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EuropeAidRevision of Revision of

Financial Regulation & Financial Regulation &

Its Implementing RulesIts Implementing Rules

Brussels, 11 June 2010Brussels, 11 June 2010

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EuropeAidSUMMARY

1. INTRODUCTION

2. DELEGATED COOPERATION

3. ASSIGNED REVENUES & EU TRUST FUNDS

4. PROCUREMENT, GRANTS OTHER TYPES OF FINANCIAL CONTRIBUTION

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EuropeAid

1INTRODUCTION

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EuropeAidIntroduction

• DG AIDCO’s objectives: Simplification of EU rules and procedures for a more efficient implementation of EU external aid

• Occasion: Triennial Review FR/IR (proposal 28 May 2010) – review of Management modes/Procurement/Grants

Note that, after Lisbon Treaty - EP stronger role: ordinary legislative procedure (ex co-decision) – expected to be adopted in 2012

• In 2010, proposals for the amendment of the FR and IR to adapt them to the Lisbon Treaty & EEAS has been adopted by the Commission.

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EuropeAid

Triennial Review of the Financial RegulationContext

• Commission proposal adopted on 28 May 2010 … but work already initiated in 2009

o DG AIDCO put forward more than 50 proposals in June 2009: Internal consultations; coordination with RELEX family DGs and consultations with external stakeholders

o Active participation in an inter-service group on the Financial Regulation

o DG AIDCO’S reply to the ISC (March-April 2010) was the most extensive reply and close follow-up with DG BUDG

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EuropeAid

Triennial Review of the Financial RegulationContext (2)

• Wider context: preparation for the post-2013 programmes will also be under way

• Calendar: Entry into force of the package: the latest by 1 June 2012.

• Main areas of simplification (as requested by AIDCO):o Delegated cooperationo Assigned revenues & establishment of Trust Fundso Grantso Procurement

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EuropeAid

Triennial Review of the Financial RegulationContext (3)

• The rationale of AIDCO’s proposals were:

o Simplified possibility for the EU to delegate tasks to other actors (such as national agencies) = smoother implementation of the principles of Aid Effectiveness, in light of the EU and international commitments;

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

o Simplification of grant & procurement procedures.

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

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EuropeAid

2DELEGATED COOPERATION

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EuropeAid

Management modesCurrent structure

centralised

Shared

(Member States)

direct Indirect

Decentralised

(Third Countries)

Joint

(international organisations)

From 5 categories ….

EU Budget

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EuropeAid

Management modes (2)New structure

Direct management Indirect management

EU Budget

Heads of Delegation

…..to TWO main categories

Member States

(shared management)

Third countries International organisations National agencies EIB-EIF / Financial institutions Public & Private Partnerships CFSP Missions Regulatory agencies

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EuropeAidManagement modes (3)New actors in indirect management

More entities for indirect management (art 53 FR)

• Same bodies:o Member States (sub-category ex-shared management with specific

rules)o national bodies, o beneficiary countries, o bodies under art 185 (“traditional agencies”)o persons under CFSP, o EIB/EIF and o international organisations (opening for new type of IOs by

Commission decision)

Executive agencies are now part of “direct” management

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EuropeAidManagement Modes (4)New actors in indirect management (2)

• New! Financial Institutions implementing Financing Instruments:

o Member State is a shareholder ORo Established in a Member State with a public service missiono If use of intermediaries: (i) they must satisfy same criteria;

and (ii) no located in non-cooperative jurisdictions

• New! Public Private Partnerships: cooperation between public authorities and private sector for performance of public contracts or concessions:

o Established in Member States; ORo Established by a Basic Act

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EuropeAidManagement Modes (5)Ex ante assessment

Alignment and “mutual recognition”

• Harmonization of pillars– Alignment to “4 pillars”: procurement/grants/financial instruments; accounting; internal control and audit (art 53b FR)

• Who does the ex ante assessment (art 34b & 34c IR)? o RAO – can also rely on assessment of other RAO within the

Commission

o New! Assessment done by other donor (only for third countries) – Possibility for “mutual recognition” of assessments, if same criteria & “international standards” as benchmarks (cf. EU Operational Framework for Aid Effectiveness, Part II, Section B)

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EuropeAidManagement Modes (6)Obligations in indirect management

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EuropeAidManagement Modes (7)Deadlines for signature and contracts

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

• All agreements for indirect management concluded between the EU and delegatees by 31 December N+1;

• Contracts concluded by the delegatees to implement the action, concluded in D+3, except for multi-donor actions;

• Conclusions:o Alignment to all cases of indirect management;o More flexibility for agreements with National Agencies:

• Under current rules if there is no FA, contracts should be signed in N+1;

• More flexibility for multi-donor actions.

