paragraphs 2 and 3 of this Article, in particular for the publication of personal data, where justified on the basis of the criteria referred to in the third subparagraph of paragraph 3 of this Article, and taking into account the specificities of the sector concerned.

5.   The information referred to in paragraph 1 shall be published on the websites of Union institutions, no later than 30 June of the year following the financial year in which the funds were legally committed.

The websites of Union institutions shall contain a reference to the address of the website where the information referred to in paragraph 1 can be found if it is not published directly on a dedicated website of Union institutions.

The Commission shall make available, in an appropriate and timely manner, information about a single website, including a reference to its address, where the information as provided by the persons, entities or bodies referred to in paragraph 4 can be found.

6.   Where personal data are published, the information shall be removed two years after the end of the financial year in which the funds were legally committed. This shall also apply to personal data referring to legal persons whose official name identifies one or more natural persons.

TITLE III

ESTABLISHMENT AND STRUCTURE OF THE BUDGET

CHAPTER 1

Establishment of the budget

Article 39

Estimates of revenue and expenditure

1.   Each Union institution other than the Commission shall draw up an estimate of its revenue and expenditure, which it shall send to the Commission, and in parallel, for information, to the European Parliament and to the Council, before 1 July each year.

2.   The High Representative shall hold consultations with the members of the Commission responsible for development policy, neighbourhood policy, international cooperation, humanitarian aid and crisis response, regarding their respective responsibilities.

3.   The Commission shall draw up its own estimates, which it shall send, directly after their adoption, to the European Parliament and to the Council. In preparing its estimates, the Commission shall use the information referred to in Article 40.

Article 40

Estimated budget of the Union bodies referred to in Article 70

By 31 January each year, each Union body referred to in Article 70 shall, in accordance with the instrument establishing it, send the Commission, the European Parliament and the Council its draft single programming document containing its annual and multi-annual programming with the corresponding planning for human and financial resources.

Article 41

Draft budget

1.   The Commission shall submit a proposal containing the draft budget to the European Parliament and to the Council by 1 September of the year preceding that in which the budget is to be implemented. It shall transmit that proposal, for information, to the national parliaments.

The draft budget shall contain a summary general statement of the revenue and expenditure of the Union and shall consolidate the estimates referred to in Article 39. It may also contain different estimates from those drawn up by Union institutions.

The draft budget shall follow the structure and presentation set out in Articles 47 to 52.

Each section of the draft budget shall be preceded by an introduction drawn up by the Union institution concerned.

The Commission shall draw up the general introduction to the draft budget. The general introduction shall comprise financial tables covering the main data by titles and justifications for the changes in the appropriations from one financial year to the next by categories of expenditure of the multiannual financial framework.

2.   In order to provide more precise and reliable forecasts of the budgetary implications of legislation in force and of pending legislative proposals, the Commission shall attach to the draft budget an indicative financial programming for the following years, structured by category of expenditure, policy area and budget line. The complete financial programming shall cover the categories of expenditure covered by point 30 of the Interinstitutional Agreement of 2 December 2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management (37). Summary data shall be provided for the categories of expenditure not covered by point 30 of that Interinstitutional Agreement.

The indicative financial programming shall be updated after the adoption of the budget to incorporate the results of the budgetary procedure and any other relevant decisions.

3.   The Commission shall attach to the draft budget:

(a) a comparative table including the draft budget for other Union institutions and the original estimates of other Union institutions as sent to the Commission and, where applicable, setting out the reasons for which the draft budget contains estimates different from those drawn up by other Union institutions;

(b) any working document it considers useful in connection with the establishment plans of Union institutions, showing the latest authorised establishment plan and presenting:

(i) all staff employed by the Union, displayed by type of employment contract;

(ii) a statement of the policy on posts and external personnel and on gender balance;

(iii) the number of posts actually filled on the last day of the year preceding the year in which the draft budget is presented and the annual average of full-time equivalents actually in place for that preceding year, indicating their distribution by grade, by gender and by administrative unit;

(iv) a list of posts broken down per policy area;

(v) for each category of external personnel, the initial estimated number of full-time equivalents on the basis of the authorised appropriations, as well as the number of persons actually in place at the beginning of the year in which the draft budget is presented, indicating their distribution by function group and, as appropriate, by grade;

(c) for the Union bodies referred to in Articles 70 and 71, a working document presenting the revenue and expenditure, as well as all information on staff as referred to in point (b) of this subparagraph;

(d) a working document on the planned implementation of appropriations for the financial year and on commitments outstanding;

(e) as regards appropriations for administration, a working document presenting administrative expenditure to be implemented by the Commission under its section of the budget;

(f) a working document on pilot projects and preparatory actions which also contain an assessment of the results and the follow-up envisaged;

(g) as regards funding to international organisations, a working document containing:

(i) a summary of all contributions, with a breakdown per Union programme or fund and per international organisation;

(ii) a statement of reasons explaining why it is more efficient for the Union to fund those international organisations rather than to act directly;

(h) programme statements or any other relevant document containing the following:

(i) an indication of which Union policies and objectives the programme is to contribute to;

(ii) a clear rationale for intervention at Union level in accordance, inter alia, with the principle of subsidiarity;

(iii) progress in achieving programme objectives, as specified in Article 33;

(iv) a full justification, including a cost-benefit analysis for proposed changes in the level of appropriations;

(v) information on the implementation rates of the programme for the current and preceding financial year;

(i) a summary statement of the schedule of payments summarising per programme and per heading payments due in subsequent financial years to meet budgetary commitments proposed in the draft budget entered into in preceding financial years.

Where public-private partnerships make use of financial instruments, the information relating to those instruments shall be included in the working document referred to in paragraph 4.

4.   Where the Commission makes use of financial instruments, it shall attach to the draft budget a working document presenting for each financial instrument the following:

(a) a reference to the financial instrument and its basic act, together with a general description of the instrument, its impact on the budget, its duration and the added value of the Union contribution;

(b) the financial institutions involved in implementation, including any issues relating to the application of Article 155(2);

(c) the contribution of the financial instrument to the achievement of the objectives of the programme concerned as measured by the indicators established including, where applicable, the geographical diversification;

(d) the envisaged operations, including target volumes based on the target leverage and expected private capital to be mobilised or, when unavailable, on the leverage effect arising from the existing financial instruments;

(e) budget lines corresponding to the relevant operations and the aggregate budgetary commitments and payments from the budget;

(f) the average duration between the budgetary commitment to the financial instruments and the legal commitments for individual projects in the form of equity or debt, where that duration exceeds three years;

(g) revenue and repayments under Article 209(3), presented separately, including an evaluation of their use;

(h) the value of equity investments, with respect to preceding years;

(i) the total amount of provisions for risks and liabilities, as well as any information on the financial risk exposure of the Union, including any contingent liability;

(j) impairments of assets and called guarantees both for the preceding year and the respective accumulated figures;

(k) the performance of the financial instrument, including the investments realised, the target and the achieved leverage and multiplier effects, and also the amount of private capital mobilised;

(l) the provisioned resources in the common provisioning fund and, when applicable, the balance on the fiduciary account.

The working document referred to in the first subparagraph shall also include an overview of the administrative expenditure arising from management fees and other financial and operating charges paid for the management of financial instruments in total and per managing party and per financial instrument managed.

The Commission shall explain the reasons for the duration referred to in point (f) of the first subparagraph and shall, where appropriate, provide an action plan for the reduction of the duration in the framework of the annual discharge procedure.

The working document referred to in the first subparagraph shall summarise in a clear and concise table information per financial instrument.

5.   Where the Union has granted a budgetary guarantee, the Commission shall attach to the draft budget a working document presenting for each budgetary guarantee and for the common provisioning fund the following:

(a) a reference to the budgetary guarantee and its basic act, together with a general description of the budgetary guarantee, its impact on the financial liabilities of the budget, its duration and the added value of the Union support;

(b) the counterparts for the budgetary guarantee, including any issues relating to the application of Article 155(2);

(c) the budgetary guarantee’s contribution to the achievement of the objectives of the budgetary guarantee as measured by the indicators established, including, where applicable, the geographical diversification and the mobilisation of private sector resources;

(d) information on operations covered by the budgetary guarantee on an aggregated basis by sectors, countries and instruments, including, where applicable, portfolios and support combined with other Union actions;

(e) the amount transferred to recipients as well as an assessment of the leverage effect achieved by the projects supported under the budgetary guarantee;

(f) information aggregated on the same basis as referred to in point (d) on calls on the budgetary guarantee, losses, returns, amounts recovered and any other payments received;

(g) information about the financial management, the performance and the risk of the common provisioning fund at the end of the preceding calendar year;

(h) the effective provisioning rate of the common provisioning fund and, where applicable, the subsequent operations in accordance with Article 213(4);

(i) the financial flows in the common provisioning fund during the preceding calendar year as well as the significant transactions and any relevant information on the financial risk exposure of the Union;

(j) pursuant to Article 210(3), an assessment of the sustainability of the contingent liabilities borne by the budget arising from budgetary guarantees or financial assistance.

6.   Where the Commission makes use of Union trust funds for external actions, it shall attach to the draft budget a detailed working document on the activities supported by those trust funds, including:

(a) on their implementation, containing, inter alia, information on the monitoring arrangements with the entities implementing the trust funds;

(b) their management costs;

(c) the contributions from other donors than the Union;

(d) a preliminary assessment of their performance based on the conditions set out in Article 234(3);

(e) a description on how their activities have contributed to the objectives laid down in the basic act of the instrument from which the Union contribution to the trust funds were provided.

7.   The Commission shall attach to the draft budget a list of its decisions imposing fines in the area of competition law and the amount of each fine imposed, together with information on whether the fines have become definitive or whether they are or could still become subject to an appeal before the Court of Justice of the European Union, as well as, where possible, information on when each fine is expected to become definitive.

8.   The Commission shall attach to the draft budget a working document indicating, for each budget line receiving internal or external assigned revenue:

(a) the estimated amount of such revenue to be received;

(b) the estimated amount of such revenue carried over from preceding years.

9.   The Commission shall also attach to the draft budget any further working document it considers useful for the European Parliament and for the Council to assess the budget requests.

10.   In accordance with Article 8(5) of Council Decision 2010/427/EU (38), the Commission shall transmit to the European Parliament and to the Council, together with the draft budget, a working document presenting, in a comprehensive way:

(a) all administrative and operational expenditure relating to the external actions of the Union, including CFSP and common security and defence policy tasks, and financed from the budget;

(b) the EEAS’ overall administrative expenditure for the preceding year, broken down into expenditure per Union delegation and expenditure for the central administration of the EEAS, together with operational expenditure, broken down by geographic area (regions, countries), thematic areas, Union delegations and missions.

11.   The working document referred to in paragraph 10 shall also:

(a) show the number of posts for each grade in each category and the number of permanent and temporary posts, including contractual and local staff authorised within the limits of the appropriations in each Union delegation, as well as in the central administration of the EEAS;

(b) show any increase or reduction, compared to the preceding financial year, of posts by grade and category in the central administration of the EEAS, and in all Union delegations;

(c) show the number of posts authorised for the financial year and for the preceding financial year, as well as the number of posts occupied by diplomats seconded from Member States, and by Union officials;

(d) provide a detailed picture of all personnel in place in Union delegations at the time of presenting the draft budget, including a breakdown by geographic area, gender, individual country and mission, distinguishing between establishment plan posts, contract agents, local agents and seconded national experts, and of appropriations requested in the draft budget for such types of personnel with corresponding estimates of the number of full-time equivalents on the basis of the appropriations requested.

Article 42

Letter of amendment to the draft budget

On the basis of any new information which was not available at the time the draft budget was established, the Commission may, on its own initiative or if requested by another Union institutions in respect of its respective section, submit simultaneously to the European Parliament and to the Council one or more letters of amendment to the draft budget before the Conciliation Committee referred to in Article 314 TFEU is convened. Such letters may include a letter of amendment updating, in particular, expenditure estimates for agriculture.

Article 43

Obligations of Member States as a result of the adoption of the budget

1.   The President of the European Parliament shall declare the budget definitively adopted in accordance with the procedure provided for in Article 314(9) TFEU and Article 106a of the Euratom Treaty.

2.   Once the budget has been declared definitively adopted, each Member State shall, from 1 January of the following financial year or from the date of the declaration of definitive adoption of the budget if that occurs after 1 January, be bound to make the payments due to the Union, as specified in Regulation (EU, Euratom) No 609/2014.

Article 44

Draft amending budgets

1.   The Commission may present draft amending budgets which are primarily revenue-driven in the following circumstances:

(a) to enter in the budget the balance of the preceding financial year, in accordance with the procedure laid down in Article 18;

(b) to revise the forecast of own resources on the basis of updated economic forecasts;

(c) to update the revised forecast of own resources and other revenue, as well as to review the availability of, and need for, payment appropriations.

If there are unavoidable, exceptional and unforeseen circumstances, in particular in view of the mobilisation of the European Union Solidarity Fund, the Commission may present draft amending budgets which are primarily expenditure-driven.

2.   Requests for amending budgets, in the same circumstances as referred to in paragraph 1, from Union institutions other than the Commission shall be sent to the Commission.

Before presenting a draft amending budget, the Commission and the other Union institutions concerned shall examine the scope for reallocation of the relevant appropriations, with particular reference to any expected under-implementation of appropriations.

Article 43 shall apply to amending budgets. Amending budgets shall be substantiated by reference to the budget the estimates of which they are amending.

3.   The Commission shall, except in duly justified exceptional circumstances or in the case of the mobilisation of the European Union Solidarity Fund for which a draft amending budget can be presented at any time of the year, submit its draft amending budgets simultaneously to the European Parliament and to the Council by 1 September of each financial year. It may attach an opinion to the requests for amending budgets from other Union institutions.

4.   Draft amending budgets shall be accompanied by statements of reasons and information on budget implementation for the preceding and current financial years available at the time of their establishment.

Article 45

Early transmission of estimates and draft budgets

The Commission, the European Parliament and the Council may agree to bring forward certain dates for the transmission of the estimates, and for the adoption and transmission of the draft budget. Such an arrangement shall not, however, have the effect of shortening or extending the periods for which provision is made for consideration of those texts under Article 314 TFEU and Article 106a of the Euratom Treaty.

CHAPTER 2

Structure and presentation of the budget

Article 46

Structure of the budget

The budget shall consist of the following:

(a) a general statement of revenue and expenditure;

(b) separate sections for each Union institution, with the exception of the European Council and of the Council which shall share the same section, subdivided into statements of revenue and expenditure.

Article 47

Budget nomenclature

1.   Commission revenue and the revenue and expenditure of the other Union institutions shall be classified by the European Parliament and by the Council according to their type or the use to which they are assigned under titles, chapters, articles and items.

2.   The statement of expenditure for the section of the budget relating to the Commission shall be set out on the basis of a nomenclature adopted by the European Parliament and by the Council and classified according to the purpose of the expenditure.

Each title shall correspond to a policy area and each chapter shall, as a rule, correspond to a programme or an activity.

Each title may include operational appropriations and administrative appropriations. The administrative appropriations for a title shall be grouped in a single chapter.

The budget nomenclature shall comply with the principles of specification, sound financial management and transparency. It shall provide the clarity and transparency necessary for the budgetary process, facilitating the identification of the main objectives as reflected in the relevant legal bases, making choices on political priorities possible and enabling efficient and effective implementation.

3.   The Commission may request the addition of a token entry

pro memoria

on an entry without authorised appropriations. Such a request shall be approved in accordance with the procedure laid down in Article 31.

4.   When presented by purpose, administrative appropriations for individual titles shall be classified as follows:

(a) expenditure on staff authorised in the establishment plan, which shall include an amount of appropriations and a number of establishment plan posts corresponding to that expenditure;

(b) expenditure on external personnel and other expenditure referred to in point (b) of the first subparagraph of Article 30(1) and financed under the ‘administration’ heading of the multiannual financial framework;

(c) expenditure on buildings and other related expenditure, including cleaning and maintenance, rental and hiring, telecommunications, water, gas and electricity;

(d) expenditure on external personnel and technical assistance directly linked to the implementation of programmes.

Any administrative expenditure of the Commission of a type which is common to several titles shall be set out in a separate summary statement classified by type.

Article 48

Negative revenue

1.   The budget shall not contain negative revenue, except where it results from negative remuneration of deposits in total.

2.   The own resources paid under Decision 2014/335/EU, Euratom shall be net amounts and shall be shown as such in the summary statement of revenue in the budget.

Article 49

Provisions

1.   Each section of the budget may include a ‘provisions’ title. Appropriations shall be entered in that title in any of the following cases:

(a) no basic act exists for the action concerned when the budget is established;

(b) there are serious grounds for doubting the adequacy of the appropriations or the possibility of implementing, under conditions in accordance with the principle of sound financial management, the appropriations entered on the budget lines concerned.

The appropriations in that title may be used only after transfers in accordance with the procedure laid down in point (c) of the first subparagraph of Article 30(1) of this Regulation, where the adoption of the basic act is subject to the procedure laid down in Article 294 TFEU, and in accordance with the procedure laid down in Article 31 of this Regulation, for all other cases.

2.   In the event of serious implementation difficulties, the Commission may, in the course of a financial year, propose that appropriations be transferred to the ‘provisions’ title. The European Parliament and the Council shall take a decision on such transfers as provided for in Article 31.

Article 50

Negative reserve

The section of the budget relating to the Commission may include a ‘negative reserve’ limited to a maximum amount of EUR 200 000 000. Such a reserve, which shall be entered in a separate title, shall comprise payment appropriations only.

That negative reserve shall be drawn upon before the end of the financial year by means of transfers in accordance with the procedure laid down in Articles 30 and 31.

Article 51

Emergency Aid Reserve

1.   The section of the budget relating to the Commission shall include a reserve for emergency aid for third countries.

2.   The reserve referred to in paragraph 1 shall be drawn upon before the end of the financial year by means of transfers in accordance with the procedure laid down in Articles 30 and 32.

Article 52

Presentation of the budget

1.   The budget shall show:

(a) in the general statement of revenue and expenditure:

(i) the estimated revenue of the Union for the current financial year concerned (‘year n’);

(ii) the estimated revenue for the preceding financial year and the revenue for year n-2;

(iii) the commitment and payment appropriations for year n;

(iv) the commitment and payment appropriations for the preceding financial year;

(v) the expenditure committed and the expenditure paid in year n–2, the latter also expressed as a percentage of the budget of year n;

(vi) appropriate remarks on each subdivision, as set out in Article 47(1), including the references of the basic act, where one exists, as well as all appropriate explanations concerning the nature and purpose of the appropriations;

(b) in each section, the revenue and expenditure following the same structure as set out in point (a);

(c) with regard to staff:

(i) for each section, an establishment plan setting the number of posts for each grade in each category and in each service and the number of permanent and temporary posts authorised within the limits of the appropriations;

(ii) an establishment plan for staff paid from the research and technological development appropriations for direct action and an establishment plan for staff paid from the same appropriations for indirect action; the establishment plans shall be classified by category and grade and shall distinguish between permanent and temporary posts, authorised within the limits of the appropriations;

(iii) an establishment plan setting the number of posts by grade and by category for each Union body referred to in Article 70 which receives a contribution charged to the budget. The establishment plans shall show, next to the number of posts authorised for the financial year, the number authorised for the preceding year. The staff of the Euratom Supply Agency shall appear separately in the Commission establishment plan;

(d) with regard to financial assistance and budgetary guarantees:

(i) in the general statement of revenue, the budget lines corresponding to the relevant operations and intended to record any reimbursements received from recipients who initially defaulted. Those lines shall carry a token entry

pro memoria

and be accompanied by appropriate remarks;

(ii) in the section of the budget relating to the Commission:

— the budget lines containing the budgetary guarantees in respect of the operations concerned. Those lines shall carry a token entry

pro memoria

, provided that no effective charge which has to be covered by definitive resources has arisen;

— remarks giving the reference to the basic act and the volume of the operations envisaged, the duration and the financial guarantee provided by the Union in respect of such operations;

(iii) in a document annexed to the section of the budget relating to the Commission, as an indication, also of the corresponding risks:

— ongoing capital operations and debt management;

— the capital operations and debt management for year n;

(e) with regard to financial instruments to be established without a basic act:

(i) budget lines corresponding to the relevant operations;

(ii) a general description of the financial instruments, including their duration and their impact on the budget;

(iii) the envisaged operations, including target volumes based on the expected multiplier and leverage effect;

(f) with regard to the funds implemented by persons or entities pursuant to point (c) of the first subparagraph of Article 62(1):

(i) a reference to the basic act of the relevant programme;

(ii) corresponding budget lines;

(iii) a general description of the action, including its duration and its impact on the budget;

(g) the total amount of CFSP expenditure entered in a chapter, entitled ‘CFSP’, with specific articles covering CFSP expenditure and containing specific budget lines identifying at least the single major missions.

2.   In addition to the documents referred to in paragraph 1, the European Parliament and the Council may attach any other relevant documents to the budget.

Article 53

Rules on the establishment plans for staff

1.   The establishment plans referred to in point (c) of Article 52(1) shall constitute an absolute limit for each Union institution or body. No appointment shall be made in excess of the limit set.

However, save in the case of grades AD 14, AD 15 and AD 16, each Union institution or body may modify its establishment plans by up to 10 % of posts authorised, subject to the following conditions:

(a) the volume of staff appropriations corresponding to a full financial year is not affected;

(b) the limit of the total number of posts authorised by each establishment plan is not exceeded;

(c) the Union institution or body has taken part in a benchmarking exercise with other Union institutions and bodies as initiated by the Commission’s staff screening exercise.

Three weeks before making the modifications referred to in the second subparagraph, the Union institution shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified objections are raised within this period by either the European Parliament or the Council, the Union institution shall refrain from making the modifications and the procedure laid down in Article 44 shall apply.

2.   By way of derogation from the first subparagraph of paragraph 1, the effects of part-time work authorised by the appointing authority in accordance with the Staff Regulations may be offset by other appointments.

CHAPTER 3

Budgetary discipline

Article 54

Compliance with the multiannual financial framework and Decision 2014/335/EU, Euratom

The budget shall comply with the multiannual financial framework and Decision 2014/335/EU, Euratom.

Article 55

Compliance of Union acts with the budget

Where the implementation of a Union act exceeds the appropriations available in the budget, such an act shall not be implemented in financial terms until the budget has been amended accordingly.

TITLE IV

BUDGET IMPLEMENTATION

CHAPTER 1

General provisions

Article 56

Budget implementation in accordance with the principle of sound financial management

1.   The Commission shall implement the revenue and expenditure of the budget in accordance with this Regulation, under its own responsibility and within the limits of the appropriations authorised.

2.   The Member States shall cooperate with the Commission so that the appropriations are used in accordance with the principle of sound financial management.

Article 57

Information on transfers of personal data for audit purposes

In any call made in the context of grants, procurement or prizes implemented under direct management, potential beneficiaries, candidates, tenderers and participants shall, in accordance with Regulation (EC) No 45/2001 be informed that, for the purposes of safeguarding the financial interests of the Union, their personal data may be transferred to internal audit services, to the Court of Auditors or to the European Anti-Fraud Office (OLAF) and between authorising officers of the Commission, and the executive agencies referred to in Article 69 of this Regulation and the Union bodies referred to in Articles 70 and 71 of this Regulation.

Article 58

Basic act and exceptions

1.   Appropriations entered in the budget for any Union action shall only be used if a basic act has been adopted.

2.   By way of derogation from paragraph 1, and subject to the conditions set out in paragraphs 3, 4 and 5, the following appropriations may be implemented without a basic act provided the actions which they are intended to finance fall within the competences of the Union:

(a) appropriations for pilot projects of an experimental nature designed to test the feasibility of an action and its usefulness;

(b) appropriations for preparatory actions in the field of application of the TFEU and the Euratom Treaty, designed to prepare proposals with a view to the adoption of future actions;

(c) appropriations for preparatory measures in the field of Title V of the TEU;

(d) appropriations for one-off actions, or for actions for an indefinite duration, carried out by the Commission by virtue of tasks resulting from its prerogatives at institutional level pursuant to the TFEU and to the Euratom Treaty, other than its right of legislative initiative to submit proposals as referred to in point (b) of this paragraph, and under specific powers directly conferred on it by Articles 154, 156, 159 and 160 TFEU, Articles 168(2), 171(2) and 173(2) TFEU, the second paragraph of Article 175 TFEU, Article 181(2) TFEU, Article 190 TFEU and Articles 210(2) and 214(6) TFEU and Articles 70 and 77 to 85 of the Euratom Treaty;

(e) appropriations for the operation of each Union institution under its administrative autonomy.

3.   With regard to appropriations referred to in point (a) of paragraph 2, the relevant commitment appropriations may be entered in the budget for not more than two consecutive financial years. The total amount of appropriations for pilot projects shall not exceed EUR 40 000 000 in any financial year.

4.   With regard to appropriations referred to in point (b) of paragraph 2, preparatory actions shall follow a coherent approach and may take various forms. The relevant commitment appropriations may be entered in the budget for not more than three consecutive financial years. The procedure for the adoption of the relevant basic act shall be concluded before the end of the third financial year. In the course of that procedure, the commitment of appropriations shall correspond to the particular features of the preparatory action with regard to the activities envisaged, the aims pursued and the recipients. As a result, the amount of the appropriations committed shall not correspond to the amount of those envisaged for financing the definitive action itself.

