EN Official Journal of the European Union L 298/1

REGULATION (EU, EURATOM) No 966/2012 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 25 October 2012

on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002

CONTENTS

PART ONE COMMON PROVISIONS

TITLE I SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1 Subject matter

Article 2 Definitions

Article 3 Compliance of secondary legislation with this Regulation

Article 4 Periods, dates and time limits

Article 5 Protection of personal data

TITLE II BUDGETARY PRINCIPLES

Article 6 Respect for budgetary principles

Chapter 1 Principles of unity and of budgetary accuracy

Article 7 Scope of the budget

Article 8 Specific rules on the principles of unity and budgetary accuracy

Chapter 2 Principle of annuality

Article 9 Definition

Article 10 Type of appropriations

Article 11 Accounting for revenue and appropriations

Article 12 Commitment of appropriations

Article 13 Cancellation and carry-over of appropriations

Article 14 Carry-over rules for assigned revenue

Article 15 Decommitment of appropriations

Article 16 Rules applicable in the event of late adoption of the budget

Chapter 3 Principle of equilibrium

Article 17 Definition and scope

Article 18 Balance from financial year

Chapter 4 Principle of unit of account

Article 19 Use of euro

Chapter 5 Principle of universality

Article 20 Definition and scope

Article 21 Assigned revenue

Article 22 Donations

Article 23 Rules on deductions and exchange rate adjustments

Chapter 6 Principle of specification

Article 24 General provisions

Article 25 Transfers by institutions other than the Commission

Article 26 Transfers by the Commission

Article 27 Transfer proposals submitted to the European Parliament and the Council by the institutions

Article 28 Specific rules on transfers

Article 29 Transfers subject to special provisions

Chapter 7 Principle of sound financial management

Article 30 Principles of economy, efficiency and effectiveness

Article 31 Compulsory financial statement

Article 32 Internal control of budget implementation

Article 33 Cost-effective control systems

Chapter 8 Principle of transparency

Article 34 Publication of accounts, budgets and reports

Article 35 Publication of information on recipients and other information

TITLE III ESTABLISHMENT AND STRUCTURE OF THE BUDGET

Chapter 1 Establishment of the budget

Article 36 Estimates of revenue and expenditure

Article 37 Estimated budget of the bodies referred to in Article 208

Article 38 Draft budget

Article 39 Letter of amendment to the draft budget

Article 40 Obligations of the Member States stemming from the adoption of the budget

Article 41 Draft amending budgets

Article 42 Early transmission of estimates and draft budgets

Chapter 2 Structure and presentation of the budget

Article 43 Structure of the budget

Article 44 Budget nomenclature

Article 45 Prohibition of negative revenue

Article 46 Provisions

Article 47 Negative reserve

Article 48 Emergency Aid Reserve

Article 49 Presentation of the budget

Article 50 Rules on the establishment plans for staff

Chapter 3 Budgetary discipline

Article 51 Compliance with the multiannual financial framework

Article 52 Compliance of Union acts with the budget

TITLE IV IMPLEMENTATION OF THE BUDGET

Chapter 1 General provisions

Article 53 Budget implementation in accordance with the principle of sound financial management

Article 54 Basic act and exceptions

Article 55 Implementation of the budget by institutions other than the Commission

Article 56 Delegation of budget implementation powers

Article 57 Conflict of interests

Chapter 2 Methods of implementation

Article 58 Methods of implementation of the budget

Article 59 Shared management with Member States

Article 60 Indirect management

Article 61 Ex ante assessments and delegation agreements

Article 62 Executive agencies

Article 63 Limits to delegation of powers

Chapter 3 Financial actors

Section 1 Principle of segregation of duties

Article 64 Segregation of duties

Section 2 Authorising officer

Article 65 The authorising officer

Article 66 Powers and duties of the authorising officer

Article 67 Powers and duties of Heads of Union Delegations

Section 3 Accounting officer

Article 68 Powers and duties of the accounting officer

Article 69 Powers which may be delegated by the accounting officer

Section 4 Imprest administrator

Article 70 Imprest accounts

Chapter 4 Liability of financial actors

Section 1 General rules

Article 71 Withdrawal of delegation and suspension of duties given to financial actors

Article 72 Liability of the authorising officer for illegal activity, fraud or corruption

Section 2 Rules applicable to authorising officers by delegation and subdelegation