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EuropeAidManagement Modes (8)Procedures

More consistency and simplification (Art 43b IR)

• Procurement: “international standards” specified (principles of transparency, non discrimination, competition) – reference to the EU Directives

• Grants: new for EU budget! procedures can also be used by national agencies if compliant with the principles mentioned (non-retroactivity, co-financing, etc).

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EuropeAidManagement Modes (9)Control issues

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

• Obligation to provide the Commission with*:o financial and narrative report and summary of results of

all available audits and controls carried out concerning the action by 1 February

o a management declaration of assurance by 1 February*o an audit opinion on the DAS by 15 March*

• Clearance of accounts procedures applicable to all indirect management entities (art 34cb IR)

* Flexibility to be negotiated with IO and third countries

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EuropeAidManagement Modes (10)Conclusions

What is new for national agencies?

• Only four pillars.

• New obligations: data protection, reinforced assurance.

• Possibility to recognise “assessments” made by this national agencies of procedures of beneficiary countries.

• More flexibility for contractualisation period (D+3 or more in cases of multi-donor actions).

• Possibility to use its own grant procedures.

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EuropeAid

3ASSIGNED REVENUES & TRUST FUNDS

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EuropeAidAssigned revenues: Transfer Agreements

• More potential donors: legal entities (i.e. private foundations) and natural persons;

• No requirement of authorization by Basic Act: new possibility for actions without Basic Act (i.e. joint evaluations);

• Flexibility for the priority rule: if an action is not completed the funds from donors can be reimbursed;

• Carry over provision (for both operational and administrative expenditure) for the whole duration of the action;

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EuropeAidAssigned revenues: Transfer Agreements (2)

• Making available commitment appropriations:

o With Member States in EURO: upon signature of Transfer Agreement for the whole amount indicated in the Agreement

o With Member States in another currency: upon actual receipt of funds

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EuropeAidEU Trust Funds

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

• Request of the European Parliament in order to gain visibility

• More flexibility than assigned revenues (decision-making and expenditure)

• Placed outside the EU Budget

• Board will take decisions on use of funds BUT with positive vote of the Commission

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EuropeAid

4PROCUREMENT, GRANTS & OTHER TYPES OF FINANCIAL CONTRIBUTION

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EuropeAidProcurementNew thresholds – Service contracts

CURRENT THRESHOLDS PROPOSED THRESHOLDS

> 200,000 International restricted > 300,000 International restricted

10,000 –

200, 000

FWC (where possible) /

Competitive Negotiated

20,000-300,000 FWC / Competitive

negotiated / AMI

0 – 10,000 Single tender 2,500-20,000 Single tender

0-2,500 Invoice

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EuropeAidProcurementNew thresholds – Supply contracts

CURRENT THRESHOLDS PROPOSED THRESHOLDS

> 150,000 International open > 300,000 International open

60,000-150,000 Local open 100,000-300,000 FWC / Local open

10,000-60,000 Competitive negotiated 100,000 -20,000 FWC / Competitive

negotiated

0-10,000 Single tender 0-20,000 Single tender

0-2,500 Invoice

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EuropeAidProcurementNew thresholds – Work contracts

CURRENT THRESHOLDS PROPOSED THRESHOLDS

> 5,000,000 International open /

International restricted

(exceptional)

> 5,000,000 International open /

International restricted

300,000-5,000,000 Local open 300,000-5,000,000 Local open

10,000-300,000 Competitive negotiated 20,000-300,000 Competitive negotiated

0-10,000 Single tender 0-20,000 Single tender

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EuropeAidProcurementNew cases for negotiated procedure

• All: Replacement of contractor - where an new contract has to be concluded after early termination of an existing contract

• Services: o Extension of services already started: The

extension of the contract not limited to a single one (value and duration shall not exceed the value and the duration of the initial contract)

o Legal services: competitive negotiated procedure (regardless of value of contract)