The total amount of appropriations for new preparatory actions referred to in point (b) of paragraph 2 shall not exceed EUR 50 000 000 in any financial year, and the total amount of appropriations actually committed for preparatory actions shall not exceed EUR 100 000 000.

5.   With regard to the appropriations referred to in point (c) of paragraph 2, preparatory measures shall be limited to a short period of time and shall be designed to establish the conditions for Union action in fulfilment of the objectives of the CFSP and for the adoption of the necessary legal instruments.

For the purpose of Union crisis management operations, preparatory measures shall be designed, inter alia, to assess the operational requirements, to provide for a rapid initial deployment of resources, or to establish the conditions on the ground for the launching of the operation. Preparatory measures shall be agreed by the Council, on a proposal by the High Representative.

In order to ensure the rapid implementation of preparatory measures, the High Representative shall inform the European Parliament and the Commission as early as possible of the Council’s intention to launch a preparatory measure and, in particular, of the estimated resources required for that purpose. The Commission shall take all the measures necessary to ensure a rapid disbursement of the funds.

The financing of measures agreed by the Council for the preparation of Union crisis management operations under Title V TEU shall cover incremental costs directly arising from a specific field deployment of a mission or team involving, inter alia, personnel from Union institutions, including high-risk insurance, travel and accommodation costs and per diem payments.

Article 59

Budget implementation by Union institutions other than the Commission

1.   The Commission shall confer on the other Union institutions the requisite powers for the implementation of the sections of the budget relating to them.

2.   In order to facilitate the implementation of their appropriations, Union institutions may conclude service-level agreements with each other laying down the conditions governing the provision of services, supply of products, execution of works or of building contracts.

Those agreements shall enable the transfer of appropriations or the recovery of costs, which result from their implementation.

3.   Service-level agreements referred to in paragraph 2 may also be agreed upon between departments of Union institutions, Union bodies, European offices, bodies or persons entrusted with implementation of specific actions in the CFSP pursuant to Title V of the TEU and the Office of the Secretary-General of the Board of Governors of the European schools. The Commission and other Union institutions shall report regularly to the European Parliament and to the Council on the service-level agreements they conclude with other Union institutions.

Article 60

Delegation of budget implementation powers

1.   The Commission and each of the other Union institutions may, within their departments, delegate their powers of budget implementation in accordance with the conditions laid down in this Regulation and their internal rules and within the limits laid down in the instrument of delegation. Those so empowered shall act within the limits of the powers expressly conferred upon them.

2.   In addition to paragraph 1, the Commission may delegate its powers of budget implementation concerning the operational appropriations of its own section of the budget to Heads of Union delegations and, in order to ensure business continuity during their absence, to deputy Heads of Union delegations. Such delegation shall be without prejudice to the responsibility of Heads of Union delegations for budget implementation. Where the absence of a Head of Union delegation exceeds four weeks, the Commission shall revise its decision to delegate powers of budget implementation. When Heads of Union delegations, and their deputies in the absence of the former, act as authorising officers by subdelegation of the Commission, they shall apply the Commission rules for budget implementation and shall be subject to the same duties, obligations and accountability as any other authorising officer by subdelegation of the Commission.

The Commission may withdraw the delegation of powers referred to in the first subparagraph in accordance with its own rules.

For the purposes of the first subparagraph, the High Representative shall take the measures necessary to facilitate cooperation between Union delegations and Commission departments.

3.   The EEAS may exceptionally delegate its powers of budget implementation concerning the administrative appropriations of its own section of the budget to Commission staff of Union delegations where this is necessary in order to ensure the continuity in the administration of such delegations in the absence of the EEAS competent authorising officer from the country where his or her delegation is based. In the exceptional cases where Commission staff of Union delegations act as authorising officers by subdelegation of the EEAS, they shall apply the EEAS internal rules for budget implementation and shall be subject to the same duties, obligations and accountability as any other authorising officer by subdelegation of the EEAS.

The EEAS may withdraw the delegation of powers referred to in the first subparagraph in accordance with its own rules.

Article 61

Conflict of interests

1.   Financial actors within the meaning of Chapter 4 of this Title and other persons, including national authorities at any level, involved in budget implementation under direct, indirect and shared management, including acts preparatory thereto, audit or control, shall not take any action which may bring their own interests into conflict with those of the Union. They shall also take appropriate measures to prevent a conflict of interests from arising in the functions under their responsibility and to address situations which may objectively be perceived as a conflict of interests.

2.   Where there is a risk of a conflict of interests involving a member of staff of a national authority, the person in question shall refer the matter to his or her hierarchical superior. Where such a risk exists for staff covered by the Staff Regulations, the person in question shall refer the matter to the relevant authorising officer by delegation. The relevant hierarchical superior or the authorising officer by delegation shall confirm in writing whether a conflict of interests is found to exist. Where a conflict of interests is found to exist, the appointing authority or the relevant national authority shall ensure that the person in question ceases all activity in the matter. The relevant authorising officer by delegation or the relevant national authority shall ensure that any further appropriate action is taken in accordance with the applicable law.

3.   For the purposes of paragraph 1, a conflict of interests exists where the impartial and objective exercise of the functions of a financial actor or other person, as referred to in paragraph 1, is compromised for reasons involving family, emotional life, political or national affinity, economic interest or any other direct or indirect personal interest.

CHAPTER 2

Methods of implementation

Article 62

Methods of budget implementation

1.   The Commission shall implement the budget in any of the following ways:

(a) directly (‘direct management’) as set out in Articles 125 to 153, by its departments, including its staff in the Union delegations under the authority of their respective Head of delegation, in accordance with Article 60(2), or through executive agencies as referred to in Article 69;

(b) under shared management with Member States (‘shared management’) as set out in Articles 63 and 125 to 129;

(c) indirectly (‘indirect management’) as set out in Articles 125 to 149 and 154 to 159, where this is provided for in the basic act or in the cases referred to in points (a) to (d) of Article 58(2), by entrusting budget implementation tasks to:

(i) third countries or the bodies they have designated;

(ii) international organisations or their agencies, within the meaning of Article 156;

(iii) the European Investment Bank (‘the EIB’) or the European Investment Fund (‘the EIF’) or both of them acting as a group (‘the EIB group’);

(iv) Union bodies referred to in Articles 70 and 71;

(v) public law bodies, including Member State organisations;

(vi) bodies governed by private law with a public service mission, including Member State organisations, to the extent that they are provided with adequate financial guarantees;

(vii) bodies governed by the private law of a Member State that are entrusted with the implementation of a public-private partnership and that are provided with adequate financial guarantees;

(viii)

bodies or persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU, and identified in the relevant basic act.

With regard to point (c)(vi) of the first subparagraph, the amount of the financial guarantees required may be set out in the relevant basic act and may be limited to the maximum amount of the Union contribution to the body concerned. In the case of multiple guarantors, the repartition of the amount of the total liability to be covered by the guarantees shall be specified in the contribution agreement, which may provide for the liability of each guarantor to be proportionate to the share of their respective contribution to the body.

2.   For the purposes of direct management, the Commission may use the instruments referred to in Titles VII, VIII, IX, X and XII.

For the purposes of shared management, the instruments for budget implementation shall be the ones provided for in sector-specific rules.

For the purposes of indirect management, the Commission shall apply Title VI and, in the case of financial instruments and budgetary guarantees, Titles VI and X. The implementing entities shall apply the instruments for budget implementation set out in the contribution agreement concerned.

3.   The Commission is responsible for budget implementation in accordance with Article 317 TFEU and shall not delegate those tasks to third parties, where such tasks involve a large measure of discretion implying political choices.

The Commission shall not, through contracts in accordance with Title VII of this Regulation, outsource tasks involving the exercise of public authority and discretionary powers of judgement.

Article 63

Shared management with Member States

1.   Where the Commission implements the budget under shared management, tasks relating to budget implementation shall be delegated to Member States. The Commission and Member States shall respect the principles of sound financial management, transparency and non-discrimination and shall ensure the visibility of the Union action when they manage Union funds. To that end, the Commission and Member States shall fulfil their respective control and audit obligations and assume the resulting responsibilities laid down in this Regulation. Complementary provisions shall be laid down in sector-specific rules.

2.   When executing tasks relating to budget implementation, Member States shall take all the necessary measures, including legislative, regulatory and administrative measures, to protect the financial interests of the Union, namely by:

(a) ensuring that actions financed from the budget are implemented correctly and effectively and in accordance with the applicable sector-specific rules;

(b) designating bodies responsible for the management and control of Union funds in accordance with paragraph 3, and supervising such bodies;

(c) preventing, detecting and correcting irregularities and fraud;

(d) cooperating, in accordance with this Regulation and sector-specific rules, with the Commission, OLAF, the Court of Auditors and, for those Member States participating in enhanced cooperation pursuant to Council Regulation (EU) 2017/1939 (39), with the European Public Prosecutor’s Office (EPPO).

In order to protect the financial interests of the Union, Member States shall, while respecting the principle of proportionality, and in compliance with this Article and the relevant sector-specific rules, carry out

ex ante

and

ex post

controls including, where appropriate, on-the-spot checks on representative and/or risk-based samples of transactions. They shall also recover funds unduly paid and bring legal proceedings where necessary in that regard.

Member States shall impose effective, dissuasive and proportionate penalties on recipients where provided for in sector-specific rules or in specific provisions in national law.

As part of its risk assessment and in accordance with sector-specific rules, the Commission shall monitor the management and control systems established in Member States. The Commission shall, in its audit work, respect the principle of proportionality and shall take into account the level of risk assessed in accordance with sector-specific rules.

3.   In accordance with the criteria and procedures laid down in sector-specific rules, Member States shall, at the appropriate level, designate bodies to be responsible for the management and control of Union funds. Such bodies may also carry out tasks not related to the management of Union funds and may entrust certain of their tasks to other bodies.

When deciding on the designation of bodies, Member States may base their decision on whether the management and control systems are essentially the same as those already in place for the previous period and whether they have functioned effectively.

If audit and control results show that the designated bodies no longer comply with the criteria set out in sector-specific rules, Member States shall take the measures necessary to ensure that deficiencies in the implementation of the tasks of those bodies are remedied, including by ending the designation in accordance with sector-specific rules.

Sector-specific rules shall define the role of the Commission in the process set out in this paragraph.

4.   Bodies designated pursuant to paragraph 3 shall:

(a) set up and ensure the functioning of an effective and efficient internal control system;

(b) use an accounting system that provides accurate, complete and reliable information in a timely manner;

(c) provide the information required under paragraphs 5, 6 and 7;

(d) ensure

ex post

publication in accordance with Article 38(2) to (6).

Any processing of personal data shall comply with Regulation (EU) 2016/679.

5.   Bodies designated pursuant to paragraph 3 shall, by 15 February of the following financial year, provide the Commission with:

(a) their accounts on the expenditure that was incurred, during the relevant reference period as defined in sector-specific rules, in the execution of their tasks and that was presented to the Commission for reimbursement;

(b) an annual summary of the final audit reports and of controls carried out, including an analysis of the nature and extent of errors and weaknesses identified in systems, as well as corrective action taken or planned.

6.   The accounts referred to in point (a) of paragraph 5 shall include pre-financing and sums for which recovery procedures are ongoing or have been completed. They shall be accompanied by a management declaration confirming that, in the opinion of those in charge of the management of the funds:

(a) the information is properly presented, complete and accurate;

(b) the expenditure was used for its intended purpose, as defined in sector-specific rules;

(c) the control systems put in place ensure the legality and regularity of the underlying transactions.

7.   The accounts referred to in point (a) of paragraph 5 and the summary referred to in point (b) of that paragraph shall be accompanied by an opinion of an independent audit body, drawn up in accordance with internationally accepted audit standards. That opinion shall establish whether the accounts give a true and fair view, whether expenditure for which reimbursement has been requested from the Commission is legal and regular, and whether the control systems put in place function properly. The opinion shall also state whether the audit work puts in doubt the assertions made in the management declaration referred to in paragraph 6.

The deadline of 15 February set out in paragraph 5 may exceptionally be extended by the Commission to 1 March, upon communication by the Member State concerned.

Member States may, at the appropriate level, publish the information referred to in paragraphs 5 and 6 and in this paragraph.

In addition, Member States may provide to the European Parliament, to the Council and to the Commission declarations signed at the appropriate level based on the information referred to in paragraphs 5 and 6 and in this paragraph.

8.   In order to ensure that Union funds are used in accordance with the applicable rules, the Commission shall:

(a) apply procedures for the examination and acceptance of the accounts of the designated bodies, ensuring that the accounts are complete, accurate and true;

(b) exclude from Union financing expenditure for which disbursements have been made in breach of applicable law;

(c) interrupt payment deadlines or suspend payments where provided for in sector-specific rules.

The Commission shall end all or part of the interruption of payment deadlines or suspension of payments after a Member State has presented its observations and as soon as it has taken any necessary measures. The annual activity report referred to in Article 74(9) shall cover all the obligations under this paragraph.

9.   Sector-specific rules shall take account of the needs of European Territorial Cooperation programmes as regards, in particular, the content of the management declaration, the process set out in paragraph 3 and the audit function.

10.   The Commission shall compile a register of bodies responsible for management, certification and audit activities under sector-specific rules.

11.   Member States may use resources allocated to them under shared management in combination with operations and instruments carried out under Regulation (EU) 2015/1017 in accordance with the conditions set out in the relevant sector-specific rules.

CHAPTER 3

European offices and Union bodies

Section 1

European offices

Article 64

Scope of competences of European offices

1.   Before setting up a new European office, the Commission shall make a cost-benefit study and an assessment of the associated risks, inform the European Parliament and the Council of the results thereof and propose to enter the necessary appropriations in an annex to the section of the budget relating to the Commission.

2.   Within the scope of their competences, European offices:

(a) shall perform obligatory tasks provided for in their act of establishment or in other legal acts of the Union;

(b) may, in accordance with Article 66, perform non-obligatory tasks authorised by their Management Committees having considered the costs, benefits and associated risks for the parties involved.

3.   This Section shall apply to the operation of OLAF, with the exception of paragraph 4 of this Article, Article 66 and Article 67(1), (2) and (3).

4.   The internal auditor of the Commission shall exercise all responsibilities laid down in Chapter 8 of this Title.

Article 65

Appropriations regarding European offices

1.   The appropriations authorised to implement obligatory tasks of each European office shall be entered in a specific budget line within the section of the budget relating to the Commission and shall be set out in detail in an annex to that section.

The annex referred to in the first subparagraph shall take the form of a statement of revenue and expenditure, subdivided in the same way as the sections of the budget.

The appropriations entered in that annex:

(a) shall cover all the financial requirements of each European office in the performance of the obligatory tasks provided for in its act of establishment or in other legal acts of the Union;

(b) may cover financial requirements of a European office in the performance of tasks requested by Union institutions, Union bodies, other European offices and agencies established by or under the Treaties and authorised in accordance with the act of establishment of the office.

2.   The Commission shall, in respect of the appropriations entered in the annex for each European office, delegate the powers of authorising officer to the Director of the European office concerned, in accordance with Article 73.

3.   The establishment plan of each European office shall be annexed to that of the Commission.

4.   The Director of each European office shall take decisions on transfers within the annex referred to in paragraph 1. The Commission shall inform the European Parliament and the Council of such transfers.

Article 66

Non-obligatory tasks

1.   For the non-obligatory tasks referred to in point (b) of Article 64(2), a European office may:

(a) receive delegation to its Director from Union institutions, Union bodies and other European offices, together with a delegation of the powers of the authorising officer concerning appropriations entered in the section of the budget relating to the Union institution, Union body or other European office;

(b) conclude ad-hoc service-level agreements with Union institutions, Union bodies, other European offices or third parties.

2.   In the cases referred to in point (a) of paragraph 1, Union institutions, Union bodies and other European offices concerned shall set the limits and conditions for the delegation of powers. Such delegation shall be agreed in accordance with the act of establishment of the European office, in particular as regards the conditions and modalities of the delegation.

3.   In the cases referred to in point (b) of paragraph 1, the Director of the European office shall, in accordance with its act of establishment, adopt the specific provisions governing the implementation of the tasks, the recovery of costs incurred, and the keeping of the corresponding accounting records. The European office shall report the result of such accounting records to the Union institutions, Union bodies or other European offices concerned.

Article 67

Accounting records of European offices

1.   Each European office shall draw up accounting records of its expenditure, enabling the proportion of its services supplied to each of Union institutions, Union bodies or other European offices to be determined. The Director of the European office concerned shall, after approval by its Management Committee, adopt the criteria upon which the accounting records shall be based.

2.   The remarks concerning the specific budget line, in which the total appropriations for each European office to which the powers of authorising officer have been delegated in accordance with point (a) of Article 66(1) are entered, shall show an estimate of the costs of services supplied by that office to each of the Union institutions, Union bodies and other European offices concerned. This shall be based on the accounting records provided for in paragraph 1 of this Article.

3.   Each European office to which authorising officer powers have been delegated in accordance with point (a) of Article 66(1) shall notify the Union institutions, Union bodies and other European offices concerned of the results of the accounting records provided for in paragraph 1 of this Article.

4.   Each European office’s accounting records shall form an integral part of the Union’s accounts in accordance with Article 241.

5.   The accounting officer of the Commission, acting on a proposal from the Management Committee of the European office concerned, may delegate to a member of staff of the European office some of the officer’s tasks relating to the collection of revenue and the payment of expenditure made directly by the European office concerned.

6.   To meet the cash requirements of the European office, bank accounts or post office giro accounts may be opened in its name by the Commission, acting on a proposal from the Management Committee. The final cash position for each year shall be reconciled and adjusted between the European office concerned and the Commission at the end of the financial year.

Section 2

Agencies and Union bodies

Article 68

Applicability to the Euratom Supply Agency

This Regulation shall apply to the implementation of the budget for the Euratom Supply Agency.

Article 69

Executive agencies

1.   The Commission may delegate powers to executive agencies to implement all or part of a Union programme or project, including pilot projects and preparatory actions and the implementation of administrative expenditure, on its behalf and under its responsibility, in accordance with Council Regulation (EC) No 58/2003 (40). Executive agencies shall be created by means of a Commission decision and shall have legal personality under Union law. They shall receive an annual contribution.

2.   The directors of executive agencies shall act as authorising officers by delegation as regards the implementation of the operational appropriations relating to the Union programmes which they manage in whole or in part.

3.   The steering committee of an executive agency may agree with the Commission that the accounting officer of the Commission shall also act as the accounting officer of the executive agency concerned. The steering committee may also entrust the accounting officer of the Commission with part of the tasks of the accounting officer of the executive agency concerned, taking into account cost-benefit considerations. In both cases, the arrangements necessary to avoid any conflict of interests shall be made.

Article 70

Bodies set up under the TFEU and the Euratom Treaty

1.   The Commission is empowered to adopt delegated acts in accordance with Article 269 of this Regulation to supplement this Regulation with a framework financial regulation for bodies which are set up under the TFEU and the Euratom Treaty and which have legal personality and receive contributions charged to the budget.

2.   The framework financial regulation shall be based on the principles and rules set out in this Regulation, taking into account the specificities of the bodies referred to in paragraph 1.

3.   The financial rules of the bodies referred to in paragraph 1 shall not depart from the framework financial regulation except where their specific needs so require and subject to the Commission’s prior consent.

4.   Discharge for the implementation of the budgets of the bodies referred to in paragraph 1 shall be given by the European Parliament on the recommendation of the Council. The bodies referred to in paragraph 1 shall fully cooperate with the Union institutions involved in the discharge procedure and provide, as appropriate, any additional necessary information, including through attendance at meetings of the relevant bodies.

5.   The internal auditor of the Commission shall exercise the same powers over the bodies referred to in paragraph 1 as those exercised in respect of the Commission.

6.   An independent external auditor shall verify that the annual accounts of each of the bodies referred to in paragraph 1 of this Article properly present the income, expenditure and financial position of the relevant body prior to the consolidation in the Commission’s final accounts. Unless otherwise provided in the relevant basic act, the Court of Auditors shall prepare a specific annual report on each body in line with the requirements of Article 287(1) TFEU. In preparing that report, the Court of Auditors shall consider the audit work performed by the independent external auditor and the action taken in response to the auditor’s findings.

7.   All aspects of the independent external audits referred to in paragraph 6, including the reported findings, shall remain under the full responsibility of the Court of Auditors.

Article 71

Public-private partnership bodies

Bodies having legal personality that are set up by a basic act and entrusted with the implementation of a public-private partnership shall adopt their own financial rules.

Those rules shall include a set of principles necessary to ensure sound financial management of Union funds.

The Commission is empowered to adopt delegated acts in accordance with Article 269 to supplement this Regulation with a model financial regulation for public-private partnership bodies laying down the principles necessary to ensure sound financial management of Union funds and which shall be based on Article 154.

The financial rules of the public-private partnership bodies shall not depart from the model financial regulation except where their specific needs so require and subject to the Commission’s prior consent.

Article 70(4) to (7) shall apply to public-private partnership bodies.

CHAPTER 4

Financial actors

Section 1

Principle of segregation of duties

Article 72

Segregation of duties

1.   The duties of authorising officer and accounting officer shall be segregated and mutually exclusive.

2.   Each Union institution shall provide each financial actor with the resources required to perform his or her duties and a charter describing in detail his or her tasks, rights and obligations.

Section 2

Authorising officer

Article 73

Authorising officer

1.   Each Union institution shall perform the duties of authorising officer.

2.   For the purposes of this Title, ‘staff’ means persons covered by the Staff Regulations.

3.   Each Union institution shall, in compliance with the conditions in its rules of procedure, delegate the duties of authorising officer to staff at an appropriate level. It shall, in its internal administrative rules, indicate the staff to whom it delegates those duties, the scope of the powers delegated and whether the persons to whom those powers are delegated may subdelegate them.

4.   The powers of authorising officer shall be delegated or subdelegated only to staff.

5.   The authorising officer responsible shall act within the limits set by the instrument of delegation or subdelegation. The authorising officer responsible may be assisted by one or more members of staff entrusted, under his or her responsibility, with the carrying out of certain operations necessary for budget implementation and the production of the financial and management information.

6.   Each Union institution and each Union body referred to in Article 70 shall inform the European Parliament, the Council, the Court of Auditors and the accounting officer of the Commission within two weeks of the appointment and the termination of the duties of authorising officers by delegation, internal auditors and accounting officers, and of any internal rules it adopts in respect of financial matters.

7.   Each Union institution shall inform the Court of Auditors of delegation decisions and of the appointment of imprest administrators under Articles 79 and 88.

Article 74

Powers and duties of the authorising officer

1.   The authorising officer shall be responsible in the Union institution concerned for implementing revenue and expenditure in accordance with the principle of sound financial management, including through ensuring reporting on performance, and for ensuring compliance with the requirements of legality and regularity and equal treatment of recipients.

2.   For the purposes of paragraph 1 of this Article, the authorising officer by delegation shall, in accordance with Article 36 and the minimum standards adopted by each Union institution and having due regard to the risks associated with the management environment and the nature of the actions financed, put in place the organisational structure and the internal control systems suited to the performance of his or her duties. The establishment of such structure and systems shall be supported by a comprehensive risk analysis, which takes into account their cost effectiveness and performance considerations.

3.   To implement expenditure, the authorising officer responsible shall make budgetary and legal commitments, shall validate expenditure and authorise payments and shall undertake the preliminary steps for the implementation of appropriations.

4.   To implement revenue, the authorising officer responsible shall draw up estimates of amounts receivable, establish entitlements to be recovered and issue recovery orders. Where appropriate, the authorising officer responsible shall waive established entitlements.

5.   In order to prevent errors and irregularities before the authorisation of operations and to mitigate risks of non-achievement of objectives, each operation shall be subject at least to an

ex ante

control relating to the operational and financial aspects of the operation, on the basis of a multiannual control strategy which takes risk into account.

The extent in terms of frequency and intensity of the

ex ante

controls shall be determined by the authorising officer responsible taking into account the results of prior controls as well as risk-based and cost-effectiveness considerations, on the basis of the authorising officer’s own risk analysis. In case of doubt, the authorising officer responsible for validating the relevant operations shall, as part of the

ex ante

control, request complementary information or perform an on-the-spot control in order to obtain reasonable assurance.

For a given operation, the verification shall be carried out by staff other than those who initiated the operation. The staff who carry out the verification shall not be subordinate to the members of staff who initiated the operation.

6.   The authorising officer by delegation may put in place

ex post

controls to detect and correct errors and irregularities of operations after they have been authorised. Such controls may be organised on a sample basis according to risk and shall take account of the results of prior controls as well as cost-effectiveness and performance considerations.

The

ex post

controls shall be carried out by staff other than those responsible for the

ex ante

controls. The staff responsible for the

ex post

controls shall not be subordinate to the members of staff responsible for the

ex ante

controls.

The rules and modalities, including timeframes, for carrying out audits of the beneficiaries shall be clear, consistent and transparent, and shall be made available to the beneficiaries when signing the grant agreement.