Article 73 Rules applicable to authorising officers

Section 3 Rules applicable to accounting officers and imprest administrators

Article 74 Rules applicable to accounting officers

Article 75 Rules applicable to imprest administrators

Chapter 5 Revenue operations

Section 1 Making own resources available

Article 76 Own resources

Section 2 Estimate of amounts receivable

Article 77 Estimate of amounts receivable

Section 3 Establishment of amounts receivable

Article 78 Establishment of amounts receivable

Section 4 Authorisation of recovery

Article 79 Authorisation of recovery

Section 5 Recovery

Article 80 Rules on Recovery

Article 81 Limitation period

Article 82 National treatment for Union entitlements

Article 83 Fines, penalties and accrued interest imposed by the Commission

Chapter 6 Expenditure operations

Article 84 Financing decisions

Section 1 Commitment of expenditure

Article 85 Types of commitments

Article 86 Rules applicable to commitments

Article 87 Checks applicable to commitments

Section 2 Validation of expenditure

Article 88 Validation of expenditure

Section 3 Authorisation of expenditure

Article 89 Authorisation of expenditure

Section 4 Payment of expenditure

Article 90 Types of payments

Article 91 Payment limited to funds available

Section 5 Time limits for expenditure operations

Article 92 Time limits

Chapter 7 IT systems and e-Government

Article 93 Electronic management of operations

Article 94 Transmission of documents

Article 95 e-Government

Chapter 8 Administrative principles

Article 96 Good administration

Article 97 Indication of means of redress

Chapter 9 Internal auditor

Article 98 Appointment of the internal auditor

Article 99 Powers and duties of the internal auditor

Article 100 Independence of the internal auditor

TITLE V PROCUREMENT

Chapter 1 General provisions

Section 1 Scope and award principles

Article 101 Definition of public contracts

Article 102 Principles applicable to public contracts

Section 2 Publication

Article 103 Publication of public contracts

Section 3 Procurement procedures

Article 104 Procurement procedures

Article 105 Content of tender documents

Article 106 Exclusion criteria applicable for participation in procurement procedures

Article 107 Exclusion criteria applicable to awards

Article 108 Central exclusion database

Article 109 Administrative and financial penalties

Article 110 Award criteria for contacts

Article 111 Submission of tenders

Article 112 Principles of equal treatment and transparency

Article 113 The award decision

Article 114 Cancellation of the procurement procedure

Section 4 Guarantees and corrective action

Article 115 Guarantees

Article 116 Errors, irregularities and fraud in the procedure

Chapter 2 Provisions applicable to contracts awarded by the institutions on their own account