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EuropeAidProcurement Other

• Eligibility rules for participation in procurement procedures without Basic Act: possibility of third country nationals

• Quality standards: no limitation to European standards

• Avoid overregulation: rules mandated by IR would be transferred to PRAG/Instruction Notes

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EuropeAidProcurement & GrantsGuarantees on pre-financing

CURRENT RULES PROPOSED RULES

Procurement - pre-financing > 150.000

- where financial capacity is not

assessed

- possible waiver: public bodies

Procurement - AO Risk assessment

- where financial

capacity is not assessed

Grants - pre-financing > 60.000 and > 80

% of the grant value

- NGO: pre-financing > 1,000,000

or > 90% of the grant value

- possible waiver: public bodies

and international organizations

Grants - AO Risk assessment

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EuropeAidProcurement & GrantsExclusion Cases

• New cases: o New illegal activity: Money laundering;o Persons with powers of representation, decision making

or control over tenderers/candidates/applicants: illegal activities and professional conduct offence

• On the basis of decisions taken by:o Professional misconduct: ALSO decisions of EIB and

international organizations o Professional conduct offence: ONLY Member State

authorities

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EuropeAidProcurement & GrantsExclusion Cases (2)

• Two additional exceptions to the obligation to exclude:

o Candidates/tenderers/applicants that have taken adequate measures against persons having powers of representation

o Captive situations (monopoly) in order to ensure continuity of service: In case of bankruptcy and analogous situations; grave professional misconduct and non compliance with social obligations

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EuropeAidGrantsPerformance based grants

• Output control vs. Input control

• Tools:

o Simplification of lump sums: ex ante methodology or on the basis of budget submitted by applicant

o “Factual audits”: was the output of the grant effectively achieved?

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EuropeAidGrantsSub-granting

CURRENT RULES PROPOSED RULES

• It cannot be the primary aim of

the action

• Conditions for giving financial

support are defined in the

contract: activities

• Amounts are small: total <

100,000 and each < 10,000

• The beneficiary offers adequate

guarantees as regards the

recovery.

• Conditions for giving financial

support are defined in the

contract: activities,

persons/categories, procedures

• Amounts are small: each <

50,000

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EuropeAidGrantsRules on pre-financing

CURRENT RULES PROPOSED RULES

< 250,000 Not due Interest is not due unless

otherwise provided in

agreements.

Interest shall be re-used for the

corresponding programme.

250,000 –

750,000

Deducted from

final payment

> 750,000 Annual

Recovery

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EuropeAidGrantsOther

• Deadline for submission of applications: By post/courier service: deadline = receipt by the contracting authority and not date of dispatch

• Co- financing: o more flexibility for 100% financingo Total costs vs. Eligible costs

• Non profit:o Broader exception (only for external actions): generation of

income was provided in the agreement and where it is reinvested to ensure the sustainability of the action

o Profit is recovered on a pro rata basis

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EuropeAidGrantsOther (2)• Direct award: updated definition of “crisis situation”

• Operating grants: clarification of bodies pursuing aims of general European interest: not only European bodies

• Low value grants > 50,000 EUR (eligibility check)

• No obligation to have selection procedure with Evaluation Committee in case of direct award of grants

• Extrapolation of errors:o Recurrent errors by one beneficiary proven by controls/audit with

impact on non-audited projecto Extension of findings to non audited projects and request

reimbursement

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EuropeAidNew category of financial contribution:Prizes and financial instruments

• Prizes are not anymore regarded as grants: new specific rules

• Financial instruments:o Loans, guarantees, equity/quasi-equity investments or

participations, other risk-bearing instruments, possibly combined with grants

o Principles shall also apply to directly related elements (i.e. technical assistance)

o Implemented: directly or indirectly (EIB, EIF, any other financial institution)

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EuropeAidFurther information• On EuropeAid:

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

• On the speakers:

• Laurent SARAZINHead of UnitLaurent.SARAZIN@ec.europa.eu

Javier RAYA AGUADOHead of Contractual matters sectionJavier.RAYA-AGUADO@ec.europa.eu

Dolores DOMINGUEZ PEREZContractual matters sectionDolores.DOMINGUEZ-PEREZ@ec.europa.eu

Unit G7: Financial and contractual matters, and legal affairs