7.   Authorising officers responsible and staff responsible for budget implementation shall have the necessary professional skills.

In each Union institution, the authorising officer by delegation shall ensure the following:

(a) that the authorising officers by subdelegation and their staff receive regularly updated and appropriate information and training concerning the control standards and the methods and techniques available for that purpose;

(b) that measures are taken, where needed, to ensure the effective and efficient functioning of the control systems in accordance with paragraph 2.

8.   If a member of staff, involved in the financial management and control of transactions, considers that a decision he or she is required by his or her superior to apply or to agree to is irregular or contrary to the principle of sound financial management or the professional rules which that member of staff is required to observe, he or she shall inform his or her hierarchical superior accordingly. If the member of staff does so in writing, the hierarchical superior shall reply in writing. If the hierarchical superior fails to take action or confirms the initial decision or instruction and the member of staff believes that such confirmation does not constitute a reasonable response to his or her concern, the member of staff shall inform the authorising officer by delegation in writing. If that officer does not reply within a reasonable time given the circumstances of the case and in any event within a month, the member of staff shall inform the relevant panel referred to in Article 143.

In the event of any illegal activity, fraud or corruption which may harm the interests of the Union, the member of staff shall inform the authorities and bodies designated in the Staff Regulations and in the decisions of Union institutions concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any other illegal activity detrimental to the interests of the Union. Contracts with external auditors carrying out audits of the financial management of the Union shall provide for an obligation of the external auditor to inform the authorising officer by delegation of any suspected illegal activity, fraud or corruption which may harm the interests of the Union.

9.   The authorising officer by delegation shall report to his or her Union institution on the performance of his or her duties in the form of an annual activity report containing financial and management information, including the results of controls, declaring that, except as otherwise specified in any reservations related to defined areas of revenue and expenditure, he or she has reasonable assurance that:

(a) the information contained in the report presents a true and fair view;

(b) the resources assigned to the activities described in the report have been used for their intended purpose and in accordance with the principle of sound financial management; and

(c) the control procedures put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions.

The annual activity report shall include information on the operations carried out, by reference to the objectives and performance considerations set in the strategic plans, the risks associated with those operations, the use made of the resources provided and the efficiency and effectiveness of internal control systems. The report shall include an overall assessment of the costs and benefits of controls and information on the extent to which the operational expenditure authorised contributes to the achievement of strategic objectives of the Union and generates EU added value. The Commission shall prepare a summary of the annual activity reports for the preceding year.

The annual activity reports for the financial year of the authorising officers and, where applicable, authorising officers by delegation of Union institutions, Union bodies, European offices and agencies shall be published by 1 July of the following financial year on the website of the respective Union institution, Union body, European office or agency in an easily accessible way, subject to duly justified confidentiality and security considerations.

10.   The authorising officer by delegation shall, for each financial year, record contracts concluded by negotiated procedures in accordance with points (a) to (f) of point 11.1 and point 39 of Annex I. If the proportion of negotiated procedures in relation to the number of contracts awarded by the same authorising officer by delegation increases significantly in relation to earlier years or if that proportion is distinctly higher than the average recorded for the Union institution, the authorising officer responsible shall report to the Union institution setting out any measures taken to reverse that trend. Each Union institution shall send a report on negotiated procedures to the European Parliament and to the Council. In the case of the Commission, that report shall be annexed to the summary of the annual activity reports referred to in paragraph 9 of this Article.

Article 75

Keeping of supporting documents by authorising officers

The authorising officer shall set up paper-based or electronic systems for the keeping of original supporting documents relating to budget implementation. Such documents shall be kept for at least five years from the date on which the European Parliament gives discharge for the financial year to which the documents relate.

Without prejudice to the first paragraph, documents relating to operations shall in any case be kept until the end of the year following that in which those operations are definitively closed.

Personal data contained in supporting documents shall, where possible, be deleted when those data are not necessary for budgetary discharge, control and audit purposes. Article 37(2) of Regulation (EC) No 45/2001 shall apply to the conservation of traffic data.

Article 76

Powers and duties of Heads of Union Delegations

1.   Where Heads of Union delegations act as authorising officers by subdelegation in accordance with Article 60(2), they shall be subject to the Commission as the Union institution responsible for the definition, exercise, monitoring and appraisal of their duties and responsibilities as authorising officers by subdelegation and shall cooperate closely with the Commission with regard to the proper implementation of the funds, in order to ensure, in particular, the legality and regularity of financial transactions, respect for the principle of sound financial management in the management of the funds and the effective protection of the financial interests of the Union. They shall be subject to the internal rules of the Commission and to the Commission Charter for the implementation of the financial management tasks subdelegated to them. They may be assisted in their duties by Commission staff of Union delegations.

To this effect, Heads of Union delegations shall take the measures necessary to prevent any situation likely to put at risk the Commission’s capacity to fulfil its responsibility for budget implementation subdelegated to them, as well as any conflict of priorities which is likely to have an impact on the implementation of the financial management tasks subdelegated to them.

Where a situation or conflict referred to in the second subparagraph arises, Heads of Union delegations shall without delay inform the Directors-General responsible of the Commission and of the EEAS thereof. Those Directors-General shall take appropriate steps to remedy the situation.

2.   If Heads of Union delegations find themselves in a situation as referred to in Article 74(8), they shall refer the matter to the panel referred to in Article 143. In the event of any illegal activity, fraud or corruption which may harm the interests of the Union, they shall inform the authorities and bodies designated by the applicable legislation.

3.   Heads of Union delegations acting as authorising officers by subdelegation in accordance with Article 60(2) shall report to their authorising officer by delegation so that the latter can integrate their reports in his or her annual activity report referred to in Article 74(9). The reports of Heads of Union delegations shall include information on the efficiency and effectiveness of internal control systems put in place in their delegation, as well as on the management of operations subdelegated to them, and provide the assurance referred to in the third subparagraph of Article 92(5). Those reports shall be annexed to the annual activity report of the authorising officer by delegation, and shall be made available to the European Parliament and to the Council having due regard, where appropriate, to their confidentiality.

Heads of Union delegations shall fully cooperate with Union institutions involved in the discharge procedure and provide, as appropriate, any necessary additional information. In this context, they may be requested to attend meetings of the relevant bodies and assist the authorising officer by delegation responsible.

Heads of Union delegations acting as authorising officers by subdelegation in accordance with Article 60(2) shall reply to any request by the authorising officer by delegation of the Commission at the Commission’s own request or, in the context of discharge, at the request of the European Parliament.

The Commission shall ensure that the subdelegating of powers to Heads of Union delegations is not detrimental to the discharge procedure under Article 319 TFEU.

4.   Paragraphs 1, 2 and 3 shall also apply to deputy Heads of Union delegations when they act as authorising officers by subdelegation in the absence of Heads of Union delegations.

Section 3

Accounting officer

Article 77

Powers and duties of the accounting officer

1.   Each Union institution shall appoint an accounting officer who shall be responsible in that institution for the following:

(a) properly implementing payments, collecting revenue and recovering amounts established as being receivable;

(b) preparing and presenting the accounts in accordance with Title XIII;

(c) keeping the accounts in accordance with Articles 82 and 84;

(d) laying down the accounting rules, procedures and the chart of accounts, in accordance with Articles 80 to 84;

(e) laying down and validating the accounting systems and, where appropriate, validating systems laid down by the authorising officer to supply or justify accounting information;

(f) treasury management.

With respect to the tasks referred to in point (e) of the first subparagraph, the accounting officer shall be empowered to verify at any time compliance with the validation criteria.

2.   The responsibilities of the accounting officer of the EEAS shall concern only the section of the budget relating to the EEAS as implemented by the EEAS. The accounting officer of the Commission shall remain responsible for the entire section of the budget relating to the Commission, including accounting operations relating to appropriations subdelegated to Heads of Union delegations.

The accounting officer of the Commission shall also act as the accounting officer of the EEAS in respect of the implementation of the section of the budget relating to the EEAS.

Article 78

Appointment and termination of duties of the accounting officer

1.   Each Union institution shall appoint an accounting officer from officials subject to the Staff Regulations.

The accounting officer shall be chosen by the Union institution on the grounds of his or her particular competence as evidenced by diplomas or by equivalent professional experience.

2.   Two or more Union institutions or bodies may appoint the same accounting officer.

In such case, they shall make the necessary arrangements in order to avoid any conflict of interests.

3.   A trial balance shall be drawn up without delay in the event of termination of the duties of the accounting officer.

4.   The trial balance accompanied by a hand-over report shall be transmitted to the new accounting officer by the accounting officer who is terminating his or her duties or, if it is not possible, by an official in his or her department.

The new accounting officer shall sign the trial balance in acceptance within one month from the date of transmission and may make reservations.

The hand-over report shall contain the result of the trial balance and any reservations made.

Article 79

Powers which may be delegated by the accounting officer

The accounting officer may, in the performance of his or her duties, delegate certain tasks to subordinate staff and to imprest administrators appointed in accordance with Article 89(1).

The instrument of delegation shall set out those tasks.

Article 80

Accounting rules

1.   The accounting rules to be applied by Union institutions, European offices and the agencies and Union bodies referred to in Section 2 of Chapter 3 of this Title shall be based on internationally accepted accounting standards for the public sector. Those rules shall be adopted by the accounting officer of the Commission following consultation with the accounting officers of other Union institutions, European offices and Union bodies.

2.   The accounting officer may deviate from the standards referred to in paragraph 1 if he or she considers this necessary in order to give a fair presentation of the assets and liabilities, charges, income and cash flow. Where an accounting rule diverges materially from those standards, the notes to the financial statements shall disclose that fact and the reasons for it.

3.   The accounting rules referred to in paragraph 1 shall lay down the structure and content of the financial statements, as well as the accounting principles underlying the accounts.

4.   The budget implementation reports referred to in Article 241 shall respect the budgetary principles laid down in this Regulation. They shall provide a detailed record of budget implementation. They shall record all revenue and expenditure operations provided for in this Title and give a fair presentation thereon.

Article 81

Organisation of the accounts

1.   The accounting officer of each Union institution or body shall draw up and keep updated documents describing the organisation of the accounts and the accounting procedures of his or her Union institution or body.

2.   Revenue and expenditure shall be recorded in a computerised system according to the economic nature of the operation, as current revenue or expenditure or as capital.

Article 82

Keeping the accounts

1.   The accounting officer of the Commission shall be responsible for laying down the harmonised charts of accounts to be applied by Union institutions, by European offices and by the agencies and Union bodies referred to in Section 2 of Chapter 3 of this Title.

2.   The accounting officers shall obtain from authorising officers all the information necessary for the production of accounts which give a fair presentation of the financial situation of Union institutions and of budget implementation. The authorising officers shall guarantee the reliability of that information.

3.   Before the adoption of the accounts by the Union institution or the Union body referred to in Article 70, the accounting officer shall sign them off, thereby certifying that he or she has reasonable assurance that the accounts give a fair presentation of the financial situation of the Union institution or the Union body referred to in Article 70.

For that purpose, the accounting officer shall verify that the accounts have been prepared in accordance with the accounting rules referred to in Article 80, and the accounting procedures referred to in point (d) of the first subparagraph of Article 77(1), and that all revenue and expenditure is entered in the accounts.

4.   The authorising officer by delegation shall, in accordance with the rules adopted by the accounting officer, send the accounting officer any financial and management information required for the performance of the accounting officer’s duties.

The accounting officer shall be informed, regularly and at least for the closure of the accounts, by the authorising officer of the relevant financial data of the fiduciary bank accounts in order to allow the use of Union funds to be reflected in the accounts of the Union.

The authorising officers shall remain fully responsible for the proper use of the funds they manage, the legality and regularity of the expenditure under their control and the completeness and accuracy of the information sent to the accounting officer.

5.   The authorising officer responsible shall notify the accounting officer of all developments or significant modifications of a financial management system, an inventory system or a system for the valuation of assets and liabilities, if it provides data for the accounts of the Union institution or is used to substantiate data thereof, so that the accounting officer can verify compliance with the validation criteria.

At any time, the accounting officer may re-examine a financial management system already validated and may request that the authorising officer responsible establishes an action plan in order to correct, in due time, possible weaknesses.

The authorising officer shall be responsible for the completeness of information sent to the accounting officer.

6.   The accounting officer shall be empowered to check the information received as well as to carry out any further checks he or she deems necessary in order to sign off the accounts.

The accounting officer shall, if necessary, make reservations, explaining exactly the nature and scope of such reservations.

7.   A Union institution’s accounting system shall serve to organise the budgetary and financial information in such a way that figures can be entered, filed and registered.

8.   The accounting system shall consist of general accounts and budget accounts. The accounts shall be kept in euro and on the basis of the calendar year.

9.   The authorising officer by delegation may also keep detailed management accounts.

10.   Supporting documents for the accounting system and for the preparation of the accounts referred to in Article 241 shall be kept for at least five years from the date on which the European Parliament gives discharge for the financial year to which the documents relate.

However, documents relating to operations not definitively closed shall be kept until the end of the year following that in which the operations are closed. Article 37(2) of Regulation (EC) No 45/2001 shall apply to the conservation of traffic data.

Each Union institution shall decide in which department the supporting documents are to be kept.

Article 83

Content and keeping of budget accounts

1.   The budget accounts shall for each subdivision of the budget show:

(a) in the case of expenditure:

(i) the appropriations authorised in the budget, including the appropriations entered in amending budgets, the appropriations carried over, the appropriations available following collection of assigned revenue, transfers of appropriations and the total appropriations available;

(ii) the commitment appropriations and payment appropriations in respect of the financial year;

(b) in the case of revenue:

(i) the estimates entered in the budget, including the estimates entered in amending budgets, assigned revenue and the total amount of estimated revenue;

(ii) the entitlements established and the amounts recovered in respect of the financial year;

(c) the commitments still to be paid and the revenue still to be recovered, carried forward from preceding financial years.

The commitment appropriations and payment appropriations referred to in point (a) of the first subparagraph shall be entered and shown separately.

2.   The budget accounts shall show separately:

(a) the use of appropriations carried over and the appropriations for the financial year;

(b) the clearance of outstanding commitments.

On the revenue side, amounts still to be recovered from preceding financial years shall be shown separately.

Article 84

General accounts

1.   The general accounts shall, in chronological order using the double-entry method, record all events and operations which affect the economic and financial situation and the assets and liabilities of Union institutions and of the agencies and Union bodies referred to in Section 2 of Chapter 3 of this Title.

2.   Balances and movements in the general accounts shall be entered in the accounting ledgers.

3.   All accounting entries, including adjustments to the accounts, shall be based on supporting documents, to which the entries shall refer.

4.   The accounting system shall be such as to leave a clear audit trail for all accounting entries.

Article 85

Bank accounts

1.   For the requirements of treasury management, the accounting officer may, in the name of his or her Union institution, open accounts with financial institutions or national central banks or request for such accounts to be opened. The accounting officer shall also be responsible for closing those accounts or for ensuring that they are closed.

2.   The terms governing the opening, operation and use of bank accounts shall, depending on internal control requirements, provide that cheques, bank credit transfer orders or any other banking operations must be signed by one or more duly authorised members of staff. Manual instructions shall be signed by at least two duly authorised members of staff, or by the accounting officer.

3.   Within the implementation of a programme or an action, fiduciary accounts may be opened on behalf of the Commission in order to allow for their management by an entity pursuant to point (c)(ii), (iii), (v) or (vi) of the first subparagraph of Article 62(1).

Such accounts shall be opened under the responsibility of the authorising officer in charge of the implementation of the programme or action in agreement with the accounting officer of the Commission.

Such accounts shall be managed under the responsibility of the authorising officer.

4.   The accounting officer of the Commission shall lay down rules for the opening, management and closure of fiduciary accounts and their use.

Article 86

Treasury management

1.   Unless otherwise provided in this Regulation, only the accounting officer shall be empowered to manage cash and cash equivalents. The accounting officer shall be responsible for their safekeeping.

2.   The accounting officer shall ensure that his or her Union institution has at its disposal sufficient funds to cover the cash requirements arising from budget implementation within the applicable regulatory framework and shall set up procedures to ensure that none of the accounts opened in accordance with Articles 85(1) and 89(3) is in debit.

3.   Payments shall be made by bank credit transfer, by cheque or, from imprest accounts, or if specifically authorised by the accounting officer, by debit card, direct debit or other means of payment, in accordance with the rules laid down by the accounting officer.

Before entering into a commitment towards a third party, the authorising officer shall confirm the payee’s identity, establish the legal entity and payment details of the payee and enter them in the common file by the Union institution for which the accounting officer is responsible in order to ensure transparency, accountability and proper payment implementation.

The accounting officer may only make payments if the payee’s legal entity and payment details have first been entered in a common file by the Union institution for which the accounting officer is responsible.

Authorising officers shall inform the accounting officer of any change in the legal entity and payment details communicated to them by the payee and shall check that those details are valid before they authorise any payment.

Article 87

The inventory of assets

1.   Union institutions and agencies or Union bodies referred to in Section 2 of Chapter 3 of this Title shall keep inventories showing the quantity and value of all their tangible, intangible and financial assets in accordance with a model drawn up by the accounting officer of the Commission.

They shall also check that entries in their respective inventories correspond to the actual situation.

All items acquired with a period of use greater than one year, which are not consumables, and whose purchase price or production cost is higher than that indicated by the accounting procedures referred to in Article 77 shall be entered in the inventory and recorded in the fixed assets accounts.

2.   The sale of the Union’s tangible assets shall be suitably advertised.

3.   Union institutions and agencies or Union bodies referred to in Section 2 of Chapter 3 of this Title shall adopt provisions on safeguarding the assets included in their respective inventories and decide which administrative departments are responsible for the inventory system.

Section 4

Imprest administrator

Article 88

Imprest accounts

1.   Imprest accounts may be set up for the payment of expenditure where, owing to the limited amounts involved, it is materially impossible or inefficient to carry out payment operations by budgetary procedures. Imprest accounts may also be set up for the collection of revenue other than own resources.

In Union delegations, imprest accounts may also be used to execute payments of limited amounts by budgetary procedures, if such use is efficient and effective due to local requirements.

The maximum amount which may be paid by the imprest administrator where it is materially impossible or inefficient to carry out payment operations by budgetary procedures shall be established by the accounting officer and shall in any case not exceed EUR 60 000 for each item of expenditure.

However, in the field of crisis management aid and humanitarian aid operations, imprest accounts may be used without any limitation on the amount, while respecting the level of appropriations decided by the European Parliament and by the Council on the corresponding budget line for the current financial year and in accordance with the internal rules of the Commission.

2.   In Union delegations, imprest accounts shall be set up for the payment of expenditure from both the sections of the budget relating to the Commission and to the EEAS, ensuring full traceability of expenditure.

Article 89

Creation and administration of imprest accounts

1.   The creation of an imprest account and the appointment of an imprest administrator shall be the subject of a decision by the accounting officer of the Union institution, on the basis of a duly substantiated proposal from the authorising officer responsible. That decision shall set out the respective responsibilities and obligations of the imprest administrator and the authorising officer.

Imprest administrators shall be chosen from officials or, should the need arise and only in duly substantiated cases, from other members of staff or in accordance with the conditions established in the internal rules of the Commission from personnel employed by the Commission in the field of crisis management aid and humanitarian aid operations provided that their employment contracts guarantee equivalent level of protection in terms of liability as applicable to staff pursuant to Article 95. Imprest administrators shall be chosen on the grounds of their knowledge, skills and particular qualifications as evidenced by diplomas or by appropriate professional experience, or after an appropriate training programme.

2.   In proposals for decisions to create an imprest account, the authorising officer responsible shall ensure that:

(a) priority is given to the use of budgetary procedures where there is access to the central computerised accounting system;

(b) imprest accounts are used only in duly substantiated cases.

In decisions to create an imprest account, the accounting officer shall specify the operating terms and the conditions for use of the imprest account.

The amendment of the operating terms for an imprest account shall also be the subject of a decision by the accounting officer on a duly substantiated proposal from the authorising officer responsible.

3.   Bank accounts for the imprest shall be opened and monitored by the accounting officer, who shall also authorise delegated signatures on them on the basis of a duly substantiated proposal from the authorising officer responsible.

4.   Imprest accounts shall be endowed by the accounting officer of the Union institution and shall be placed under the responsibility of imprest administrators.

5.   Payments made shall be followed by formal final validation decisions or payment orders signed by the authorising officer responsible.

The imprest transactions shall be settled by the authorising officer by the end of the following month, so that the accounting balance and the bank balance can be reconciled.

6.   The accounting officer shall carry out checks, or have them carried out by a staff member in his or her own department or in the authorising department specifically empowered for that purpose. Those checks shall as a general rule be effected on the spot and, where necessary, without warning, to verify the existence of the funds allocated to the imprest administrators and the bookkeeping and to check that imprest transactions are settled within the time limit set. The accounting officer shall communicate the findings of those checks to the authorising officer responsible.

CHAPTER 5

Liability of financial actors

Section 1

General rules

Article 90

Withdrawal of delegation of powers to and suspension of duties of financial actors

1.   Authorising officers responsible may at any time have their delegation or subdelegation withdrawn temporarily or definitively by the authority which appointed them.

2.   Accounting officers or imprest administrators, or both, may at any time be suspended temporarily or definitively from their duties by the authority which appointed them.

3.   Paragraphs 1 and 2 shall be without prejudice to any disciplinary action taken in respect of the financial actors referred to in those paragraphs.

Article 91

Liability of financial actors for illegal activity, fraud or corruption

1.   This Chapter is without prejudice to any liability under criminal law which the financial actors referred to in Article 90 may incur as provided for in applicable national law and in the provisions in force concerning the protection of the financial interests of the Union and the fight against corruption involving Union officials or officials of Member States.

2.   Without prejudice to Articles 92, 94 and 95 of this Regulation, each authorising officer responsible, accounting officer or imprest administrator shall be liable to disciplinary action and payment of compensation as laid down in the Staff Regulations, or for the personnel employed by the Commission in the field of crisis management aid and humanitarian aid operations as referred to in Article 89(1) of this Regulation in their employment contracts. In the event of illegal activity, fraud or corruption which may harm the interests of the Union, the matter shall be referred to the authorities and bodies designated by the applicable legislation, in particular to OLAF.

Section 2

Rules applicable to authorising officers responsible

Article 92

Rules applicable to authorising officers

1.   The authorising officer responsible shall be liable for payment of compensation as laid down in the Staff Regulations.

2.   The obligation to pay compensation shall apply in particular if the authorising officer responsible, whether intentionally or through gross negligence on his or her part:

(a) determines entitlements to be recovered or issues recovery orders, commits expenditure or signs a payment order without complying with this Regulation;

(b) omits to draw up a document establishing an amount receivable, neglects to issue a recovery order or is late in issuing it or is late in issuing a payment order, thereby rendering the Union institution liable to civil action by third parties.

3.   An authorising officer by delegation or sub-delegation who receives a binding instruction which he or she considers to be irregular or contrary to the principle of sound financial management, in particular because the instruction cannot be carried out with the resources allocated to him or her, shall inform the authority from which he or she received the delegation or subdelegation about that fact in writing. If the instruction is confirmed in writing and that confirmation is received in good time and is sufficiently clear, in that it refers explicitly to the points which the authorising officer by delegation or subdelegation has challenged, the authorising officer by delegation or subdelegation shall not be held liable. He or she shall carry out the instruction, unless it is manifestly illegal or constitutes a breach of the relevant safety standards.

The same procedure shall apply in cases where an authorising officer considers that a decision, which is his or her responsibility to take, is irregular or contrary to the principle of sound financial management or where an authorising officer learns, in the course of acting on a binding instruction, that the circumstances of the case could give rise to such a situation.

Any instructions confirmed in the circumstances referred to in this paragraph shall be recorded by the authorising officer by delegation responsible and mentioned in his or her annual activity report.

4.   In the event of subdelegation within his or her service, the authorising officer by delegation shall continue to be responsible for the efficiency and effectiveness of the internal management and control systems put in place and for the choice of the authorising officer by subdelegation.

5.   In the event of subdelegation to Heads of Union delegations and their deputies, the authorising officer by delegation shall be responsible for the definition of the internal management and control systems put in place, as well as their efficiency and effectiveness. Heads of Union delegations shall be responsible for the adequate setting up and functioning of those systems, in accordance with the instructions of the authorising officer by delegation, and for the management of the funds and the operations they carry out within the Union delegation under their responsibility. Before taking up their duties, they shall complete specific training courses on the tasks and responsibilities of authorising officers and budget implementation.

Heads of Union delegations shall in accordance with Article 76(3) report on their responsibilities pursuant to the first subparagraph of this paragraph.

Each year, Heads of Union delegations shall provide to the authorising officer by delegation of the Commission assurance on the internal management and control systems put in place in their delegation, as well as on the management of operations subdelegated to them, and the results thereof, in order to allow the authorising officer to make the statement of assurance provided for in Article 74(9).

This paragraph shall also apply to deputy Heads of Union delegations when they act as authorising officers by subdelegation in the absence of Heads of Union delegations.

Article 93

Treatment of financial irregularities on the part of a member of staff

1.   Without prejudice to the powers of OLAF and to the administrative autonomy of Union institutions, Union bodies, European offices or bodies or persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU in respect of members of their staff and with due regard to the protection of whistle-blowers, any infringement of this Regulation, or of a provision relating to financial management or the checking of operations, resulting from an act or omission of a member of staff shall be referred for an opinion to the panel referred to in Article 143, by any of the following:

(a) the appointing authority in charge of disciplinary matters;

(b) the authorising officer responsible, including Heads of Union delegations and their deputies in their absence acting as authorising officers by subdelegation in accordance with Article 60(2).

Where the panel is directly informed of a matter by a member of staff, it shall transmit the file to the appointing authority of the Union institution, Union body, European office or body or person concerned and shall inform the member of staff accordingly. The appointing authority may request the panel’s opinion on the case.

2.   A request for an opinion of the panel pursuant to the first subparagraph of paragraph 1 shall be accompanied by a description of the facts and the act or omission which the panel is asked to assess, as well as by relevant supporting documents, including reports of any investigation which has taken place. Wherever possible, the information shall be produced in anonymised form.

Before submitting a request or any additional information to the panel, the appointing authority or the authorising officer, as appropriate, shall give the member of staff involved the opportunity to submit its observations, after having notified to him or her the supporting documents referred to in the first subparagraph, insofar as that notification does not seriously undermine the pursuit of further investigations.

3.   In the cases referred in paragraph 1 of this Article, the panel referred to in Article 143 shall be competent to assess whether, on the basis of the elements submitted to it pursuant to paragraph 2 of this Article and any additional information received, a financial irregularity has occurred. On the basis of the opinion of the panel, the Union institution, Union body, European office or body or person concerned shall decide on the appropriate follow-up actions in accordance with the Staff Regulations. If the panel detects systemic problems, it shall make a recommendation to the authorising officer and to the authorising officer by delegation, unless the latter is the member of staff involved, as well as to the internal auditor.

4.   Where the panel gives the opinion referred to in paragraph 1 of this Article, it shall be composed of the members referred to in Article 143(2) as well as the following three additional members, which shall be appointed taking into account the need for avoiding any conflicts of interests:

(a) a representative of the appointing authority in charge of disciplinary matters of the Union institution, Union body, European office or body or person concerned;

(b) a member appointed by the staff committee of the Union institution, Union body, European office or body or person concerned;

(c) a member of the legal service of the Union institution employing the member of staff concerned.

Where the panel gives the opinion referred to in paragraph 1, it shall be addressed to the appointing authority of the Union institution, Union body, European office or body or person concerned.

5.   The panel shall have no investigative powers. The Union institution, Union body, European office or body or person concerned shall cooperate with the panel with a view to ensuring that it has all the information necessary for giving its opinion.

6.   Where the panel considers that the case is a matter for OLAF, it shall in accordance with paragraph 1 transmit the file to the relevant appointing authority without delay and inform OLAF immediately.

7.   The Member States shall fully support the Union in the enforcement of any liability, under Article 22 of the Staff Regulations, of temporary staff to whom point (e) of Article 2 of the Conditions of Employment of Other Servants of the European Union applies.

Section 3

Rules applicable to accounting officers and imprest administrators

Article 94

Rules applicable to accounting officers

An accounting officer shall be liable to disciplinary action and payment of compensation, as laid down in, and in accordance with, the procedures in the Staff Regulations. An accounting officer may, in particular, become liable as a result of any of the following forms of misconduct on his or her part:

(a) losing or damaging funds, assets or documents in his or her keeping;

(b) wrongly altering bank accounts or postal giro accounts;

(c) recovering or paying amounts which are not in conformity with the corresponding recovery or payment orders;

(d) failing to collect revenue due.

Article 95

Rules applicable to imprest administrators

An imprest administrator may in particular become liable as a result of any of the following forms of misconduct on his or her part:

(a) losing or damaging funds, assets or documents in his or her keeping;

(b) not providing proper supporting documents for the payments he or she has made;

(c) making payments to persons other than those entitled to such payments;

(d) failing to collect revenue due.

CHAPTER 6

Revenue operations

Section 1

Making own resources available

Article 96

Own resources

1.   An estimate of revenue constituted by own resources, as referred to in Decision 2014/335/EU, Euratom shall be entered in the budget in euro. The corresponding own resources shall be made available in accordance with Regulation (EU, Euratom) No 609/2014.

2.   The authorising officer shall draw up a schedule indicating when the own resources defined in Decision 2014/335/EU, Euratom will be made available to the Commission.

Own resources shall be established and recovered in accordance with the rules adopted pursuant to that Decision.

For accounting purposes, the authorising officer shall issue a recovery order for credits and debits to the account for own resources referred to in Regulation (EU, Euratom) No 609/2014.

Section 2

Estimate of amounts receivable

Article 97

Estimate of amounts receivable

1.   When the authorising officer responsible has sufficient and reliable information in respect of any measure or situation which may give rise to an amount being owed to the Union, the authorising officer responsible shall make an estimate of the amount receivable.

2.   The estimate of the amount receivable shall be adjusted by the authorising officer responsible as soon as he or she is aware of an event modifying the measure or the situation which gave rise to the estimate being made.

When establishing the recovery order on a measure or situation that had previously given rise to an estimate of amounts receivable, that estimate shall be adjusted accordingly by the authorising officer responsible.

If the recovery order is drawn up for the same amount as the original estimate of amounts receivable, that estimate shall be reduced to zero.

3.   By way of derogation from paragraph 1, no estimate of the amount receivable shall be made before Member States make available to the Commission the amounts of own resources defined in Decision 2014/335/EU, Euratom, which are paid at fixed intervals by Member States. The authorising officer responsible shall issue a recovery order in respect of those amounts.

Section 3

Establishment of amounts receivable

Article 98

Establishment of amounts receivable

1.   In order to establish an amount receivable, the authorising officer responsible shall:

(a) verify that the debt exists;

(b) determine or verify the reality and the amount of the debt; and

(c) verify the conditions according to which the debt is due.

The establishment of an amount receivable shall constitute recognition of the right of the Union in respect of a debtor and establishment of entitlement to demand that the debtor pay the debt.

2.   Any amount receivable that is identified as being certain, of a fixed amount and due shall be established by a recovery order by which the authorising officer responsible instructs the accounting officer to recover the amount. It shall be followed by a debit note sent to the debtor, except for the cases where a waiver procedure is carried out immediately in accordance with the second subparagraph of paragraph 4. Both the recovery order and the debit note shall be drawn up by the authorising officer responsible.

The authorising officer shall send the debit note immediately after establishing the amount receivable and at the latest within a period of five years from the time when the Union institution was, in normal circumstances, in a position to claim its debt. Such period shall not apply where the authorising officer responsible establishes that, despite the efforts which the Union institution has made, the delay in acting was caused by the debtor’s conduct.

3.   To establish an amount receivable the authorising officer responsible shall ensure that:

(a) the amount receivable is certain, meaning that it is not subject to any condition;

(b) the amount receivable is fixed, expressed precisely in cash terms;

(c) the amount receivable is due and is not subject to any payment time;

(d) the particulars of the debtor are correct;

(e) the amount is booked to the correct budgetary item;

(f) the supporting documents are in order; and

(g) the principle of sound financial management is complied with, in particular with regard to the criteria referred to in point (a) or (b) of the first subparagraph of Article 101(2).

4.   The debit note shall be to inform the debtor that:

(a) the Union has established the amount receivable;

(b) if payment of the debt is made within the deadline, as specified in the debit note, no default interest will be due;

(c) failing payment of the debt within the deadline referred to in point (b) of this subparagraph the debt shall bear interest at the rate referred to in Article 99, without any prejudice to any specific regulations applicable;

(d) failing payment of the debt by the deadline referred to in point (b) the Union institution will effect recovery either by offsetting or by enforcement of any guarantee lodged in advance;

(e) the accounting officer may in exceptional circumstances effect recovery by offsetting before the deadline referred to in point (b), where it is necessary to protect the financial interests of the Union when he or she has justified grounds to believe that the amount due to the Union would be lost, after the debtor has been informed of the reasons and date of the recovery by offsetting;

(f) if, after taking all the steps set out in points (a) to (e) of this subparagraph, the amount has not been recovered in full, the Union institution will effect recovery by enforcement of a decision secured either in accordance with Article 100(2) or by legal action.

Where following the verification of the particulars of the debtor or on the basis of other relevant information available at the time, it is clear that the debt falls under the cases referred to in point (a) or (b) of the first subparagraph of Article 101(2), or that the debit note has not been sent in accordance with paragraph 2 of this Article, the authorising officer shall, after having established the amount receivable, decide to directly waive recovery in accordance with Article 101 without sending a debit note, in agreement with the accounting officer.

In all other cases, the authorising officer shall print out the debit note and send it to the debtor. The accounting officer shall be informed of the dispatch of the debit note through the financial information system.

5.   Amounts wrongly paid shall be recovered.

Article 99

Default interest

1.   Without prejudice to any specific provisions deriving from the application of specific regulations, any amount receivable not repaid on the deadline referred to in point (b) of the first subparagraph of Article 98(4) shall bear interest in accordance with paragraphs 2 and 3 of this Article.

2.   Except in the case referred to in paragraph 4 of this Article, the interest rate for amounts receivable not repaid on the deadline referred to in point (b) of the first subparagraph of Article 98(4) shall be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the

Official Journal of the European Union

, in force on the first calendar day of the month in which the deadline falls, increased by:

(a) eight percentage points where the obligating event is a supply contract or a service contract;

(b) three and a half percentage points in all other cases.

3.   Interest shall be calculated from the calendar day following the deadline referred to in point (b) of the first subparagraph of Article 98(4) up to the calendar day on which the debt is repaid in full.

The recovery order corresponding to the amount of the default interest shall be issued when that interest is actually received.

4.   In the case of fines or other penalties, the interest rate for amounts receivable not paid within the deadline referred to in point (b) of the first subparagraph of Article 98(4) shall be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the

Official Journal of the European Union

, in force on the first calendar day of the month in which the decision imposing a fine or other penalty has been adopted, increased by:

(a) one and a half percentage points where the debtor provides a financial guarantee which is accepted by the accounting officer instead of payment;

(b) three and a half percentage points in all other cases.

Where the Court of Justice of the European Union, in the exercise of its competence under Article 261 TFEU, increases the amount of a fine or other penalty, interest on the amount of the increase shall run from the date of the judgment of the Court.

5.   In cases where the overall interest rate would be negative it shall be set at zero percent.

Section 4

Authorisation of recovery

Article 100

Authorisation of recovery

1.   The authorising officer responsible shall, by issuing a recovery order, instruct the accounting officer to recover an amount receivable which that authorising officer responsible has established (‘the authorisation of recovery’).

2.   A Union institution may formally establish an amount as being receivable from persons other than Member States by means of a decision which shall be enforceable within the meaning of Article 299 TFEU.

If the efficient and timely protection of the financial interests of the Union so requires, other Union institutions may, in exceptional circumstances, request the Commission to adopt such an enforceable decision for their benefit with respect to claims arising in relation to staff or in relation to members or former members of a Union institution, provided that those institutions have agreed with the Commission on the practical modalities for the application of this Article.

Such exceptional circumstances shall be deemed to exist when there is no prospect of recovery of the debt by the Union institution concerned by means of a voluntary payment or by means of offsetting as provided for in Article 101(1) and the conditions for waiving the recovery under Article 101(2) and (3) are not met. In all cases, the enforceable decision shall specify that the amounts claimed shall be entered in the section of the budget relating to the Union institution concerned, which shall act as authorising officer. The revenue shall be entered as general revenue except if it constitutes assigned revenue as provided for in Article 21(3).

The requesting Union institution shall inform the Commission of any event likely to alter the recovery and shall intervene in support of the Commission in the event of an appeal against the enforceable decision.

Section 5

Recovery

Article 101

Rules on recovery

1.   The accounting officer shall act on recovery orders for amounts receivable duly established by the authorising officer responsible. The accounting officer shall exercise due diligence to ensure that the Union receives its revenue and shall ensure that the Union’s rights are safeguarded.

Partial reimbursement by a debtor who is subject to several recovery orders shall first be posted on the oldest entitlement unless otherwise specified by the debtor. Any partial payments shall first cover the interest.

The accounting officer shall recover amounts due to the budget by offsetting them in accordance with Article 102.

2.   The authorising officer responsible may waive recovery of all or part of an established amount receivable only in the following cases:

(a) where the foreseeable cost of recovery would exceed the amount to be recovered and the waiver would not harm the image of the Union;

(b) where the amount receivable cannot be recovered in view of its age, of delay in the dispatch of the debit note in the terms defined in Article 98(2), of the insolvency of the debtor, or of any other insolvency proceedings;

(c) where recovery is inconsistent with the principle of proportionality.

Where the authorising officer responsible plans to waive or partially waive recovery of an established amount receivable, he or she shall ensure that the waiver is in order and is in accordance with the principles of sound financial management and proportionality. The decision to waive recovery shall be substantiated. The authorising officer may delegate the power to take that decision.

3.   In the case referred to in point (c) of the first subparagraph of paragraph 2, the authorising officer responsible shall act in accordance with predetermined procedures established within his or her Union institution and shall apply the following criteria which are compulsory and applicable in all circumstances:

(a) the facts, having regard to the gravity of the irregularity giving rise to the establishment of the amount receivable (fraud, repeated offence, intent, diligence, good faith, manifest error);

(b) the impact that waiving recovery would have on the operation of the Union and its financial interests (amount involved, risk of setting a precedent, undermining of the authority of the law).

4.   Depending on the circumstances of the case, the authorising officer responsible shall, where appropriate, take the following additional criteria into account:

(a) any distortion of competition that would be caused by the waiving of recovery;

(b) the economic and social damage that would be caused were the debt to be recovered in full.

5.   Each Union institution shall send to the European Parliament and to the Council each year a report on the waivers granted by it pursuant to paragraphs 2, 3 and 4 of this Article. Information on waivers below EUR 60 000 shall be provided as a total amount. In the case of the Commission, that report shall be annexed to the summary of the annual activity reports referred to in Article 74(9).

6.   The authorising officer responsible may cancel an established amount receivable in full or in part. The partial cancellation of an established amount receivable does not imply the waiver of the remaining established Union entitlement.

In the event of a mistake, the authorising officer responsible shall cancel totally or partially the established amount receivable and include adequate reasons.

Each Union institution shall in its internal rules lay down the conditions and procedure for delegating the power to cancel an established amount receivable.

7.   Member States shall have primary responsibility for carrying out controls and audits and for recovering amounts unduly spent, as provided for in sector-specific rules. To the extent that Member States detect and correct irregularities on their own account, they shall be exempt from financial corrections by the Commission concerning those irregularities.

8.   The Commission shall make financial corrections on Member States in order to exclude expenditure incurred in breach of applicable law from Union financing. The Commission shall base its financial corrections on the identification of amounts unduly spent, and the financial implications for the budget. Where such amounts cannot be identified precisely, the Commission may apply extrapolated or flat-rate corrections in accordance with sector-specific rules.

The Commission shall, when deciding on the amount of a financial correction, take account of the nature and gravity of the breach of applicable law and the financial implications for the budget, including deficiencies in management and control systems.

The criteria for establishing financial corrections and the procedure to be followed may be laid down in sector-specific rules.

9.   The methodology for applying extrapolated or flat-rate corrections shall be laid down in accordance with sector-specific rules with a view to enabling the Commission to protect the financial interests of the Union.

Article 102

Recovery by offsetting

1.   Where the debtor has a claim on the Union, or on an executive agency when it implements the budget, that is certain within the meaning of point (a) of Article 98(3), of a fixed amount and due relating to a sum established by a payment order, the accounting officer shall, after expiry of the deadline referred to in point (b) of the first subparagraph of Article 98(4), recover established amounts receivable by offsetting.

In exceptional circumstances, where it is necessary to safeguard the financial interests of the Union and where the accounting officer has justified grounds to believe that the amount due to the Union would be lost, the accounting officer may recover by offsetting before the expiry of the deadline referred to in point (b) of the first subparagraph of Article 98(4).

The accounting officer may also recover by offsetting before the expiry of the deadline referred to in point (b) of first subparagraph of Article 98(4) when the debtor agrees.

2.   Before proceeding with any recovery in accordance with paragraph 1 of this Article, the accounting officer shall consult the authorising officer responsible and inform the debtors concerned, including of the means of redress in accordance with Article 133.

Where the debtor is a national authority or one of its administrative entities, the accounting officer shall also inform the Member State concerned of his or her intention to resort to recovery by offsetting at least 10 working days in advance of proceeding with it. However, in agreement with the Member State or administrative entity concerned, the accounting officer may proceed with the recovery by offsetting before that deadline has passed.

3.   The offsetting referred to in paragraph 1 shall have the same effect as a payment and discharge the Union for the amount of the debt and, where appropriate, of the interest due.

Article 103

Recovery procedure failing voluntary payment

1.   Without prejudice to Article 102, if the full amount has not been recovered by the deadline referred to in point (b) of the first subparagraph of Article 98(4), the accounting officer shall inform the authorising officer responsible and shall without delay launch the procedure for effecting recovery by any means offered by the law, including, where appropriate, by enforcement of any guarantee lodged in advance.

2.   Without prejudice to Article 102, where the recovery method referred to in paragraph 1 of this Article cannot be used and the debtor has failed to pay in response to a letter of formal notice sent by the accounting officer, the accounting officer shall effect recovery by enforcement of a decision secured either in accordance with Article 100(2) or by legal action.

Article 104

Additional time for payment

The accounting officer may, in collaboration with the authorising officer responsible, allow additional time for payment only at the written request of the debtor, with due indication of the reasons, and provided that the following conditions are fulfilled:

(a) the debtor undertakes to pay interest at the rate specified in Article 99 for the entire additional period allowed, starting from the deadline referred to in point (b) of the first subparagraph of Article 98(4);

(b) in order to safeguard the rights of the Union, the debtor lodges a financial guarantee covering the debt outstanding in both the principal sum and the interest, which is accepted by the accounting officer of the Union institution.

The guarantee referred to in point (b) of the first paragraph may be replaced by a joint and several guarantee by a third party approved by the accounting officer of the Union institution.

In exceptional circumstances, following a request by the debtor, the accounting officer may waive the requirement of a guarantee referred to in point (b) of the first paragraph when, on the basis of his or her assessment, the debtor is willing and able to make the payment in the additional time period but is not able to lodge such guarantee and is in a situation of financial distress.

Article 105

Limitation period

1.   Without prejudice to the provisions of specific regulations and the application of Decision 2014/335/EU, Euratom, entitlements of the Union in respect of third parties and entitlements of third parties in respect of the Union shall be subject to a limitation period of five years.

2.   The limitation period for entitlements of the Union in respect of third parties shall begin to run on the expiry of the deadline referred to in point (b) of the first subparagraph of Article 98(4).

The limitation period for entitlements of third parties in respect of the Union shall begin to run on the date on which the payment of the third party’s entitlement is due according to the corresponding legal commitment.

3.   The limitation period for entitlements of the Union in respect of third parties shall be interrupted by any act of a Union institution or a Member State acting at the request of a Union institution, notified to the third party and aiming at recovering the debt.

The limitation period for entitlements of third parties in respect of the Union shall be interrupted by any act notified to the Union by its creditors or on behalf of its creditors aiming at recovering the debt.

4.   A new limitation period of five years shall begin to run on the day following the interruptions referred to in paragraph 3.

5.   Any legal action relating to an entitlement as referred to in paragraph 2, including actions brought before a court which later declares itself not to have jurisdiction, shall interrupt the limitation period. A new limitation period of five years shall not begin to run until a judgment having the force of res judicata is given or there is an extrajudicial settlement between the same parties on the same action.

6.   Where the accounting officer allows the debtor additional time for payment in accordance with Article 104, this shall be considered as an interruption of the limitation period. A new limitation period of five years shall begin to run on the day following the expiry of the extended time for payment.

7.   Entitlements of the Union shall not be recovered after the expiry of the limitation period, as provided for in paragraphs 2 to 6.

Article 106

National treatment for entitlements of the Union

In the event of insolvency proceedings, entitlements of the Union shall be given the same preferential treatment as entitlements of the same nature due to public bodies in Member States where the recovery proceedings are being conducted.

Article 107

Fines, other penalties, sanctions and accrued interest imposed by Union institutions

1.   Amounts received by way of fines, other penalties and sanctions, and any accrued interest or other income generated by them, shall not be entered in the budget as long as the decisions imposing them are or could still become subject to an appeal before the Court of Justice of the European Union.

2.   The amounts referred to in paragraph 1 shall be entered in the budget as soon as possible following the exhaustion of all legal remedies. Under duly justified exceptional circumstances or where the exhaustion of all legal remedies occurs after 1 September of the current financial year, the amounts may be entered in the budget in the following financial year.

Amounts that are to be returned to the entity that paid them, following a judgment of the Court of Justice of the European Union, shall not be entered in the budget.

3.   Paragraph 1 shall not apply to decisions on clearance of accounts or financial corrections.

Article 108

Recovery of fines, other penalties or sanctions imposed by Union institutions

1.   Where an action is brought before the Court of Justice of the European Union against a decision of a Union institution imposing a fine, other penalty or sanction under the TFEU or the Euratom Treaty and until such time as all legal remedies have been exhausted, the debtor shall either provisionally pay the amounts concerned on the bank account designated by the accounting officer of the Commission or lodge a financial guarantee acceptable to the accounting officer of the Commission. The guarantee shall be independent of the obligation to pay the fine, other penalty or sanction and shall be enforceable on demand. It shall cover the claim as to principal and the interest due as specified in Article 99(4).

2.   The Commission shall secure the provisionally collected amounts by having them invested in financial assets, thereby ensuring the security and liquidity of the monies whilst also aiming at yielding a positive return.

3.   After the exhaustion of all legal remedies and where the fine, other penalty or sanction has been confirmed by the Court of Justice of the European Union, or where the decision imposing such a fine, other penalty or sanction may no longer become subject to an appeal before the Court of Justice of the European Union, one of the following measures shall be taken:

(a) the provisionally collected amounts and the return on them shall be entered in the budget in accordance with Article 107(2);

(b) where a financial guarantee has been lodged, it shall be enforced and the corresponding amounts entered in the budget.

Where the amount of the fine, other penalty or sanction has been increased by the Court of Justice of the European Union, points (a) and (b) of the first subparagraph of this paragraph shall apply up to the amounts of the original decision of the Union institution or, if applicable, to the amount laid down in a former judgment by the Court of Justice of the European Union in the same proceedings. The accounting officer of the Commission shall collect the amount corresponding to the increase and the interest due as specified in Article 99(4), which shall be entered in the budget.

4.   After all legal remedies have been exhausted and where the fine, other penalty or sanction has been cancelled or the amount has been reduced, one of the following measures shall be taken:

(a) the provisionally collected amounts or, in the event of a reduction, the relevant part thereof, including any return, shall be repaid to the third party concerned;

(b) where a financial guarantee has been lodged, it shall be released accordingly.

In the cases referred to in point (a) of the first subparagraph, where the overall return on the provisionally collected amount is negative, the loss incurred shall be deducted from the amount to be repaid.

Article 109

Compensatory interests

Without prejudice to Articles 99(2) and 116(5), and for cases other than fines, other penalties and sanctions as referred to in Articles 107 and 108, when an amount is to be reimbursed following a judgment of the Court of Justice of the European Union or as a result of an amicable settlement, the interest rate shall be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the

Official Journal of the European Union

on the first calendar day of each month. The interest rate shall not be negative. The interest shall run from the date of payment of the amount to be reimbursed until the date at which the reimbursement is due.

In cases where the overall interest rate would be negative it shall be set at zero percent.

CHAPTER 7

Expenditure operations

Article 110

Financing decisions

1.   A budgetary commitment shall be preceded by a financing decision adopted by the Union institution or by the authority to which powers have been delegated by the Union institution. The financing decisions shall be annual or multiannual.

The first subparagraph of this paragraph shall not apply in the case of appropriations for the operations of each Union institution under its administrative autonomy that can be implemented without a basic act in accordance with point (e) of Article 58(2), of administrative support expenditure and of contributions to the Union bodies referred to in Articles 70 and 71.

2.   The financing decision shall at the same time constitute the annual or multiannual work programme and shall be adopted, as appropriate, as soon as possible after the adoption of the draft budget and in principle no later than 31 March of the year of implementation. Where the relevant basic act provides for specific modalities for the adoption of a financing decision or a work programme or both, those modalities shall be applied to the part of the financing decision constituting the work programme, in compliance with the requirements of that basic act. The part which constitutes the work programme shall be published on the website of the Union institution concerned immediately after its adoption and prior to its implementation. The financing decision shall indicate the total amount it covers and shall contain a description of the actions to be financed. It shall specify:

(a) the basic act and the budget line;

(b) the objectives pursued and the expected results;

(c) the methods of implementation;

(d) any additional information required by the basic act for the work programme.

3.   In addition to the elements referred to in paragraph 2, the financing decision shall set out the following:

(a) for grants: the type of applicants targeted by the call for proposals or direct award and the global budgetary envelope reserved for the grants;

(b) for procurement: the global budgetary envelope reserved for procurements;

(c) for contributions to Union trust funds referred to in Article 234: the appropriations reserved for the trust fund for the year together with the amounts planned over its duration, from the budget as well as from other donors;

(d) for prizes: the type of participants targeted by the contest, the global budgetary envelope reserved for the contest and a specific reference to prizes with a unit value of EUR 1 000 000 or more;

(e) for financial instruments: the amount allocated to the financial instrument;

(f) in the event of indirect management: the person or entity implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or the criteria to be used to select the person or entity;

(g) for contributions to blending facilities or platforms: the amount allocated to the blending facility or platform and the list of entities participating in the blending facility or platform;

(h) for budgetary guarantees: the amount of annual provisioning and, where applicable, the amount of the budgetary guarantee to be released.

4.   The authorising officer by delegation may add any additional information considered appropriate either in the respective financing decision constituting the work programme or in any other document published on the website of the Union institution.

A multiannual financing decision shall be consistent with the financial programming referred to in Article 41(2) and shall specify that the implementation of the decision is subject to the availability of budget appropriations for the respective financial years after the adoption of the budget or as provided for in the system of provisional twelfths.

5.   Without prejudice to any specific provision of a basic act, any substantial change in a financing decision already adopted shall follow the same procedure as the initial decision.

Article 111

Expenditure operations

1.   Every item of expenditure shall be committed, validated, authorised and paid.

At the end of the periods referred to in Article 114, the unused balance of budgetary commitments shall be decommitted.

When executing operations, the authorising officer responsible shall ensure that the expenditure is in compliance with the Treaties, the budget, this Regulation, and other acts adopted pursuant to the Treaties as well as with the principle of sound financial management.

2.   Budgetary commitments shall be made and legal commitments entered into by the same authorising officer, except in duly justified cases. In particular, in the field of crisis management aid and humanitarian aid operations, legal commitments may be entered into by Heads of Union delegations, or in their absence by their deputies, on the instruction of the authorising officer responsible of the Commission who remains fully responsible, however, for the underlying transaction. The personnel employed by the Commission in the field of crisis management aid and humanitarian aid operations may sign legal commitments linked to payments executed from imprest accounts of a value not exceeding EUR 2 500.

The authorising officer responsible shall make a budgetary commitment before entering into a legal commitment with third parties or transferring funds to a Union trust fund referred to in Article 234.

The second subparagraph of this paragraph shall not apply:

(a) to legal commitments concluded following a declaration of a crisis situation in the framework of a business continuity plan, in accordance with the procedures adopted by the Commission or by any other Union institution under its administrative autonomy;

(b) in the case of humanitarian aid operations, civil protection operations and crisis management aid, if efficient delivery of the Union’s intervention requires that the Union enter into a legal commitment with third parties immediately and if prior booking of the individual budgetary commitment is not possible.

In the cases referred to in point (b) of the third subparagraph, the budgetary commitment shall be booked without delay after entering into a legal commitment with third parties.

3.   The authorising officer responsible shall validate expenditure by accepting that an item of expenditure is charged to the budget, after having checked the supporting documents attesting the creditor’s entitlement as per the conditions set in the legal commitment when there is a legal commitment. For that purpose, the authorising officer responsible shall:

(a) verify the existence of the creditor’s entitlement;

(b) determine or verify the reality and the amount of the claim through the endorsement ‘certified correct’;

(c) verify the conditions according to which payment is due.

Notwithstanding the first subparagraph, the validation of expenditure shall also apply to interim or final reports not associated with a payment request in which case the impact on the accounting system is limited to the general accounts.

4.   The validation decision shall be expressed through electronically secured signature in accordance with Article 146 by the authorising officer, or by a technically competent member of staff duly empowered by a formal decision of the authorising officer, or, exceptionally, for paper workflow take the form of a stamp incorporating that signature.

With the endorsement ‘certified correct’ the authorising officer responsible, or a technically competent member of staff duly empowered by the authorising officer responsible, shall certify:

(a) for pre-financing: that the conditions required in the legal commitment for the payment of the pre-financing are met;

(b) for interim and balance payments in contracts: that the services provided for in the contract have been properly provided, the supplies properly delivered or that the work has been properly carried out;

(c) for interim and balance payments in grants: that the action or work programme carried out by the beneficiary is in all respects in compliance with the grant agreement, including, where applicable that the costs declared by the beneficiary are eligible.

In the case referred to in point (c) of the second subparagraph, cost estimates shall not be deemed to comply with the eligibility conditions set out in Article 186(3). The same principle shall also apply to interim and final reports not associated to a payment request.

5.   In order to authorise the expenditure, the authorising officer responsible shall, after having verified that the appropriations are available, issue a payment order to instruct the accounting officer to pay the amount of expenditure which was previously validated.

Where periodic payments are made with regard to services rendered, including rental services, or goods delivered, the authorising officer may, subject to that officer’s risk analysis, order the application of a direct debit system from an imprest account. The application of such a system may also be ordered if it is specifically authorised by the accounting officer in accordance with Article 86(3).

Article 112

Types of budgetary commitments

1.   Budgetary commitments shall fall into one of the following categories:

(a) individual: when the recipient and the amount of the expenditure are known;

(b) global: when at least one of the elements necessary to identify the individual commitment is still not known;

(c) provisional: to cover routine management expenditure for the EAGF as referred to in Article 11(2), and routine administrative expenditure where either the amount or the final payees are not definitively known.

Notwithstanding point (c) of the first subparagraph, routine administrative expenditure relating to Union delegations and Union representations may be covered by provisional budgetary commitments also when the amount and final payee are known.

2.   Budgetary commitments for actions extending over more than one financial year may be broken down over several years into annual instalments only where the basic act so provides or where they relate to administrative expenditure.

3.   A global budgetary commitment shall be made on the basis of a financing decision.

The global budgetary commitment shall be made at the latest before the decision on the recipients and amounts is taken and, where implementation of the appropriations concerned involves the adoption of a work programme, at the earliest after that programme has been adopted.

4.   A global budgetary commitment shall be implemented either by the conclusion of a financing agreement, itself providing for the subsequent entering into one or more legal commitments, or by entering into one or more legal commitments.

Financing agreements in the field of direct financial assistance to third countries, including budget support, which constitute legal commitments may give rise to payments without entering into other legal commitments.

Where the global budgetary commitment is implemented by the conclusion of a financing agreement, the second subparagraph of paragraph 3 shall not apply.

5.   Each individual legal commitment entered into following a global budgetary commitment shall, prior to signature, be registered by the authorising officer responsible in the central budgetary accounts and booked to the global budgetary commitment.

6.   Provisional budgetary commitments shall be implemented by entering into one or more legal commitments giving rise to an entitlement to subsequent payments. However, in cases relating to expenditure on staff management, expenditure on members or former members of a Union institution or expenditure on communication engaged in by Union institutions for the coverage of Union events, or in the cases referred to in point 14.5 of Annex I, they may be implemented directly by payments without entering into prior legal commitments.

Article 113

Commitments for EAGF appropriations

1.   For each financial year, the EAGF appropriations shall include non-differentiated appropriations for expenditure related to measures referred to in Article 4(1) of Regulation (EU) No 1306/2013. Expenditure related to the measures referred to in Article 4(2) and Article 6 of that Regulation, with the exception of measures financed under non-operational technical assistance and contributions to executive agencies, shall be covered by differentiated appropriations.

2.   The Commission decisions fixing the amount of reimbursement of expenditure related to the EAGF incurred by Member States shall constitute global provisional budgetary commitments, which shall not exceed the total appropriations entered in the budget for the EAGF.

3.   Global provisional budgetary commitments for the EAGF which have been made for a financial year and which have not given rise to a commitment on specific budget lines by 1 February of the following financial year shall be decommitted in respect of the financial year concerned.

4.   Expenditure effected by the authorities and bodies referred to in the rules relating to the EAGF shall, within two months of receipt of the statements sent by Member States, be the subject of a commitment by chapter, article and item. Such commitments may be made after the expiry of that two-month period where a procedure for a transfer of appropriations concerning the relevant budget lines is necessary. Except where payment has not yet been made by Member States or where eligibility is in doubt, the amounts shall be charged as payments within the same two-month period.

The commitments referred to in the first subparagraph of this paragraph shall be deducted from the global provisional budgetary commitment referred to in paragraph 1.

5.   Paragraphs 2 and 3 shall apply subject to the examination and acceptance of the accounts.

Article 114

Time limits for commitments

1.   Without prejudice to Articles 111(2) and 264(3), legal commitments relating to individual or provisional budgetary commitments shall be entered into by 31 December of year n, year n being the one in which the budgetary commitment was made.

2.   Global budgetary commitments shall cover the total cost of the corresponding legal commitments entered into up to 31 December of year n+1.

Where the global budgetary commitment gives rise to the award of a prize referred to in Title IX, the legal commitment referred to in Article 207(4) shall be entered into by 31 December of year n+3.

In external actions, where the global budgetary commitment gives rise to a financing agreement concluded with a third country, the financing agreement shall be concluded by 31 December of year n+1. In that case, the global budgetary commitment shall cover the total costs of legal commitments implementing the financing agreement entered into within a period of three years following the date of conclusion of the financing agreement.

However, in the following cases, the global budgetary commitment shall cover the total costs of legal commitments entered into until the end of the period of implementation of the financing agreement:

(a) multi-donor actions;

(b) blending operations;

(c) legal commitments relating to audit and evaluation;

(d) the following exceptional circumstances:

(i) modifications made to legal commitments which have already been entered into;

(ii) legal commitments that are to be entered into after early termination of an existing legal commitment;

(iii) changes of the implementing entity.

3.   The third and fourth subparagraphs of paragraph 2 shall not apply to the following multiannual programmes that are implemented through split commitments:

(a) the Instrument for Pre-accession Assistance established by Regulation (EU) No 231/2014 of the European Parliament and of the Council (41);

(b) the European Neighbourhood Instrument established by Regulation (EU) No 232/2014 of the European Parliament and of the Council (42).

In the cases referred to in the first subparagraph, the appropriations shall be automatically decommitted by the Commission in accordance with sector-specific rules.

4.   The individual and provisional budgetary commitments for actions extending over more than one financial year shall, except in the case of staff expenditure, have a final date for implementation set, in accordance with the conditions in the legal commitments to which they refer, and taking into account the principle of sound financial management.

5.   Any parts of budgetary commitments which have not been implemented by payments six months after the final date for implementation shall be decommitted.

6.   The amount of a budgetary commitment for which no payment within the meaning of Article 115 has been made within two years of the entering into the legal commitment shall be decommitted, except where that amount relates to a case under litigation before judicial courts or arbitral bodies, where the legal commitment takes the form of a financing agreement with a third country or where there are special provisions laid down in sector-specific rules.

Article 115

Types of payments

1.   Payment of expenditure shall be made by the accounting officer within the limits of the funds available.

2.   Payment shall be made on production of proof that the relevant action is in accordance with the contract, the agreement or the basic act and shall cover one or more of the following operations:

(a) payment of the entire amount due;

(b) payment of the amount due in any of the following ways:

(i) pre-financing providing a float, which may be divided into a number of payments in accordance with the principle of sound financial management; such pre-financing amount shall be paid either on the basis of the contract, the agreement or the basic act, or on the basis of supporting documents which make it possible to check that the terms of the contract or agreement in question are complied with;

(ii) one or more interim payments as a counterpart of a partial execution of the action or partial performance of the contract or agreement, which may clear pre-financing in whole or in part, without prejudice to the basic act;

(iii) one payment of the balance of the amounts due where the action is completely executed, or the contract or agreement is completely performed;

(c) payment of a provision into the common provisioning fund established pursuant to Article 212.

The payment of the balance shall clear all preceding expenditure. A recovery order shall be issued to recover unused amounts.

3.   A distinction shall be made in budgetary accounting between the different types of payment referred to in paragraph 2 at the time each payment is made.

4.   The accounting rules referred to in Article 80 shall include the rules for clearing the pre-financing in the accounts and for the acknowledgment of the eligibility of costs.

5.   Pre-financing payments shall be cleared regularly by the authorising officer responsible, according to the economic nature of the project and, at the latest, at the end of the project. The clearing shall be performed on the basis of information on costs incurred or confirmation of the conditions for payment being fulfilled in accordance with Article 125 as validated by the authorising officer in accordance with Article 111(3).

For grant agreements, contracts or contribution agreements above EUR 5 000 000, the authorising officer shall obtain at each year-end at least the information needed to calculate a reasonable estimate of the costs. That information shall not be used for clearing the pre-financing, but may be used by the authorising officer and the accounting officer to comply with Article 82(2).

For the purposes of the second subparagraph, appropriate provisions shall be included in the legal commitments entered into.

Article 116

Time limits for payments

1.   Payments shall be made within:

(a) 90 calendar days for contribution agreements, contracts and grant agreements involving technical services or actions which are particularly complex to evaluate and for which payment depends on the approval of a report or a certificate;

(b) 60 calendar days for all other contribution agreements, contracts and grant agreements for which payment depends on the approval of a report or a certificate;

(c) 30 calendar days for all other contribution agreements, contracts and grant agreements.

2.   The time allowed for making payments shall be understood to include validation, authorisation and the payment of expenditure.

It shall begin to run from the date on which a payment request is received.

3.   A payment request shall be registered by the authorised department of the authorising officer responsible as soon as possible and is deemed to be received on the date it is registered.

The date of payment is deemed to be the date on which the Union institution’s account is debited.

A payment request shall include the following essential elements:

(a) the creditor’s identification;

(b) the amount;

(c) the currency;

(d) the date.

Where at least one essential element is missing, the payment request shall be rejected.

The creditor shall be informed in writing of a rejection and the reasons for it as soon as possible and in any case within 30 calendar days from the date on which the payment request was received.

4.   The authorising officer responsible may suspend the time limit for payment where:

(a) the amount of the payment request is not due; or

(b) the appropriate supporting documents have not been produced.

If information comes to the notice of the authorising officer responsible which puts in doubt the eligibility of expenditure in a payment request, he or she may suspend the time limit for payment for the purpose of verifying, including by means of on-the-spot-checks, that the expenditure is eligible. The remaining time allowed for payment shall begin to run from the date on which the requested information or revised documents are received or the necessary further verification, including on-the-spot checks, is carried out.

The creditors concerned shall be informed in writing of the reasons for a suspension.

5.   Except in the case of Member States, the EIB and the EIF, on the expiry of the time limits laid down in paragraph 1, the creditor shall be entitled to interest in accordance with the following conditions:

(a) the interest rates shall be those referred to in Article 99(2);

(b) the interest shall be payable for the period elapsing from the calendar day following expiry of the time limit for payment laid down in paragraph 1 up to the day of payment.

However, in the event that the interest calculated in accordance with the first subparagraph is lower than or equal to EUR 200, it shall be paid to the creditor only on a request submitted within two months of receiving late payment.

6.   Each Union institution shall submit to the European Parliament and Council a report on the compliance with and the suspension of the time limits laid down in paragraphs 1 to 4 of this Article. The report of the Commission shall be annexed to the summary of the annual activity reports referred to in Article 74(9).

CHAPTER 8

Internal auditor

Article 117

Appointment of the internal auditor

1.   Each Union institution shall establish an internal audit function which shall be performed in compliance with the relevant international standards. The internal auditor appointed by the Union institution concerned shall be accountable to the latter for verifying the proper operation of budget implementation systems and procedures. The internal auditor shall not be the authorising officer or the accounting officer.

2.   For the purposes of the internal auditing of the EEAS, Heads of Union delegations, acting as authorising officers by subdelegation in accordance with Article 60(2), shall be subject to the verifying powers of the internal auditor of the Commission for the financial management subdelegated to them.

The internal auditor of the Commission shall also act as the internal auditor of the EEAS in respect of the implementation of the section of the budget relating to the EEAS.

3.   Each Union institution shall appoint its internal auditor in accordance with arrangements adapted to its specific features and requirements. Each Union institution shall inform the European Parliament and the Council of the appointment of its internal auditor.

4.   Each Union institution shall determine, in accordance with its specific features and its requirements, the scope of the mission of its internal auditor and shall lay down in detail the objectives and procedures for the exercise of the internal audit function with due respect for international internal audit standards.

5.   Each Union institution may appoint as internal auditor, by virtue of their particular competence, an official or other servant covered by the Staff Regulations selected from nationals of Member States.

6.   If two or more Union institutions appoint the same internal auditor they shall make the necessary arrangements for the internal auditor to be declared liable for his or her actions as laid down in Article 121.

7.   Each Union institution shall inform the European Parliament and Council when the duties of its internal auditor are terminated.

Article 118

Powers and duties of the internal auditor

1.   The internal auditor shall advise his or her Union institution on dealing with risks, by issuing independent opinions on the quality of management and control systems and by issuing recommendations for improving the conditions of implementation of operations and promoting sound financial management.

The internal auditor shall in particular be responsible for:

(a) assessing the suitability and effectiveness of internal management systems and the performance of departments in implementing policies, programmes and actions by reference to the risks associated with them;

(b) assessing the efficiency and effectiveness of the internal control and audit systems applicable to each budget implementation operation.

2.   The internal auditor shall perform his or her duties in relation to all the activities and departments of the Union institution concerned. He or she shall enjoy full and unlimited access to all information required to perform his or her duties, if necessary also on-the-spot access, including in Member States and in third countries.

The internal auditor shall take note of the annual report of the authorising officers and any other pieces of information identified.

3.   The internal auditor shall report to the Union institution concerned on his or her findings and recommendations. The Union institution concerned shall ensure that action is taken with regard to recommendations resulting from audits.

Each Union institution shall consider whether the recommendations made in the reports of its internal auditor are suitable for an exchange of best practices with other Union institutions.

4.   The internal auditor shall submit to the Union institution concerned an annual internal audit report indicating the number and type of internal audits carried out, the principal recommendations made and the action taken with regard to those recommendations.

That annual internal audit report shall mention any systemic problems detected by the panel set up pursuant to Article 143 where it gives the opinion referred to in Article 93.

5.   The internal auditor shall, during the elaboration of the report, particularly focus on the overall compliance with the principles of sound financial management and performance, and shall ensure that appropriate measures have been taken in order to steadily improve and enhance their application.

6.   Each year, the Commission shall, in the context of the discharge procedure and in accordance with Article 319 TFEU, forward on request its annual internal audit report with due regard to confidentiality requirements.

7.   Each Union institution shall make available the contact details of its internal auditor to any natural or legal person involved in expenditure operations, for the purposes of confidentially contacting the internal auditor.

8.   Each year each Union institution shall draft a report containing a summary of the number and type of internal audits carried out, a synthesis of the recommendations made and the action taken on those recommendations and forward it to the European Parliament and to the Council as provided for in Article 247.

9.   The reports and findings of the internal auditor, as well as the report of the Union institution concerned, shall be accessible to the public only after validation by the internal auditor of the action taken for their implementation.

10.   Each Union institution shall provide its internal auditor with the resources required for the proper performance of the internal audit function and a mission charter detailing the tasks, rights and obligations of its internal auditor.

Article 119

Work programme of the internal auditor

1.   The internal auditor shall adopt the work programme and shall submit it to the Union institution concerned.

2.   Each Union institution may ask its internal auditor to carry out audits not included in the work programme referred to in paragraph 1.

Article 120

Independence of the internal auditor

1.   The internal auditor shall enjoy complete independence in the conduct of the audits. Special rules applicable to the internal auditor shall be laid down by the Union institution concerned and shall be such as to guarantee that the internal auditor is totally independent in the performance of his or her duties, and to establish the internal auditor’s responsibility.

2.   The internal auditor shall not be given any instructions nor be restricted in any way as regards the performance of the functions which, by virtue of his or her appointment, are assigned to him or her under this Regulation.

3.   If the internal auditor is a member of staff, he or she shall exercise exclusive audit functions in full independence and shall assume responsibility as laid down in the Staff Regulations.

Article 121

Liability of the internal auditor

Each Union institution alone, proceeding in accordance with this Article, may act to have its internal auditor, as a member of staff, declared liable for his or her actions.

Each Union institution shall take a reasoned decision to open an investigation. That decision shall be communicated to the interested party. The Union institution concerned may put in charge of the investigation, under its direct responsibility, one or more officials of a grade equal to or higher than that of the member of staff concerned. In the course of the investigation, the views of the interested party shall be heard.

The investigation report shall be communicated to the interested party, who shall then be heard by the Union institution concerned on the subject of that report.

On the basis of the report and the hearing, the Union institution concerned shall adopt either a reasoned decision terminating the proceedings or a reasoned decision in accordance with Articles 22 and 86 of and Annex IX to the Staff Regulations. Decisions imposing disciplinary measures or financial penalties shall be notified to the interested party and communicated, for information purposes, to other Union institutions and the Court of Auditors.

The interested party may bring an action in respect of such decisions before the Court of Justice of the European Union, as provided for in the Staff Regulations.

Article 122

Action before the Court of Justice of the European Union

Without prejudice to the remedies allowed by the Staff Regulations, the internal auditor may bring an action directly before the Court of Justice of the European Union in respect of any act relating to the performance of his or her duties as internal auditor. He or she shall lodge such an action within three months running from the calendar day on which the act in question came to his or her knowledge

Such actions shall be investigated and heard in accordance with Article 91(5) of the Staff Regulations.

Article 123

Internal audit progress committees

1.   Each Union institution shall establish an internal audit progress committee tasked with ensuring the independence of the internal auditor, monitoring the quality of the internal audit work and ensuring that internal and external audit recommendations are properly taken into account and followed up by its services.

2.   The composition of the internal audit progress committee shall be decided by each Union institution taking into account its organisational autonomy and the importance of independent expert advice.

TITLE V

COMMON RULES

CHAPTER 1

Rules applicable to direct, indirect and shared management

Article 124

Scope

With the exception of Article 138, references in this Title to legal commitments shall be construed as references to legal commitments, framework contracts and financial framework partnership agreements.

Article 125

Forms of Union contribution

1.   Union contributions under direct, shared and indirect management shall help achieve a Union policy objective and the results specified and may take any of the following forms:

(a) financing not linked to the costs of the relevant operations based on:

(i) the fulfilment of conditions set out in sector-specific rules or Commission decisions; or

(ii) the achievement of results measured by reference to previously set milestones or through performance indicators;

(b) reimbursement of eligible costs actually incurred;

(c) unit costs, which cover all or certain specific categories of eligible costs which are clearly identified in advance by reference to an amount per unit;

(d) lump sums, which cover in global terms all or certain specific categories of eligible costs which are clearly identified in advance;

(e) flat-rate financing, which covers specific categories of eligible costs, which are clearly identified in advance, by applying a percentage;

(f) a combination of the forms referred to in points (a) to (e).

Union contributions under point (a) of the first subparagraph of this paragraph shall, in direct and indirect management, be established in accordance with Article 181, sector-specific rules or a Commission decision and, in shared management, in accordance with sector-specific rules. Union contributions under points (c), (d) and (e) of the first subparagraph of this paragraph shall, in direct and indirect management, be established in accordance with Article 181 or sector-specific rules and, in shared management, in accordance with sector-specific rules.

2.   When determining the appropriate form of a contribution, the potential recipients’ interests and accounting methods shall be taken into account to the greatest extent possible.

3.   The authorising officer responsible shall report on financing not linked to costs pursuant to points (a) and (f) of the first subparagraph of paragraph 1 of this Article in the annual activity report referred to in Article 74(9).

Article 126

Cross-reliance on assessments

The Commission may rely in full or in part on assessments made by itself or other entities, including donors, insofar as such assessments were made on the compliance with conditions equivalent to those set out in this Regulation for the applicable method of implementation. To that end, the Commission shall promote the recognition of internationally accepted standards or international best practices.

Article 127

Cross-reliance on audits

Without prejudice to existing possibilities for carrying out further audits, where an audit based on internationally accepted audit standards providing reasonable assurance has been conducted by an independent auditor on the financial statements and reports setting out the use of a Union contribution, that audit shall form the basis of the overall assurance, as further specified, where appropriate, in sector-specific rules, provided that there is sufficient evidence of the independence and competence of the auditor. To that end, the report of the independent auditor and the related audit documentation shall be made available on request to the European Parliament, the Commission, the Court of Auditors and the audit authorities of Member States.

Article 128

Use of already available information

In order to avoid asking persons and entities receiving Union funds for the same information more than once, information already available at Union institutions, managing authorities or other bodies and entities implementing the budget shall be used to the extent possible.

Article 129

Cooperation for protection of the financial interests of the Union

1.   Any person or entity receiving Union funds shall fully cooperate in the protection of the financial interests of the Union and shall, as a condition for receiving the funds, grant the necessary rights and access required for the authorising officer responsible, for EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, for OLAF, for the Court of Auditors, and, where appropriate, for the relevant national authorities, to comprehensively exert their respective competences. In the case of OLAF, such rights shall include the right to carry out investigations, including on-the-spot checks and inspections, in accordance with Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council (43).

2.   Any person or entity receiving Union funds under direct and indirect management shall agree in writing to grant the necessary rights as referred to in paragraph 1 and shall ensure that any third parties involved in the implementation of Union funds grant equivalent rights.

CHAPTER 2

Rules applicable to direct and indirect management

Section 1

Rules on procedures and management

Article 130

Financial framework partnerships

1.   The Commission may establish financial framework partnership agreements for a long-term cooperation with persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or with beneficiaries. Without prejudice to point (c) of paragraph 4 of this Article, financial framework partnership agreements shall be reviewed at least once during the term of every multiannual financial framework. Contribution agreements or grant agreements may be signed under such agreements.

2.   The purpose of a financial framework partnership agreement shall be to facilitate the achievement of policy objectives of the Union by stabilising the contractual terms of the cooperation. The financial framework partnership agreement shall specify the forms of financial cooperation and shall include an obligation to set out, in the specific agreements signed under the financial framework partnership agreement, arrangements for monitoring the achievement of specific objectives. Those agreements shall also, on the basis of the results of an

ex ante

assessment, indicate whether the Commission may rely on the systems and the procedures of the persons or entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or of beneficiaries, including audit procedures.

3.   With a view to optimising costs and benefits of audits and facilitate coordination, audit or verification agreements may be concluded with persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or with beneficiaries. Such agreements shall be without prejudice to Articles 127 and 129.

4.   In the case of financial framework partnerships implemented through specific grants:

(a) the financial framework partnership agreement shall, in addition to paragraph 2, specify:

(i) the nature of the actions or work programmes foreseen;

(ii) the procedure for awarding specific grants, in compliance with the principles and procedural rules in Title VIII;

(b) the financial framework partnership agreement and the specific grant agreement taken as a whole shall comply with the requirements of Article 201;

(c) the duration of the financial framework partnership shall not exceed four years save in duly justified cases which are clearly indicated in the annual activity report referred to in Article 74(9);

(d) the financial framework partnership shall be implemented in compliance with the principles of transparency and equal treatment of applicants;

(e) the financial framework partnership shall be treated as a grant with regard to programming,

ex ante

publication and award;

(f) specific grants based on the financial framework partnership shall be subject to the

ex post

publication procedures set out in Article 38.

5.   A financial framework partnership agreement implemented through specific grants may provide for the reliance on the systems and the procedures of the beneficiary in accordance with paragraph 2 of this Article, where those systems and procedures have been assessed in accordance with Article 154(2), (3) and (4). In such a case, point (d) of Article 196(1) shall not apply. Where the procedures of the beneficiary for providing financing to third parties referred to in point (d) of the first subparagraph of Article 154(4) were positively assessed by the Commission, Articles 204 and 205 shall not apply.

6.   In the case of financial framework partnership agreement implemented through specific grants the verification of the financial and operational capacity referred to in Article 198 shall be performed before signature of the financial framework partnership agreement. The Commission may rely on an equivalent verification of the financial and operational capacity carried out by other donors.

7.   In the case of financial framework partnerships implemented through contribution agreements, the financial framework partnership agreement and the contribution agreement taken as a whole shall comply with Article 129 and Article 155(6).

Article 131

Suspension, termination and reduction

1.   Where an award procedure has been subject to irregularities or fraud, the authorising officer responsible shall suspend the procedure and may take any necessary measures, including the cancellation of the procedure. The authorising officer responsible shall inform OLAF immediately of suspected cases of fraud.

2.   Where, after the award, the award procedure proves to have been subject to irregularities or fraud, the authorising officer responsible may:

(a) refuse to enter into the legal commitment or cancel the award of a prize;

(b) suspend payments;

(c) suspend the implementation of the legal commitment;

(d) where appropriate, terminate the legal commitment in whole or with regard to one or more recipients.

3.   The authorising officer responsible may suspend payments or the implementation of the legal commitment where:

(a) the implementation of the legal commitment proves to have been subject to irregularities, fraud or breach of obligations;

(b) it is necessary to verify whether presumed irregularities, fraud or breach of obligations have actually occurred;

(c) irregularities, fraud or breach of obligations call into question the reliability or effectiveness of the internal control systems of a person or entity implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or the legality and regularity of the underlying transactions.

Where the presumed irregularities, fraud or breach of obligations referred to in point (b) of the first subparagraph are not confirmed, the implementation or payments shall resume as soon as possible.

The authorising officer responsible may terminate the legal commitment in whole or with regard to one or more recipients in the cases referred to in points (a) and (c) of the first subparagraph.

4.   In addition to measures referred to in paragraph 2 or 3, the authorising officer responsible may reduce the grant, the prize, the contribution under the contribution agreement or the price due under a contract in proportion to the seriousness of the irregularities, fraud or of the breach of obligations, including where the activities concerned were not implemented or were implemented poorly, partially or late.

In the case of financing referred to in point (a) of the first subparagraph of Article 125(1) the authorising officer responsible may reduce the contribution proportionally if the results have been achieved poorly, partially or late or the conditions have not been fulfilled.

5.   Points (b), (c) and (d) of paragraph 2 and paragraph 3 shall not apply to applicants in a contest for prizes.

Article 132

Record-keeping

1.   Recipients shall keep records and supporting documents, including statistical records and other records pertaining to the funding, as well as records and documents in an electronic format, for five years following the payment of the balance or, in the absence of such payment, the transaction. This period shall be three years where the funding is of an amount lower than or equal to EUR 60 000.

2.   Records and documents pertaining to audits, appeals, litigation, the pursuit of claims relating to legal commitments or pertaining to OLAF investigations shall be retained until such audits, appeals, litigation, pursuit of claims or investigations have been closed. For records and documents pertaining to OLAF investigations, the obligation to retain shall apply once those investigations have been notified to the recipient.

3.   Records and documents shall be kept either in the form of the originals, or certified true copies of the originals, or on commonly accepted data carriers including electronic versions of original documents or documents existing in electronic version only. Where electronic versions exist, no originals shall be required where such documents meet the applicable legal requirements in order to be considered as equivalent to originals and to be relied on for audit purposes.

Article 133

Adversarial procedure and means of redress

1.   Before adopting any measure adversely affecting the rights of a participant or a recipient the authorising officer responsible shall ensure that the participant or the recipient has been given the opportunity to submit observations.

2.   Where a measure of an authorising officer adversely affects the rights of a participant or a recipient, the act establishing that measure shall contain an indication of the available means of administrative and/or judicial redress for challenging it.

Article 134

Interest rate rebates and guarantee fee subsidies

1.   Interest rate rebates and guarantee fee subsidies shall be provided in accordance with Title X where they are combined in a single measure with financial instruments.

2.   Where interest rate rebates and guarantee fee subsidies are not combined in a single measure with financial instruments they may be provided in accordance with Title VI or VIII.

Section 2

Early-detection and exclusion system

Article 135

Protection of the financial interests of the Union by means of detection of risks, exclusion and imposition of financial penalties

1.   In order to protect the financial interests of the Union, the Commission shall set up and operate an early-detection and exclusion system.

The purpose of such a system shall be to facilitate:

(a) the early detection of persons or entities referred to in paragraph 2, which pose a risk to the financial interests of the Union;

(b) the exclusion of persons or entities referred to in paragraph 2, which are in one of the exclusion situations referred to in Article 136(1);

(c) the imposition of a financial penalty on a recipient pursuant to Article 138.

2.   The early-detection and exclusion system shall apply to:

(a) participants and recipients;

(b) entities on whose capacity the candidate or tenderer intends to rely or subcontractors of a contractor;

(c) any person or entity receiving Union funds where the budget is implemented pursuant to point (c) of the first subparagraph of Article 62(1) and to Article 154(4) on the basis of information notified in accordance with Article 155(6);

(d) any person or entity receiving Union funds under financial instruments exceptionally implemented in accordance with point (a) of the first subparagraph of Article 62(1);

(e) participants or recipients on which entities implementing the budget in accordance with Article 63 have provided information, as transmitted by Member States in accordance with sector-specific rules, in accordance with point (d) of Article 142(2);

(f) sponsors as referred to in Article 26.

3.   The decision to register information concerning an early detection of the risks referred to in point (a) of the second subparagraph of paragraph 1 of this Article, to exclude persons or entities referred to in paragraph 2 and/or to impose a financial penalty on a recipient shall be taken by the authorising officer responsible. Information related to such decisions shall be registered in the database referred to in Article 142(1). Where such decisions are taken on the basis of Article 136(4), the information registered in the database shall include the information concerning the persons referred to in that paragraph.

4.   The decision to exclude persons or entities referred to in paragraph 2 of this Article or to impose financial penalties on a recipient shall be based on a final judgment or, in the exclusion situations referred to in Article 136(1), on a final administrative decision, or on a preliminary classification in law by the panel referred to in Article 143 in the situations referred to in Article 136(2) in order to ensure a centralised assessment of those situations. In the cases referred to in Article 141(1), the authorising officer responsible shall reject a participant from a given award procedure.

Without prejudice to Article 136(5), the authorising officer responsible may take a decision to exclude a participant or recipient and/or to impose a financial penalty on a recipient and a decision to publish the related information, on the basis of a preliminary classification as referred to in Article 136(2), only after having obtained a recommendation of the panel referred to in Article 143.

Article 136

Exclusion criteria and decisions on exclusions

1.   The authorising officer responsible shall exclude a person or entity referred to in Article 135(2) from participating in award procedures governed by this Regulation or from being selected for implementing Union funds where that person or entity is in one or more of the following exclusion situations:

(a) the person or entity is bankrupt, subject to insolvency or winding-up procedures, its assets are being administered by a liquidator or by a court, it is in an arrangement with creditors, its business activities are suspended, or it is in any analogous situation arising from a similar procedure provided for under Union or national law;

(b) it has been established by a final judgment or a final administrative decision that the person or entity is in breach of its obligations relating to the payment of taxes or social security contributions in accordance with the applicable law;

(c) it has been established by a final judgment or a final administrative decision that the person or entity is guilty of grave professional misconduct by having violated applicable laws or regulations or ethical standards of the profession to which the person or entity belongs, or by having engaged in any wrongful conduct which has an impact on its professional credibility where such conduct denotes wrongful intent or gross negligence, including, in particular, any of the following:

(i) fraudulently or negligently misrepresenting information required for the verification of the absence of grounds for exclusion or the fulfilment of eligibility or selection criteria or in the implementation of the legal commitment;

(ii) entering into agreement with other persons or entities with the aim of distorting competition;

(iii) violating intellectual property rights;

(iv) attempting to influence the decision-making of the authorising officer responsible during the award procedure;

(v) attempting to obtain confidential information that may confer upon it undue advantages in the award procedure;

(d) it has been established by a final judgment that the person or entity is guilty of any of the following:

(i) fraud, within the meaning of Article 3 of Directive (EU) 2017/1371 of the European Parliament and of the Council (44) and Article 1 of the Convention on the protection of the European Communities’ financial interests, drawn up by the Council Act of 26 July 1995 (45);

(ii) corruption, as defined in Article 4(2) of Directive (EU) 2017/1371 or active corruption within the meaning of Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, drawn up by the Council Act of 26 May 1997 (46), or conduct referred to in Article 2(1) of Council Framework Decision 2003/568/JHA (47), or corruption as defined in other applicable laws;

(iii) conduct related to a criminal organisation as referred to in Article 2 of Council Framework Decision 2008/841/JHA (48);

(iv) money laundering or terrorist financing within the meaning of Article 1(3), (4) and (5) of Directive (EU) 2015/849 of the European Parliament and of the Council (49);

(v) terrorist offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA (50), respectively, or inciting, aiding, abetting or attempting to commit such offences, as referred to in Article 4 of that Decision;

(vi) child labour or other offences concerning trafficking in human beings as referred to in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council (51);

(e) the person or entity has shown significant deficiencies in complying with main obligations in the implementation of a legal commitment financed by the budget which has:

(i) led to the early termination of a legal commitment;

(ii) led to the application of liquidated damages or other contractual penalties; or

(iii) been discovered by an authorising officer, OLAF or the Court of Auditors following checks, audits or investigations;

(f) it has been established by a final judgment or final administrative decision that the person or entity has committed an irregularity within the meaning of Article 1(2) of Council Regulation (EC, Euratom) No 2988/95 (52);

(g) it has been established by a final judgment or final administrative decision that the person or entity has created an entity in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations in the jurisdiction of its registered office, central administration or principal place of business;

(h) it has been established by a final judgment or final administrative decision that an entity has been created with the intent referred to in point (g).

2.   In the absence of a final judgment or, where applicable, a final administrative decision in the cases referred to in points (c), (d), (f), (g) and (h) of paragraph 1 of this Article, or in the case referred to in point (e) of paragraph 1 of this Article, the authorising officer responsible shall exclude a person or entity referred to in Article 135(2) on the basis of a preliminary classification in law of a conduct as referred to in those points, having regard to established facts or other findings contained in the recommendation of the panel referred to in Article 143.

The preliminary classification referred to in the first subparagraph of this paragraph does not prejudge the assessment of the conduct of the person or entity referred to in Article 135(2) concerned by the competent authorities of Member States under national law. The authorising officer responsible shall review his or her decision to exclude the person or entity referred to in Article 135(2) and/or to impose a financial penalty on a recipient without delay following the notification of a final judgment or a final administrative decision. In cases where the final judgment or the final administrative decision does not set the duration of the exclusion, the authorising officer responsible shall set that duration on the basis of established facts and findings and having regard to the recommendation of the panel referred to in Article 143.

Where such final judgment or final administrative decision holds that the person or entity referred to in Article 135(2) is not guilty of the conduct subject to a preliminary classification in law, on the basis of which that person or entity has been excluded, the authorising officer responsible shall, without delay, bring an end to that exclusion and/or reimburse, as appropriate, any financial penalty imposed.

The facts and findings referred to in the first subparagraph shall include, in particular:

(a) facts established in the context of audits or investigations carried out by EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, the Court of Auditors, OLAF or the internal auditor, or any other check, audit or control performed under the responsibility of the authorising officer;

(b) non-final administrative decisions which may include disciplinary measures taken by the competent supervisory body responsible for the verification of the application of standards of professional ethics;

(c) facts referred to in decisions of persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1);

(d) information transmitted in accordance with point (d) of Article 142(2) by entities implementing Union funds pursuant to point (b) of the first subparagraph of Article 62(1);

(e) decisions of the Commission relating to the infringement of Union competition law or of a national competent authority relating to the infringement of Union or national competition law.

3.   Any decision of the authorising officer responsible taken under Articles 135 to 142 or, where applicable, any recommendation of the panel referred to in Article 143, shall be made in compliance with the principle of proportionality, in particular taking into account:

(a) the seriousness of the situation, including the impact on the financial interests and image of the Union;

(b) the time which has elapsed since the relevant conduct;

(c) the duration of the conduct and its recurrence;

(d) whether the conduct was intentional or the degree of negligence shown;

(e) in the cases referred to in point (b) of paragraph 1, whether a limited amount is at stake;

(f) any other mitigating circumstances, such as:

(i) the degree of collaboration of the person or entity referred to in Article 135(2) concerned with the relevant competent authority and the contribution of that person or entity to the investigation as recognised by the authorising officer responsible; or

(ii) the disclosure of the exclusion situation by means of a declaration as referred to in Article 137(1).

4.   The authorising officer responsible shall exclude a person or entity referred to in Article 135(2) where:

(a) a natural or legal person who is a member of the administrative, management or supervisory body of the person or entity referred to in Article 135(2), or who has powers of representation, decision or control with regard to that person or entity, is in one or more of the situations referred to in points (c) to (h) of paragraph 1 of this Article;

(b) a natural or legal person that assumes unlimited liability for the debts of the person or entity referred to in Article 135(2) is in one or more of the situations referred to in point (a) or (b) of paragraph 1 of this Article;

(c) a natural person who is essential for the award or for the implementation of the legal commitment is in one or more of the situations referred to in points (c) to (h) of paragraph 1.

5.   In the cases referred to in paragraph 2 of this Article, the authorising officer responsible may exclude a person or entity referred to in Article 135(2) provisionally without the prior recommendation of the panel referred to in Article 143, where their participation in an award procedure or their selection for implementing Union funds would constitute a serious and imminent threat to the financial interests of the Union. In such cases, the authorising officer responsible shall immediately refer the case to the panel referred to in Article 143 and shall take a final decision no later than 14 days after having received the recommendation of the panel.

6.   The authorising officer responsible, having regard, where applicable, to the recommendation of the panel referred to in Article 143, shall not exclude a person or entity referred to in Article 135(2) from participating in an award procedure or from being selected for implementing Union funds where:

(a) the person or entity has taken remedial measures as specified in paragraph 7 of this Article, to an extent that is sufficient to demonstrate its reliability. This point shall not apply in the case referred to in point (d) of paragraph 1 of this Article;

(b) it is indispensable to ensure the continuity of service, for a limited duration and pending the adoption of remedial measures specified in paragraph 7 of this Article;

(c) such an exclusion would be disproportionate on the basis of the criteria referred to in paragraph 3 of this Article.

In addition, point (a) of paragraph 1 of this Article shall not apply in the case of the purchase of supplies on particularly advantageous terms from either a supplier which is definitively winding up its business activities or the liquidators in an insolvency procedure, an arrangement with creditors, or a similar procedure under Union or national law.

In the cases of non-exclusion referred to in the first and second subparagraphs of this paragraph, the authorising officer responsible shall specify the reasons for not excluding the person or entity referred to in Article 135(2) and inform the panel referred to in Article 143 of those reasons.

7.   The remedial measures referred to in point (a) of the first subparagraph of paragraph 6 shall include, in particular:

(a) measures to identify the origin of the situations giving rise to exclusion and concrete technical, organisational and personnel measures within the relevant business or activity area of the person or entity referred to in Article 135(2), appropriate to correct the conduct and prevent its further occurrence;

(b) proof that the person or entity referred to in Article 135(2) has undertaken measures to compensate or redress the damage or harm caused to the financial interests of the Union by the underlying facts giving rise to the exclusion situation;

(c) proof that the person or entity referred to in Article 135(2) has paid or secured the payment of any fine imposed by the competent authority or of any taxes or social security contributions referred to in point (b) of paragraph 1 of this Article.

8.   The authorising officer responsible, having regard, where applicable, to the revised recommendation of the panel referred to in Article 143, shall, without delay, revise its decision to exclude a person or entity referred to in Article 135(2)

ex officio

or on request from that person or entity, where the latter has taken remedial measures sufficient to demonstrate its reliability or has provided new elements demonstrating that the exclusion situation referred to in paragraph 1 of this Article no longer exists.

9.   In the case referred to in point (b) of Article 135(2), the authorising officer responsible shall require that the candidate or tenderer replaces an entity or a subcontractor on whose capacity it intends to rely, which is in an exclusion situation referred to in paragraph 1 of this Article.

Article 137

Declaration and evidence of absence of an exclusion situation

1.   A participant shall declare whether it is in one of the situations referred to in Articles 136(1) and 141(1), and, where applicable, whether it has taken any remedial measures referred to in point (a) of the first subparagraph of Article 136(6).

A participant shall also declare whether the following persons or entities are in one of the exclusion situations referred to in points (c) to (h) of Article 136(1):

(a) natural or legal persons that are members of the administrative, management or supervisory body of the participant or that have powers of representation, decision or control with regard to that participant;

(b) beneficial owners, as defined in point (6) of Article 3 of Directive (EU) 2015/849, of the participant.

The participant or the recipient shall without delay inform the authorising officer responsible of any changes in the situations as declared.

Where appropriate, the candidate or tenderer shall provide the same declarations referred to in the first and second subparagraphs signed by a subcontractor or by any other entity on whose capacity it intends to rely, as the case may be.

The authorising officer responsible shall not request the declarations referred to in the first and second subparagraph when such declarations have already been submitted for the purposes of another award procedure, provided that the situation has not changed, and that the time that has elapsed since the issuing date of the declarations does not exceed one year.

The authorising officer responsible may waive the requirements under the first and second subparagraphs for very low value contracts the value of which does not exceed the amount referred to in point 14.4 of Annex I.

2.   Whenever requested by the authorising officer responsible and where this is necessary to ensure the proper conduct of the procedure, the participant, the subcontractor or the entity on whose capacity a candidate or tenderer intends to rely shall provide:

(a) appropriate evidence that it is not in one of the exclusion situations referred to in Article 136(1);

(b) information on natural or legal persons that are members of the administrative, management or supervisory body of the participant or that have powers of representation, decision or control with regard to that participant, including persons and entities within the ownership and control structure and beneficial owners, and appropriate evidence that none of those persons are in one of the exclusion situations referred to in points (c) to (f) of Article 136(1).

(c) appropriate evidence that natural or legal persons that assume unlimited liability for the debts of that participant are not in an exclusion situation referred to in point (a) or (b) of Article 136(1).

3.   Where applicable and in accordance with national law, the authorising officer responsible may accept as appropriate evidence that a participant or an entity referred to in paragraph 2 is not in one of the exclusion situations referred to in points (a), (c), (d), (f), (g) and (h) of Article 136(1), a recent extract from the judicial record or, failing that, an equivalent document recently issued by a judicial or administrative authority in its country of establishment showing that those requirements are satisfied.

The authorising officer responsible may accept as appropriate evidence that a participant or an entity referred to in paragraph 2 is not in one of the exclusion situations referred to in points (a) and (b) of Article 136(1), a recent certificate issued by the competent authority of the country of establishment. Where such types of certificates are not issued in the country of establishment, the participant may provide a sworn statement made before a judicial authority or notary or, failing that, a solemn statement made before an administrative authority or a qualified professional body in its country of establishment.

4.   The authorising officer responsible shall waive the obligation of a participant or an entity referred to in paragraph 2 to submit the documentary evidence referred to in paragraphs 2 and 3:

(a) if he or she can access such evidence on a national database free of charge;

(b) if such evidence has already been submitted for the purposes of another procedure and provided that any submitted documents are still valid and that the time that has elapsed since the issuing date of the documents does not exceed one year;

(c) if he or she recognises that there is a material impossibility to provide such evidence.

5.   Paragraphs 1 to 4 of this Article shall not apply to persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) or to Union bodies referred to in Articles 70 and 71.

For financial instruments and in the absence of rules and procedures fully equivalent to those referred to in point (d) of the first subparagraph of Article 154(4), final recipients and intermediaries shall provide the person or entity implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1) with a signed declaration on honour confirming that they are not in one of the situations referred to in points (a) to (d), (g) and (h) of Article 136(1) or points (b) and (c) of the first subparagraph of Article 141(1) or in a situation deemed equivalent following the assessment carried out in accordance with Article 154(4).

Where, exceptionally, financial instruments are implemented pursuant to point (a) of the first subparagraph of Article 62(1), final recipients shall provide financial intermediaries with a signed declaration on honour confirming that they are not in one of the situations referred to in points (a) to (d), (g) and (h) of Article 136(1) or points (b) and (c) of the first subparagraph of Article 141(1).

Article 138

Financial penalties

1.   In order to ensure a deterrent effect, the authorising officer responsible may, having regard, where applicable, to the recommendation of the panel referred to in Article 143, impose a financial penalty on a recipient with whom a legal commitment has been entered into and who is in an exclusion situation referred to in point (c), (d), (e) or (f) of Article 136(1).

Regarding the exclusion situations referred to in points (c) to (f) of Article 136(1), the financial penalty may be imposed as an alternative to a decision to exclude a recipient, where such an exclusion would be disproportionate on the basis of the criteria referred to in Article 136(3).

Regarding the exclusion situations referred to in points (c), (d) and (e) of Article 136(1), the financial penalty may be imposed in addition to an exclusion where this is necessary to protect the financial interests of the Union, due to the systemic and recurrent conduct engaged in by the recipient with the intention to unduly obtain Union funds.

Notwithstanding the first, second and third subparagraphs of this paragraph, a financial penalty shall not be imposed on a recipient who in accordance with Article 137 has disclosed that it is in an exclusion situation.

2.   The amount of the financial penalty shall not exceed 10 % of the total value of the legal commitment. In the event of a grant agreement signed with a number of beneficiaries the financial penalty shall not exceed 10 % of the grant amount the beneficiary concerned is entitled to in accordance with the grant agreement.

Article 139

Duration of exclusion and limitation period

1.   The duration of exclusion shall not exceed any of the following:

(a) the duration, if any, set by the final judgement or the final administrative decision of a Member State;

(b) in the absence of a final judgment or a final administrative decision:

(i) five years for the cases referred to in point (d) of Article 136(1);

(ii) three years for the cases referred to in points (c) and (e) to (h) of Article 136(1).

A person or entity referred to in Article 135(2) shall be excluded as long as it is in one of the exclusion situations referred to in points (a) and (b) of Article 136(1).

2.   The limitation period for excluding and/or imposing financial penalties on a person or entity referred to Article 135(2) shall be five years calculated from any of the following:

(a) the date of the conduct giving rise to exclusion or, in the case of continued or repeated acts, the date on which the conduct ceases, in the cases referred to in points (b) to (e) and (g) and (h) of Article 136(1);

(b) the date of the final judgment of a national jurisdiction or of the final administrative decision in the cases referred to in points (b), (c), (d), (g) and (h) of Article 136(1).

The limitation period shall be interrupted by an act of a national authority, of the Commission, of OLAF, of EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, of the panel referred to in Article 143 of this Regulation or of any entity involved in budget implementation, if such an act is notified to the person or entity referred to in Article 135(2) of this Regulation and is relating to investigations or judicial proceedings. A new limitation period shall begin to run on the day following the interruption.

For the purpose of point (f) of Article 136(1) of this Regulation, the limitation period to exclude a person or entity referred to in Article 135(2) of this Regulation and/or impose financial penalties on a recipient provided for in Article 3 of Regulation (EC, Euratom) No 2988/95 shall apply.

Where the conduct of a person or entity referred to in Article 135(2) of this Regulation concerned qualifies under several of the grounds listed in Article 136(1) of this Regulation, the limitation period applicable to the most serious of those grounds shall apply.

Article 140

Publication of exclusion and financial penalties

1.   In order to, where necessary, reinforce the deterrent effect of the exclusion and/or financial penalty, the Commission shall, subject to a decision of the authorising officer responsible, publish on its website the following information related to the exclusion and, where applicable, the financial penalty in the cases referred to in points (c) to (h) of Article 136(1):

(a) the name of the person or entity referred to in Article 135(2) concerned;

(b) the exclusion situation;

(c) the duration of the exclusion and/or the amount of the financial penalty.

Where the decision on the exclusion and/or financial penalty has been taken on the basis of a preliminary classification as referred to in Article 136(2), the publication shall indicate that there is no final judgment or, where applicable, final administrative decision. In such cases, information about any appeals, their status and their outcome, as well as any revised decision of the authorising officer responsible shall be published without delay. Where a financial penalty has been imposed, the publication shall also indicate whether that penalty has been paid.

The decision to publish the information shall be taken by the authorising officer responsible either following the relevant final judgment or, where applicable, final administrative decision, or following the recommendation of the panel referred to in Article 143, as the case may be. That decision shall take effect three months after its notification to the person or entity concerned, as referred to in Article 135(2).

The information published shall be removed as soon as the exclusion has come to an end. In the case of a financial penalty, the publication shall be removed six months after payment of that penalty.

Where personal data are concerned, the authorising officer responsible shall in accordance with Regulation (EC) No 45/2001 inform the person or entity concerned, as referred to in Article 135(2) of this Regulation, of their rights under the applicable data protection rules and of the procedures available for exercising those rights.

2.   The information referred to in paragraph 1 of this Article shall not be published in any of the following circumstances:

(a) where it is necessary to preserve the confidentiality of an investigation or of national judicial proceedings;

(b) where publication would cause disproportionate damage to the person or entity referred to in Article 135(2) concerned or would otherwise be disproportionate on the basis of the proportionality criteria set out in Article 136(3) and having regard to the amount of the financial penalty;

(c) where a natural person is concerned, unless the publication of personal data is justified by exceptional circumstances, inter alia, by the seriousness of the conduct or its impact on the financial interests of the Union. In such cases, the decision to publish the information shall duly take into consideration the right to privacy and other rights provided for in Regulation (EC) No 45/2001.

Article 141

Rejection from an award procedure

1.   The authorising officer responsible shall reject from an award procedure a participant who:

(a) is in an exclusion situation established in accordance with Article 136;

(b) has misrepresented the information required as a condition for participating in the procedure or has failed to supply that information;

(c) was previously involved in the preparation of documents used in the award procedure where this entails a breach of the principle of equality of treatment, including distortion of competition, that cannot be remedied otherwise.

The authorising officer responsible shall communicate to the other participants in the award procedure the relevant information exchanged in the context of or resulting from the involvement of the participant in the preparation of the award procedure as referred to in point (c) of the first subparagraph. Prior to any such rejection the participant shall be given the opportunity to prove that its involvement in preparing the award procedure does not breach the principle of equality of treatment.

2.   Article 133(1) shall apply unless the rejection has been justified in accordance with point (a) of the first subparagraph of paragraph 1 of this Article by a decision concerning exclusion taken with regard to the participant, following an examination of its observations.

Article 142

The early-detection and exclusion system

1.   Information exchanged within the early-detection and exclusion system referred to in Article 135 shall be centralised in a database set up by the Commission (‘the database’) and shall be managed in accordance with the right to privacy and other rights provided for in Regulation (EC) No 45/2001.

Information on cases of early detection, exclusion and/or financial penalties shall be entered in the database by the authorising officer responsible after notifying the person or entity concerned, as referred to in Article 135(2). Such notification may be deferred in exceptional circumstances, where there are compelling legitimate grounds to preserve the confidentiality of an investigation or of national judicial proceedings, until such compelling legitimate grounds to preserve the confidentiality cease to exist.

In accordance with Regulation (EC) No 45/2001, the Commission shall upon request inform the person or entity subject to the early-detection and exclusion system, as referred to in Article 135(2), of the data stored in the database relating to that person or entity.

The information contained in the database shall be updated, where appropriate, following a rectification, an erasure or any modification of data. It shall only be published in accordance with Article 140.

2.   The early-detection and exclusion system shall be based on facts and findings as referred to in the fourth subparagraph of Article 136(2) and on the transmission of information to the Commission, in particular, by:

(a) EPPO in respect of those Member States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, or OLAF in accordance with Regulation (EU, Euratom) No 883/2013 where an investigation completed or in progress shows that it might be appropriate to take precautionary measures or actions to protect the financial interests of the Union, with due regard to the respect for procedural and fundamental rights, and to the protection of whistle-blowers;

(b) an authorising officer of the Commission, of a European office set up by the Commission or of an executive agency;

(c) a Union institution, a European office, an agency other than those referred to in point (b) of this paragraph, or a body or a person entrusted with implementation of CFSP actions;

(d) entities implementing the budget in accordance with Article 63, in cases of detected fraud and/or irregularity and their follow up, where the transmission of information is required by sector-specific rules;

(e) persons or entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1), in cases of detected fraud and/or irregularity and their follow up.

3.   Except where information is to be submitted in accordance with sector-specific rules, the information to be transmitted pursuant to paragraph 2 of this Article shall include:

(a) the identification of the entity or person concerned;

(b) a summary of the risks detected or the facts in question;

(c) information that could assist the authorising officer in carrying out the verification referred to in paragraph 4 of this Article or in taking a decision on exclusion as referred to in Article 136(1) or (2), or a decision to impose a financial penalty as referred to in Article 138;

(d) where applicable, information on any special measures necessary to ensure the confidentiality of the information transmitted, including measures for the safeguarding of evidence to protect the investigation or the national judicial proceedings.

4.   The Commission shall without delay transmit the information referred to in paragraph 3 to its authorising officers and those of its executive agencies, all other Union institutions, Union bodies, European offices and agencies through the database referred to in paragraph 1 in order to allow them to carry out the necessary verification in respect of their ongoing award procedures and existing legal commitments.

In carrying out that verification, the authorising officer responsible shall exercise his or her powers as set out in Article 74 and shall not go beyond what is foreseen in the terms and conditions of the award procedure and legal commitments.

The retention period for the information related to the early detection transmitted in accordance with paragraph 3 of this Article shall not exceed one year. If, during that period, the authorising officer responsible requests the panel to issue a recommendation in a case concerning exclusion or financial penalties, the retention period may be extended until such time as the authorising officer responsible has taken a decision.

5.   All persons and entities involved in budget implementation in accordance with Article 62 shall be granted access by the Commission to the information on decisions on exclusion pursuant to Article 136 to enable them to verify whether there is an exclusion in the system with a view to taking this information into account, as appropriate and on their own responsibility, when awarding contracts in budget implementation.

6.   As part of the annual report of the Commission to the European Parliament and to the Council pursuant to Article 325(5) TFEU, the Commission shall provide aggregate information on the decisions taken by the authorising officers under Articles 135 to 142 of this Regulation. That report shall also provide further information on any decisions taken by the authorising officers pursuant to point (b) of the first subparagraph of Article 136(6) of this Regulation and Article 140(2) of this Regulation and on any decisions by the authorising officers to deviate from the recommendation of the panel pursuant to the third subparagraph of Article 143(6) of this Regulation.

The information referred to in the first subparagraph of this paragraph shall be provided with due regard to confidentiality requirements and shall, in particular, not allow for the identification of the person or entity concerned, as referred to in Article 135(2).

Article 143

Panel

1.   A panel shall be convened at the request of an authorising officer of any Union institution, Union body, European office or body or person entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU.

2.   The panel shall be composed of:

(a) a standing high-level independent chair appointed by the Commission;

(b) two permanent representatives of the Commission as the owner of the early-detection and exclusion system, who shall express a joint position; and

(c) one representative of the requesting authorising officer.

The composition of the panel shall ensure the appropriate legal and technical expertise. The panel shall be assisted by a permanent secretariat, provided by the Commission, which shall ensure the continuous administration of the panel.

3.   The Chair shall be chosen from among former members of the Court of Justice of the European Union, the Court of Auditors or former officials who have had at least the rank of Director-General in a Union institution other than the Commission. He or she shall be selected on the basis of his or her personal and professional qualities, extensive experience in legal and financial matters and proven competence, independence and integrity. The term of office shall be five years and shall not be renewable. The Chair shall be appointed as special adviser within the meaning of Article 5 of the Conditions of Employment of Other Servants of the European Union. The Chair shall preside all sessions of the panel. He or she shall be independent in the performance of his or her duties. He or she shall not have a conflict of interests between his or her duties as Chair and any other official duties.

4.   The rules of procedure of the panel shall be adopted by the Commission.

5.   The panel shall uphold the right of the person or entity concerned, as referred to in Article 135(2), to submit observations on the facts or findings referred to in Article 136(2) and on the preliminary classification in law before adopting its recommendations. The right to submit observations may be deferred in exceptional circumstances where there are compelling legitimate grounds to preserve the confidentiality of an investigation or of national judicial proceedings, until such legitimate grounds cease to exist.

6.   The recommendation of the panel to exclude and/or impose a financial penalty shall, where applicable, contain the following elements:

(a) the facts or findings referred to in Article 136(2) and their preliminary classification in law;

(b) an assessment of the need to impose a financial penalty and its amount;

(c) an assessment of the need to exclude the person or entity referred to in Article 135(2) and, in that case, the suggested duration of such an exclusion;

(d) an assessment of the need to publish the information related to the person or entity referred to in Article 135(2) who is excluded and/or subject to a financial penalty;

(e) an assessment of remedial measures taken by the person or entity referred to Article 135(2), if any.

Where the authorising officer responsible envisages taking a more severe decision than what has been recommended by the panel, he or she shall ensure that such a decision is taken with due respect for the right to be heard and for the rules of personal data protection.

Where the authorising officer responsible decides to deviate from the recommendation of the panel, he or she shall justify such decision to the panel.

7.   The panel shall revise its recommendation during the exclusion period on request from the authorising officer responsible in the cases referred to in Article 136(8) or following the notification of a final judgment or a final administrative decision establishing the grounds for exclusion where such a judgment or decision does not set the duration of the exclusion, as referred to in the second subparagraph of Article 136(2).

8.   The panel shall notify the requesting authorising officer without delay of its revised recommendation, following which the authorising officer shall review his or her decision.

9.   The Court of Justice of the European Union shall have unlimited jurisdiction to review a decision whereby the authorising officer excludes a person or entity referred to in Article 135(2) and/or imposes a financial penalty on a recipient, including annulling the exclusion, reducing or increasing its duration and/or annulling, reducing or increasing the financial penalty imposed. Article 22(1) of Regulation (EC) No 58/2003 shall not apply when the decision of the authorising officer to exclude or impose a financial penalty is taken on the basis of a recommendation of the panel.

Article 144

Functioning of the database for the early-detection and exclusion system

1.   Information requested from the entities referred to in point (d) of Article 142(2) shall be transmitted only through the automated information system established by the Commission currently in use for reporting of fraud and irregularities (‘the Irregularity Management System’), in accordance with sector-specific rules.

2.   The use of the data received through the Irregularity Management System shall take into consideration the status of the national procedure that existed at the time when the information was submitted. Such use shall be preceded by a consultation of the Member State that has submitted the relevant data through the Irregularity Management System.

Article 145

Exception applicable to the Joint Research Centre

Articles 135 to 144 shall not apply to the JRC.

Section 3

IT systems and e-government

Article 146

Electronic management of operations

1.   Where revenue and expenditure operations or document exchanges are managed by means of computer systems, documents may be signed by a computerised or electronic procedure providing authentication of the signatory. Such computer systems shall include a full and up-to-date description of the system defining the content of all data fields, describing how each individual operation is treated and explaining in detail how the computer system guarantees the existence of a complete audit trail for each operation.

2.   Subject to the prior agreement of the Union institutions and Member States concerned, any transmission of documents between them may be done by electronic means.

Article 147

e-Government

1.   Union institutions, the executive agencies and the Union bodies referred to in Articles 70 and 71 shall establish and apply uniform standards for the electronic exchange of information with participants. In particular, they shall, to the greatest possible extent, design and implement solutions for the submission, storage and processing of data submitted in award procedures, and to that end, put in place a single ‘electronic data interchange area’ for participants. The Commission shall report regularly to the European Parliament and to the Council on the progress made in that regard.

2.   Under shared management, all official exchanges of information between Member States and the Commission shall be carried out by means indicated in sector-specific rules. Those rules shall provide for interoperability of data gathered or received, and transmitted in the management of the budget.

Article 148

Electronic exchange systems

1.   All exchanges with recipients, including the entering into legal commitments and any amendments thereto, may be done through electronic exchange systems.

2.   Electronic exchange systems shall satisfy the following conditions:

(a) only authorised persons may have access to the system and to documents transmitted through it;

(b) only authorised persons may electronically sign or transmit a document through the system;

(c) authorised persons are identified through the system by established means;

(d) the time and date of the electronic transaction are determined precisely;

(e) the integrity of documents is preserved;

(f) the availability of documents is preserved;

(g) where appropriate, the confidentiality of documents is preserved;

(h) the protection of personal data in accordance with Regulation (EC) No 45/2001 is ensured.

3.   Data sent or received through such a system shall enjoy legal presumption of the integrity of the data and the accuracy of the date and time of sending or receiving the data indicated by the system.

A document sent or notified through such a system shall be considered as equivalent to a paper document, shall be admissible as evidence in legal proceedings, shall be deemed original and shall enjoy legal presumption of its authenticity and integrity, provided that the document does not contain any dynamic features capable of automatically changing it.

The electronic signatures referred to in point (b) of paragraph 2 shall have a legal effect equivalent to handwritten signatures.

Article 149

Submission of application documents

1.   The arrangements for the submission of application documents shall be determined by the authorising officer responsible who may choose an exclusive method of submission.

The means of communication chosen shall be such as to ensure that there is genuine competition and that the following conditions are satisfied:

(a) each submission contains all the information required for its evaluation;

(b) the integrity of data is preserved;

(c) the confidentiality of application documents is preserved;

(d) the protection of personal data in accordance with Regulation (EC) No 45/2001 is ensured.

2.   The Commission shall ensure by appropriate means and in accordance with Article 147(1) that participants may submit the application documents and any supporting evidence in an electronic format. Any electronic communication system used to support communications and information exchanges shall be non-discriminatory, generally available and interoperable with information and communication technology products in general use and shall not restrict participants’ access to the award procedure.

The Commission shall report regularly to the European Parliament and to the Council on the progress of the application of this paragraph.

3.   Devices for the electronic receipt of application documents shall guarantee, through technical means and appropriate procedures, that:

(a) the participant can be authenticated with certainty;

(b) the exact time and date of the receipt of application documents can be determined precisely;

(c) only authorised persons have access to the data transmitted and may set or change the dates for opening the application documents;

(d) during the different stages of the award procedure only authorised persons have access to all data submitted and may give access to the data as needed for the procedure;

(e) it is reasonably ensured that any attempt to infringe any of the conditions set out in points (a) to (d) can be detected.

The first subparagraph shall not apply to contracts below the thresholds referred to in Article 175(1).

4.   Where the authorising officer responsible authorises submission of application documents by electronic means, the electronic documents submitted by means of such systems shall be deemed to be the originals.

5.   Where submission is by letter, participants may choose to submit application documents:

(a) either by post or by courier service, in which case the evidence shall be constituted by the postmark or the date of the deposit slip;

(b) by hand-delivery to the premises of the authorising officer responsible by the participant in person or by an agent, in which case the evidence shall be constituted by the acknowledgement of receipt.

6.   By submitting application documents, participants accept to receive notification of the outcome of the procedure by electronic means.

7.   Paragraphs 1 to 6 of this Article shall not apply to the selection of persons or entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1).

CHAPTER 3

Rules applicable to direct management

Article 150

Evaluation committee

1.   Application documents shall be evaluated by an evaluation committee.

2.   The evaluation committee shall be appointed by the authorising officer responsible.

The evaluation committee shall be made up of at least three persons.

3.   The members of the evaluation committee evaluating grant applications or tenders shall represent at least two organisational entities of Union institutions or Union bodies referred to in Articles 68, 70 and 71 with no hierarchical link between them, at least one of which does not come under the authorising officer responsible. Where representations and local units outside the Union, such as a Union delegation, office or branch office in a third country, and Union bodies referred to in Articles 68, 70 and 71 have no separate entities, the requirement of organisational entities with no hierarchical link between them shall not apply.

External experts may assist the evaluation committee pursuant to a decision of the authorising officer responsible.

Members of the evaluation committee may be external experts where that possibility is provided for in the basic act.

4.   The members of the evaluation committee evaluating applications in a contest for prizes may be persons referred to in the first subparagraph of paragraph 3 or external experts.

5.   The members of the evaluation committee and the external experts shall comply with Article 61.

Article 151

Clarification and correction of application documents

The authorising officer responsible may correct obvious clerical errors in application documents after confirmation of the intended correction by the participant.

Where a participant fails to submit evidence or to make statements, the evaluation committee or, where appropriate, the authorising officer responsible shall, except in duly justified cases, ask the participant to provide the missing information or to clarify supporting documents.

Such information, clarification or confirmation shall not substantially change application documents.

Article 152

Guarantees

1.   With the exception of contracts and grants the value of which does not exceed EUR 60 000, the authorising officer responsible may, if proportionate and subject to the authorising officer’s risk analysis, require a guarantee to be lodged:

(a) by contractors or beneficiaries in order to limit the financial risks connected with a payment of pre-financing (‘guarantee on pre-financing’);

(b) by contractors to ensure compliance with substantial contractual obligations in the case of works, supplies or complex services (‘performance guarantee’);

(c) by contractors to ensure full performance of the contract during the contract liability period (‘retention money guarantee’).

The JRC shall be exempted from lodging guarantees.

As an alternative to requesting a guarantee on pre-financing, for grants, the authorising officer responsible may decide to split the payment into several instalments.

2.   The authorising officer responsible shall decide whether the guarantee is to be denominated in euro or in the currency of the contract or of the grant agreement.

3.   The guarantee shall be issued by a bank or by an authorised financial institution accepted by the authorising officer responsible.

At the request of the contractor or the beneficiary and provided it is accepted by the authorising officer responsible:

(a) the guarantees referred to points (a), (b) and (c) of the first subparagraph of paragraph 1 may be replaced by a joint and several guarantee of the contractor or the beneficiary and a third party;

(b) the guarantee referred to in point (a) of the first subparagraph of paragraph 1 may be replaced by an irrevocable and unconditional joint guarantee of the beneficiaries who are parties to the same grant agreement.

4.   The guarantee shall have the effect of making the bank or financial institution or the third party provide irrevocable collateral security, or stand as first-call guarantor of the contractor’s or beneficiary’s obligations.

5.   Where, in the course of implementation of the contract or the grant agreement, the authorising officer responsible discovers that a guarantor is not or is no longer authorised to issue guarantees in accordance with the applicable national law, he or she shall require that the contractor or the beneficiary replaces the guarantee issued by such a guarantor.

Article 153

Guarantee on pre-financing

1.   A guarantee on pre-financing shall be for an amount not exceeding the amount of the pre-financing and shall be valid for a period sufficiently long to allow it to be activated.

2.   The guarantee on pre-financing shall be released as and when the pre-financing is deducted from interim payments or payments of the balance to the contractor or the beneficiary in accordance with the terms of the contract or the conditions of the grant agreement.

TITLE VI

INDIRECT MANAGEMENT

Article 154

Indirect management

1.   The selection of the persons and entities to be entrusted with the implementation of Union funds or budgetary guarantees pursuant to point (c) of the first subparagraph of Article 62(1) shall be transparent, justified by the nature of the action and shall not give rise to a conflict of interests. For entities referred to in points (c)(ii), (v), (vi) and (vii) of the first subparagraph of Article 62(1) the selection shall also take due account of their financial and operational capacity.

Where the person or entity is identified in a basic act, the financial statement provided for in Article 35 shall include a justification for the choice of that particular person or entity.

In cases of implementation by a network, requiring the designation of at least one body or entity per Member State or per country concerned, the body or entity shall be designated by the Member State or the country concerned in accordance with the basic act. In all other cases, the Commission shall designate such bodies or entities in agreement with Member States or countries concerned.

2.   Persons and entities entrusted with the implementation of Union funds or budgetary guarantees pursuant to point (c) of the first subparagraph of Article 62(1) shall respect the principles of sound financial management, transparency, non-discrimination and visibility of Union action. Where the Commission establishes financial framework partnership agreements in accordance with Article 130 those principles shall be further described in such agreements.

3.   Prior to signing contribution agreements, financing agreements or guarantee agreements, the Commission shall ensure a level of protection of the financial interests of the Union equivalent to the one that is provided for when the Commission implements the budget in accordance with point (a) of the first subparagraph of Article 62(1). The Commission shall do so by carrying out an assessment of the systems, rules and procedures of the persons or entities implementing Union funds, if it intends to rely on such systems, rules and procedures for the implementation of the action, or by taking appropriate supervisory measures in accordance with paragraph 5 of this Article.

4.   The Commission shall, in accordance with the principle of proportionality and with due consideration for the nature of the action and the financial risks involved, assess that persons and entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1):

(a) set up and ensure the functioning of an effective and efficient internal control system based on international best practices and allowing in particular to prevent, detect and correct irregularities and fraud;

(b) use an accounting system that provides accurate, complete and reliable information in a timely manner;

(c) are subject to an independent external audit, performed in accordance with internationally accepted auditing standards by an audit service functionally independent of the person or entity concerned;

(d) apply appropriate rules and procedures for providing financing to third parties, including transparent, non-discriminatory, efficient and effective review procedures, rules for recovering funds unduly paid and rules for excluding from access to funding;

(e) make public adequate information on their recipients equivalent to that provided for under Article 38;

(f) ensure protection of personal data equivalent to that referred to in Article 5.

In addition, in agreement with the persons or entities concerned, the Commission may assess other rules and procedures such as the costs of administrating the accounting practices of the persons or entities. On the basis on the results of that assessment, the Commission may decide to rely on those rules and procedures.

Persons or entities which have been assessed in accordance with the first and second subparagraphs shall inform the Commission without undue delay if any substantive changes are made to their systems, rules or procedures which may impact the reliability of the Commission’s assessment.

5.   Where the persons or entities concerned comply only in part with paragraph 4, the Commission shall take appropriate supervisory measures ensuring the protection of the financial interests of the Union. Those measures shall be specified in the relevant agreements. Information about any such measures shall be made available to the European Parliament and to the Council at their request.

6.   The Commission may decide not to require an

ex ante

assessment as referred to in paragraphs 3 and 4:

(a) for Union bodies referred to in Articles 70 and 71 and for bodies or persons referred to in point (c)(viii) of the first subparagraph of Article 62(1) which have adopted financial rules with prior consent of the Commission;

(b) for third countries or the bodies they designate, in so far as the Commission retains financial management responsibilities that guarantee a sufficient protection of the financial interests of the Union; or

(c) for those procedures specifically required by the Commission, including its own and those specified in basic acts.

7.   Where the systems, rules or procedures of the persons or entities referred to in point (c) of the first subparagraph of Article 62(1) are assessed as appropriate, Union contributions to those persons or entities may be implemented in accordance with this Title. Where such persons or entities participate in a call for proposals they shall comply with the rules of the call for proposals contained in Title VIII. In such a case, the authorising officer may decide to sign a contribution agreement or a financing agreement instead of a grant agreement.

Article 155

Implementation of Union funds and budgetary guarantees

1.   Persons and entities implementing Union funds or budgetary guarantees shall provide the Commission with:

(a) a report on the implementation of Union funds or budgetary guarantees, including the fulfilment of the conditions or the achievement of results referred to in point (a) of the first subparagraph of Article 125(1);

(b) where the contribution reimburses expenditure, their accounts drawn up for the expenditure incurred;

(c) a management declaration covering the information referred to in point (a) and, where appropriate, point (b) confirming that:

(i) the information is properly presented, complete and accurate;

(ii) the Union funds were used for their intended purpose, as defined in the contribution agreements, financing agreements or guarantee agreements, or where applicable, in the relevant sector-specific rules;

(iii) the control systems put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions;

(d) a summary of the final audit reports and of controls carried out, including an analysis of the nature and extent of errors and weaknesses identified in systems, as well as corrective action taken or planned.

Where cross-reliance on audits as referred to in Article 127 takes place, the summary referred to in point (d) of the first subparagraph of this paragraph shall include all relevant audit documentation to be relied upon.

For actions terminating before the end of the financial year concerned, the final report may replace the management declaration referred to in point (c) of the first subparagraph, provided it is submitted before 15 February of the following financial year.

The documents referred to in the first subparagraph shall be accompanied by an opinion of an independent audit body, drawn up in accordance with internationally accepted audit standards. That opinion shall establish whether the control systems put in place function properly and are cost-effective, and whether the underlying transactions are legal and regular. The opinion shall also state whether the audit work puts in doubt the assertions made in the management declaration referred to in point (c) of the first subparagraph. Where such an opinion is absent, the authorising officer may seek an equivalent level of assurance through other independent means.

The documents referred to in the first subparagraph shall be provided to the Commission no later than 15 February of the following financial year. The opinion referred to in the third subparagraph shall be provided to the Commission no later than 15 March of that year.

The obligations set out in this paragraph shall be without prejudice to agreements concluded with the EIB, the EIF, Member State organisations, international organisations and third countries. With regard to the management declaration, such agreements shall include at least the obligation of those entities to provide the Commission annually with a statement that, during the financial year concerned, the Union funds were used and accounted for in compliance with Article 154(3) and (4) and with the obligations laid down in such agreements. Such statement may be incorporated in the final report if the action implemented is limited to 18 months.

2.   When implementing Union funds, persons and entities shall:

(a) comply with applicable Union law and agreed international and Union standards and, therefore, not support actions that contribute to money laundering, terrorism financing, tax avoidance, tax fraud or tax evasion;

(b) when implementing financial instruments and budgetary guarantees in accordance with Title X, not enter into new or renewed operations with entities incorporated or established in jurisdictions listed under the relevant Union policy on non-cooperative jurisdictions or that are identified as high-risk third countries pursuant to Article 9(2) of Directive (EU) 2015/849, or that do not effectively comply with Union or internationally agreed tax standards on transparency and exchange of information.

Entities may derogate from point (b) of the first subparagraph only if the action is physically implemented in one of those jurisdictions, and does not present any indication that the relevant operation falls under any of the categories listed in point (a) of the first subparagraph.

When concluding agreements with financial intermediaries, entities implementing financial instruments and budgetary guarantees in accordance with Title X shall transpose the requirements referred to in this paragraph into the relevant agreements and shall request the financial intermediaries to report on their observance.

3.   When implementing financial instruments and budgetary guarantees in accordance with Title X, persons and entities shall apply the principles and standards set out in Union law on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, in particular Regulation (EU) 2015/847 of the European Parliament and of the Council (53) and Directive (EU) 2015/849. They shall make funding under this Regulation contingent upon the disclosure of beneficial ownership information in accordance with Directive (EU) 2015/849 and publish country-by-country reporting data within the meaning of Article 89(1) of Directive 2013/36/EU of the European Parliament and of the Council (54).

4.   The Commission shall verify that the Union funds or budgetary guarantees have been used in accordance with the conditions laid down in the relevant agreements. Where the costs of the person or entity are reimbursed based on a simplified cost option in accordance with points (c), (d) and (e) of the first subparagraph of Article 125(1), Article 181(1) to (5) and Articles 182 to 185 shall apply

mutatis mutandis

. Where Union funds or budgetary guarantees have been used in breach of the obligations laid down in the relevant agreements, Article 131 shall apply.

5.   In multi-donor actions, where the Union contribution reimburses expenditure, the procedure set out in paragraph 4 shall consist in verifying that an amount corresponding to that paid by the Commission for the action concerned has been used by the person or entity in accordance with the conditions laid down in the relevant grant, contribution or financing agreement.

6.   Contribution agreements, financing agreements and guarantee agreements shall clearly define the responsibilities and obligations of the person or entity implementing Union funds, including the obligations set out in Article 129 and the conditions for payment of the contribution. Such agreements shall also, where applicable, define the mutually agreed remuneration which shall be commensurate with the conditions under which the actions are implemented, taking due account of situations of crisis and fragility, and, where appropriate, be performance-based. Those agreements shall also include rules on reporting to the Commission on how the tasks are performed, the results expected, including indicators on measuring performance, and the obligation for persons or entities implementing Union funds to notify the Commission without delay of cases of detected fraud and irregularities and their follow-up.

7.   All contribution agreements, financing agreements and guarantee agreements shall be made available to the European Parliament and to the Council at their request.

8.   This Article shall not apply to the Union contribution to Union bodies which are subject to a separate discharge procedure under Articles 70 and 71, with the exception of possible ad-hoc contribution agreements.

Article 156

Indirect management with international organisations

1.   The Commission may, in accordance with point (c)(ii) of the first subparagraph of Article 62(1), implement the budget indirectly with international public-sector organisations set up by international agreements (‘international organisations’) and with specialised agencies set up by such organisations. Those agreements shall be transmitted to the Commission as part of the assessment carried out by the Commission in accordance with Article 154(3).

2.   The following organisations shall be assimilated to international organisations:

(a) the International Committee of the Red Cross;

(b) the International Federation of National Red Cross and Red Crescent Societies.

3.   The Commission may adopt a duly justified decision assimilating a non-profit organisation to an international organisation provided that it satisfies the following conditions:

(a) it has legal personality and autonomous governance bodies;

(b) it has been established to perform specific tasks of general international interest;

(c) at least six Member States are members of the non-profit organisation;

(d) it is provided with adequate financial guarantees;

(e) it operates on the basis of a permanent structure and in accordance with systems, rules and procedures which can be assessed in accordance with Article 154(3).

4.   Where international organisations implement funds under indirect management, verification agreements concluded with them shall apply.

Article 157

Indirect management with Member State organisations

1.   The Commission may in accordance with points (c)(v) and (vi) of the first subparagraph of Article 62(1) implement the budget indirectly with Member State organisations.

2.   Where the Commission implements the budget indirectly with Member States organisations, it shall rely on the systems, rules and procedures of those organisations which have been assessed in accordance with Article 154(3) and (4).

3.   Financial framework partnership agreements concluded with Member State organisations in accordance with Article 130 shall further specify the extent and the modalities of the cross-reliance on systems, rules and procedures of Member State organisations and may include specific provisions on the cross-reliance on assessments and audits as referred to in Articles 126 and 127.

Article 158

Indirect management with third countries

1.   The Commission may implement the budget indirectly with a third country or the bodies designated by that country, as referred to point (c)(i) of the first subparagraph of Article 62(1) by concluding a financing agreement describing the Union’s intervention in the third country and laying down the method of implementation for each part of the action.

2.   For the part of the action implemented indirectly with the third country or the bodies it has designated, the financing agreement shall, in addition to the elements referred to in Article 155(5), clearly define the roles and responsibilities of the third country and of the Commission in the implementation of the funds. The financing agreement shall also determine the rules and procedures to be applied by the third country when implementing Union funds.

Article 159

Blending operations

1.   Blending operations shall be managed either by the Commission or by persons or entities implementing Union funds pursuant to point (c) of the first subparagraph of Article 62(1).

2.   Where financial instruments and budgetary guarantees are implemented within a blending facility or platform Title X applies.

3.   For financial instruments and budgetary guarantees implemented within blending facilities or platforms, point (h) of the first subparagraph of Article 209(2) shall be deemed to be complied with if an

ex ante

evaluation is carried out prior to the establishment of the relevant blending facility or platform.

4.   Annual reports pursuant to Article 249 shall be drawn up at the level of the blending facility or platform taking into account all financial instruments and budgetary guarantees grouped under the facility or platform and clearly identifying the different types of financial support within it.

TITLE VII

PROCUREMENT AND CONCESSIONS

CHAPTER 1

Common provisions

Article 160

Principles applicable to contracts and scope

1.   All contracts financed in whole or in part by the budget shall respect the principles of transparency, proportionality, equal treatment and non-discrimination.

2.   All contracts shall be put out to competition on the broadest possible basis, except when use is made of the procedure referred to in point (d) of Article 164(1).

The estimated value of a contract shall not be determined with a view to circumventing the applicable rules, nor shall a contract be split up for that purpose.

The contracting authority shall divide a contract into lots, whenever appropriate, with due regard to broad competition.

3.   Contracting authorities shall not use framework contracts improperly or in such a way that their purpose or effect is to prevent, restrict or distort competition.

4.   The JRC may receive funding charged to appropriations other than research and technological development appropriations in respect of its participation in procurement procedures financed in whole or in part from the budget.

5.   The rules on procurement laid down in this Regulation shall not apply to the activities of the JRC on behalf of third parties, with the exception of the principles of transparency and equal treatment.

Article 161

Annex on procurement and delegation of powers

Detailed rules on procurement are laid down in Annex I to this Regulation. To ensure that Union institutions, when awarding contracts on their own account, apply the same standards as those imposed on contracting authorities covered by Directives 2014/23/EU and 2014/24/EU, the Commission is empowered to adopt delegated acts in accordance with Article 269 of this Regulation to amend Annex I to this Regulation, in order to align that Annex to amendments to those Directives and to introduce related technical adjustments.

Article 162

Mixed contracts and common procurement vocabulary

1.   A mixed contract covering two or more types of procurement (works, supplies or services) or concessions (works or services) or both, shall be awarded in accordance with the provisions applicable to the type of procurement that characterises the main subject matter of the contract in question.

2.   In the case of mixed contracts consisting of supplies and services, the main subject matter shall be determined by a comparison of the values of the respective supplies or services.

A contract covering one type of procurement (works, supplies or services) and concessions (works or services) shall be awarded in accordance with the provisions applicable to the public contract concerned.

3.   This Title shall not apply to contracts for technical assistance concluded with the EIB or the EIF.

4.   Any references to nomenclatures in the context of procurement shall be made using the Common Procurement Vocabulary (CPV) as set out in Regulation (EC) No 2195/2002 of the European Parliament and of the Council (55).

Article 163

Publicity measures

1.   For procedures with a value equal to or greater than the thresholds referred to in Article 175(1) or Article 178, the contracting authority shall publish in the

Official Journal of the European Union

:

(a) a contract notice to launch a procedure, except in the case of the procedure referred to in point (d) of Article 164(1);

(b) a contract award notice on the results of the procedure.

2.   Procedures with a value below the thresholds referred to in Article 175(1) or Article 178 shall be advertised by appropriate means.

3.   Publication of certain information on a contract award may be withheld where its release would impede law enforcement, or otherwise be contrary to the public interest, would harm the legitimate commercial interests of economic operators or might prejudice fair competition between them.

Article 164

Procurement procedures

1.   Procurement procedures for awarding concession contracts or public contracts, including framework contracts shall take one of the following forms:

(a) open procedure;

(b) restricted procedure, including through a dynamic purchasing system;

(c) design contest;

(d) negotiated procedure, including without prior publication;

(e) competitive dialogue;

(f) competitive procedure with negotiation;

(g) innovation partnership;

(h) procedures involving a call for expression of interest.

2.   In open procedures any interested economic operator may submit a tender.

3.   In restricted procedures, competitive dialogues, competitive procedures with negotiation and innovation partnerships, any economic operator may submit a request to participate by providing the information that is requested by the contracting authority. The contracting authority shall invite all candidates, that satisfy the selection criteria and that are not in any of the situations referred to in Articles 136(1) and 141(1), to submit a tender.

Notwithstanding the first subparagraph, the contracting authority may limit the number of candidates to be invited to participate in the procedure on the basis of objective and non-discriminatory selection criteria, which shall be indicated in the contract notice or the call for expression of interest. The number of candidates invited shall be sufficient to ensure genuine competition.

4.   In all procedures involving negotiation, the contracting authority shall negotiate with tenderers the initial and any subsequent tenders or parts thereof, except their final tenders, in order to improve their content. The minimum requirements and the criteria specified in the procurement documents shall not be subject to negotiation.

A contracting authority may award a contract on the basis of the initial tender without negotiation where it has indicated in the procurement documents that it reserves the possibility to do so.

5.   The contracting authority may use:

(a) the open or restricted procedure for any purchase;

(b) the procedures involving a call for expression of interest for contracts with a value below the thresholds referred to in Article 175(1), to preselect candidates to be invited to submit tenders in response to future restricted invitations to tender, or to collect a list of vendors to be invited to submit requests to participate or submit tenders;

(c) the design contest to acquire a plan or design selected by a jury after being put out to competition;

(d) the innovation partnership to develop an innovative product, service or innovative works and for the subsequent purchase of the resulting supply, services or works;

(e) the competitive procedure with negotiation or the competitive dialogue for concession contracts, for the service contracts referred to in Annex XIV to Directive 2014/24/EU, in cases where only irregular or unacceptable tenders were submitted in response to an open or restricted procedure after the initial procedure has been completed, and for cases where this is justified by the specific circumstances linked, inter alia, to the nature or the complexity of the subject matter of the contract or to the specific type of contract, as further detailed in Annex I to this Regulation;

(f) the negotiated procedure for contracts with a value below the thresholds referred to in Article 175(1), or the negotiated procedure without prior publication for specific types of purchases falling outside the scope of Directive 2014/24/EU or in the clearly defined exceptional circumstances set out in Annex I to this Regulation.

6.   A dynamic purchasing system shall be open throughout its duration to any economic operator who satisfies the selection criteria.

The contracting authority shall follow the rules of the restricted procedure for procurement through a dynamic purchasing system.

Article 165

Interinstitutional procurement and joint procurement

1.   Where a contract or a framework contract is of interest to two or more Union institutions, executive agencies or Union bodies referred to in Articles 70 and 71, and whenever there is a possibility for realising efficiency gains, the contracting authorities concerned may carry out the procedure and the management of the subsequent contract or framework contract on an interinstitutional basis under the lead of one of the contracting authorities.

The bodies and persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU as well as the Office of the Secretary of the Board of Governors of the European Schools may also participate in interinstitutional procedures.

The terms of a framework contract shall only apply between those contracting authorities that are identified for that purpose in the procurement documents and those economic operators that are party to the framework contract.

2.   Where a contract or framework contract is necessary for the implementation of a joint action between a Union institution and one or more contracting authorities from Member States, the procurement procedure may be carried out jointly by the Union institution and the contracting authorities.

Joint procurement may be conducted with EFTA States and Union candidate countries if that possibility has been specifically provided for in a bilateral or multilateral treaty.

The procedural provisions applicable to Union institutions shall apply to the joint procurement.

Where the share pertaining to or managed by the contracting authority of a Member State in the total estimated value of the contract is equal to or above 50 %, or in other duly justified cases, the Union institution may decide that the procedural rules applicable to the contracting authority of a Member State shall apply to the joint procurement, provided that those rules may be considered as equivalent to those of the Union institution.

The Union institution and the contracting authority from a Member State, an EFTA State or a Union candidate country concerned by the joint procurement shall agree in particular upon the detailed practical arrangements for the evaluation of the requests for participation or of the tenders, the award of the contract, the law applicable to the contract and the competent court for hearing disputes.

Article 166

Preparation of a procurement procedure

1.   Before launching a procurement procedure, the contracting authority may conduct a preliminary market consultation with a view to preparing the procedure.

2.   In the procurement documents, the contracting authority shall identify the subject matter of the procurement by providing a description of its needs and the characteristics required of the works, supplies or services to be bought, and shall specify the applicable exclusion, selection and award criteria. The contracting authority shall also indicate which elements define the minimum requirements to be met by all tenders. Minimum requirements shall include compliance with applicable environmental, social and labour law obligations established by Union law, national law, collective agreements or the applicable international social and environmental conventions listed in Annex X to Directive 2014/24/EU.

Article 167

Award of contracts

1.   Contracts shall be awarded on the basis of award criteria provided that the contracting authority has verified the following:

(a) the tender complies with the minimum requirements specified in the procurement documents;

(b) the candidate or tenderer is not excluded under Article 136 or rejected under Article 141;

(c) the candidate or tenderer meets the selection criteria specified in the procurement documents and is not subject to conflicts of interest which may negatively affect the performance of the contract.

2.   The contracting authority shall apply the selection criteria to evaluate the capacity of the candidate or tenderer. Selection criteria shall only relate to the legal and regulatory capacity to pursue the professional activity, the economic and financial capacity, and the technical and professional capacity. The JRC shall be presumed to meet the requirements relating to financial capacity.

3.   The contracting authority shall apply the award criteria to evaluate the tender.

4.   The contracting authority shall base the award of contracts on the most economically advantageous tender, which shall consist in one of three award methods: lowest price, lowest cost or best price-quality ratio.

For the lowest cost method, the contracting authority shall use a cost-effectiveness approach including life-cycle costing.

For the best price-quality ratio, the contracting authority shall take into account the price or cost and other quality criteria linked to the subject matter of the contract.

Article 168

Submission, electronic communication and evaluation

1.   The contracting authority shall lay down time limits for the receipt of tenders and requests to participate in accordance with point 24 of Annex I and taking into account the complexity of the purchase, leaving an adequate period for economic operators to prepare their tenders.

2.   If deemed appropriate and proportionate, the contracting authority may require tenderers to lodge a guarantee to make sure that the tenders submitted are not withdrawn before contract signature. The required guarantee shall represent 1 to 2 % of the total estimated value of the contract.

The contracting authority shall release the guarantees:

(a) in respect of tenderers or tenders rejected as referred to in point 30.2(b) or (c) of Annex I, after having provided the information on the outcome of the procedure;

(b) in respect of tenderers ranked as referred to in point 30.2(e) of Annex I, after the contract is signed.

3.   The contracting authority shall open all requests to participate and tenders. However, it shall reject:

(a) requests to participate and tenders which do not comply with the time limit for receipt, without opening them;

(b) tenders already open when they are received, without examining their content.

4.   The contracting authority shall evaluate all requests to participate or tenders not rejected during the opening phase as laid down in paragraph 3 on the basis of the criteria specified in the procurement documents with a view to awarding the contract or to proceeding with an electronic auction.

5.   The authorising officer may waive the appointment of an evaluation committee as provided for in Article 150(2) in the following cases:

(a) the value of the contract is below the thresholds referred to in Article 175(1);

(b) on the basis of a risk analysis for the cases referred to in points (c), (e), (f)(i), (f)(iii) and (h) of the second subparagraph of point 11.1 of Annex I;

(c) on the basis of a risk analysis when reopening competition within a framework contract;

(d) for procedures in the field of external actions having a value of less than or equal to EUR 20 000.

6.   Requests to participate and tenders which do not comply with all the minimum requirements set out in the procurement documents shall be rejected.

Article 169

Contacts during the procurement procedure

1.   Before the time limit for receipt of requests to participate or tenders, the contracting authority may communicate additional information about the procurement documents if it discovers an error or omission in the text or upon request from candidates or tenderers. Information provided shall be disclosed to all candidates or tenderers.

2.   After the time limit for receipt of requests to participate or tenders, in every case where contact has been made, and in the duly justified cases where contact has not been made as provided for in Article 151, a record shall be kept in the procurement file.

Article 170

Award decision and information to candidates or tenderers

1.   The authorising officer responsible shall decide to whom the contract is to be awarded, in compliance with the selection and award criteria specified in the procurement documents.

2.   The contracting authority shall notify all candidates or tenderers, whose requests to participate or tenders are rejected, of the grounds on which the decision was taken, as well as the duration of the standstill periods referred to in Articles 175(2) and 178(1).

For the award of specific contracts under a framework contract with reopening of competition, the contracting authority shall inform the tenderers of the result of the evaluation.

3.   The contracting authority shall inform each tenderer who is not in an exclusion situation referred to in Article 136(1), who is not rejected under Article 141, whose tender is compliant with the procurement documents and who makes a request in writing, of any of the following:

(a) the name of the tenderer, or tenderers in the case of a framework contract, to whom the contract is awarded and, except in the case of a specific contract under a framework contract with reopening of competition, the characteristics and relative advantages of the successful tender, the price paid or contract value, whichever is appropriate;

(b) the progress of negotiation and dialogue with tenderers.

However, the contracting authority may decide to withhold certain information where its release would impede law enforcement, would be contrary to the public interest or would prejudice the legitimate commercial interests of economic operators or might distort fair competition between them.

Article 171

Cancellation of the procurement procedure

The contracting authority may, before the contract is signed, cancel the procurement procedure without the candidates or tenderers being entitled to claim any compensation.

The decision shall be justified and brought to the attention of the candidates or tenderers as soon as possible.

Article 172

Performance and modifications of the contract

1.   Performance of the contract shall not start before it is signed.

2.   The contracting authority may modify a contract or framework contract without a procurement procedure only in the cases provided for in paragraph 3 and provided the modification does not alter the subject matter of the contract or framework contract.

3.   A contract, a framework contract or a specific contract under a framework contract may be modified without a new procurement procedure in any of the following cases:

(a) for additional works, supplies or services by the original contractor that have become necessary and that were not included in the initial procurement, where the following conditions are fulfilled:

(i) a change of contractor cannot be made for technical reasons linked to interchangeability or interoperability requirements with existing equipment, services or installations;

(ii) a change of contractor would cause substantial duplication of costs for the contracting authority;

(iii) any increase in price, including the net cumulative value of successive modifications, does not exceed 50 % of the initial contract value;

(b) where all of the following conditions are fulfilled:

(i) the need for modification has been brought about by circumstances which a diligent contracting authority could not foresee;

(ii) any increase in price does not exceed 50 % of the initial contract value;

(c) where the value of the modification is below the following thresholds:

(i) the thresholds referred to in Article 175(1), and in point 38 of Annex I in the field of external actions, applicable at the time of the modification; and

(ii) 10 % of the initial contract value for public service and supply contracts and works or services concession contracts and 15 % of the initial contract value for public works contracts;

(d) where both of the following conditions are fulfilled:

(i) the minimum requirements of the initial procurement procedure are not altered;

(ii) any ensuing modification of value complies with the conditions set out in point (c) of this subparagraph, unless such modification of value results from the strict application of the procurement documents or contractual provisions.

The initial contract value shall not take into account price revisions.

The net cumulative value of several successive modifications under point (c) of the first subparagraph shall not exceed any threshold referred to therein.

The contracting authority shall apply the

ex post

publicity measures set out in Article 163.

Article 173

Performance guarantees and retention money guarantees

1.   A performance guarantee shall amount to a maximum of 10 % of the total value of the contract.

It shall be fully released after final acceptance of the works, supplies or complex services, within a period subject to the time limits set out in Article 116(1) and to be specified in the contract. It may be released partially or fully upon provisional acceptance of the works, supplies or complex services.

2.   A retention money guarantee amounting to a maximum of 10 % of the total value of the contract may be constituted by deductions from interim payments as and when they are made or by deduction from the final payment.

The contracting authority shall determine the amount of the retention money guarantee which shall be proportionate to the risks identified in relation to the performance of the contract, taking into account its subject matter and the usual commercial terms applicable in the sector concerned.

A retention money guarantee shall not be used in a contract where a performance guarantee has been requested and not released.

3.   Subject to approval by the contracting authority, the contractor may request to replace the retention money guarantee by another type of guarantee referred to in Article 152.

4.   The contracting authority shall release the retention money guarantee after the expiry of the contractual liability period, within a period subject to the time limits set out in Article 116(1) and to be specified in the contract.

CHAPTER 2

Provisions applicable to contracts awarded by Union institutions on their own account

Article 174

The contracting authority

1.   Union institutions, executive agencies and Union bodies referred to in Articles 70 and 71 shall be deemed to be contracting authorities in respect of contracts awarded on their own account, except where they purchase from a central purchasing body. Departments of Union institutions shall not be deemed to be contracting authorities where they conclude service-level agreements amongst themselves.

Union institutions deemed to be contracting authorities in accordance with the first subparagraph shall, in accordance with Article 60, delegate the necessary powers for the exercise of the function of the contracting authority.

2.   Each authorising officer by delegation or subdelegation within each Union institution shall assess whether the thresholds referred to in Article 175(1) have been reached.

Article 175

Thresholds applicable and standstill period

1.   To award public and concession contracts, the contracting authority shall respect the thresholds laid down in points (a) and (b) of Article 4 of Directive 2014/24/EU when selecting a procedure referred to in Article 164(1) of this Regulation. Those thresholds shall determine the publicity measures set out in Article 163(1) and (2) of this Regulation.

2.   Subject to the exceptions and conditions specified in Annex I to this Regulation, in the case of contracts the value of which exceeds the thresholds referred to in paragraph 1, the contracting authority shall not sign the contract or framework contract with the successful tenderer until a standstill period has elapsed.

3.   The standstill period shall have a duration of 10 days when using electronic means of communication and 15 days when using other means.

Article 176

Rules on access to procurement

1.   Participation in procurement procedures shall be open on equal terms to all natural and legal persons within the scope of the Treaties and to all natural and legal persons established in a third country which has a special agreement with the Union in the field of procurement under the conditions laid down in such an agreement. It shall also be open to international organisations.

2.   For the purpose of Article 160(4), the JRC shall be considered as a legal person established in a Member State.

Article 177

Procurement rules of the World Trade Organisation

Where the plurilateral Agreement on Government Procurement concluded within the World Trade Organisation applies, the procurement procedure shall also be open to economic operators established in the states which have ratified that agreement, under the conditions laid down therein.

CHAPTER 3

Provisions applicable for procurement in the field of external actions

Article 178

External action procurement

1.   The general provisions on procurement set out in Chapter 1 of this Title shall apply to contracts covered by this Chapter subject to the special provisions relating to the arrangements for awarding external contracts laid down in Chapter 3 of Annex I. Articles 174 to 177 shall not apply to the procurement covered by this Chapter.