Article 117 The contracting authority

Article 118 Thresholds applicable

Article 119 Rules on participation in tendering procedures

Article 120 Procurement rules of the World Trade Organisation

TITLE VI GRANTS

Chapter 1 Scope and form of grants

Article 121 Scope of grants

Article 122 Beneficiaries

Article 123 Forms of grants

Article 124 Lump sums, unit costs and flat-rate financing

Chapter 2 Principles

Article 125 General principles applicable to grants

Article 126 Eligible costs

Article 127 Co-financing in kind

Article 128 Transparency

Article 129 Principle of non-cumulative award

Article 130 Principle of non-retroactivity

Chapter 3 Award procedure

Article 131 Applications for grants

Article 132 Selection and award criteria

Article 133 Evaluation procedure

Chapter 4 Payment and control

Article 134 Pre-financing guarantee

Article 135 Payment of grants and controls

Article 136 Periods for record-keeping

Chapter 5 Implementation

Article 137 Implementation contracts and financial support to third parties

TITLE VII PRIZES

Article 138 General rules

TITLE VIII FINANCIAL INSTRUMENTS

Article 139 Scope

Article 140 Principles and conditions applicable to financial instrument

TITLE IX PRESENTATION OF THE ACCOUNTS AND ACCOUNTING

Chapter 1 Presentation of the accounts

Article 141 Structure of the accounts

Article 142 Report on budgetary and financial management

Article 143 Rules governing the accounts

Article 144 Accounting principles

Article 145 Financial statements

Article 146 Budgetary implementation reports

Article 147 Provisional accounts

Article 148 Approval of the final consolidated accounts

Chapter 2 Information on the implementation of the budget

Article 149 Report on the budgetary guarantees and risks

Article 150 Information on budget implementation

Chapter 3 Accounting

Section 1 Common provisions

Article 151 The accounting system

Article 152 Common requirements for the institutions' accounting system

Section 2 General accounts

Article 153 The general accounts

Article 154 Entries in the general accounts

Article 155 Accounting adjustments

Section 3 Budgetary accounts

Article 156 Budgetary accounting

Chapter 4 Property inventories

Article 157 The inventory

TITLE X EXTERNAL AUDIT AND DISCHARGE

Chapter 1 External audit

Article 158 External audit by the Court of Auditors

Article 159 Rules and procedure on the audit

Article 160 Checks on securities and cash

Article 161 Court of Auditors' right of access

Article 162 Annual report of the Court of Auditors

Article 163 Special reports of the Court of Auditors

Chapter 2 Discharge

Article 164 Timetable of the discharge procedure

Article 165 The discharge procedure

Article 166 Follow-up measures

Article 167 Specific provisions regarding the EEAS

PART TWO SPECIAL PROVISIONS

TITLE I EUROPEAN AGRICULTURAL GUARANTEE FUND

Article 168 Special provisions on the European Agricultural Guarantee Fund

Article 169 Commitments of EAGF appropriations

Article 170 Global provisional commitments of EAGF appropriations

Article 171 Schedule and timing of EAGF budgetary commitments

Article 172 Accounting of EAGF expenditure

Article 173 Transfer of EAGF appropriations

Article 174 Assigned EAGF revenue

TITLE II STRUCTURAL FUNDS, COHESION FUND, EUROPEAN FISHERIES FUND, EUROPEAN AGRICULTURAL FUND FOR RURAL DEVELOPMENT, AND FUNDS IN THE AREA OF FREEDOM, SECURITY AND JUSTICE MANAGED IN SHARED MANAGEMENT

Article 175 Special provisions

Article 176 Respect of the allocations of commitment appropriations

Article 177 Payments of contributions, interim payments and repayments

Article 178 Decommitment of appropriations

Article 179 Transfer of appropriations

Article 180 Management, selection and audit

TITLE III RESEARCH

Article 181 Research funds

Article 182 Commitments of Research Fund

Article 183 Joint Research Centre

TITLE IV EXTERNAL ACTIONS

Chapter 1 General provisions

Article 184 External actions

Chapter 2 Implementation of actions

Section 1 General provisions

Article 185 Implementation of external actions

Section 2 Budget support and multi donor trust funds

Article 186 Use of budget support

Article 187 Union trust funds for external actions

Section 3 Other management modes

Article 188 Implementation of external actions through indirect management

Article 189 Financing agreements on the implementation of external actions

Chapter 3 Procurement

Article 190 External action procurement

Article 191 Rules on participation in tendering procedures

Chapter 4 Grants

Article 192 Full financing of an external action

Article 193 Applicable rules for external action grants

Chapter 5 Auditing of accounts

Article 194 Union audit in external action

TITLE V EUROPEAN OFFICES

Article 195 The European Offices

Article 196 Appropriations regarding the European offices

Article 197 Authorising Officer of European offices

Article 198 The accounts of the interinstitutional European offices

Article 199 Delegation of authorising officer powers for interinstitutional European offices

Article 200 Services to third parties

TITLE VI ADMINISTRATIVE APPROPRIATIONS

Article 201 General provisions

Article 202 Commitments

Article 203 Specific provisions regarding administrative appropriations

TITLE VII EXPERTS

Article 204 Remunerated external experts

PART THREE FINAL PROVISIONS

Article 205 Transitional provisions

Article 206 Information requests by the European Parliament and the Council

Article 207 Thresholds and amounts

Article 208 Framework financial regulation for bodies set up under the TFEU and the Euratom Treaty

Article 209 Model Financial Regulation for public-private partnership bodies

Article 210 Exercise of the delegation

Article 211 Review

Article 212 Repeal

Article 213 Review concerning the EEAS

Article 214 Entry into force

ANNEX CORRELATION TABLE

Joint Statement on MFF-related issues

Joint Statement on expenditure related to buildings with reference to Article 203

Joint Statement by the European Parliament, the Council and the Commission on Article 203(3)

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 Article 322 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),

Acting in accordance with the ordinary legislative procedure (2),

Whereas:

(1) Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (3) has been substantially amended several times. Since further amendments are to be made, including changes to take account of the entry into force of the Treaty of Lisbon, Regulation (EC, Euratom) No 1605/2002 should be repealed and replaced by this Regulation, in the interests of clarity.

(2) Regulation (EC, Euratom) No 1605/2002 laid down the budgetary principles and financial rules governing the establishment and implementation of the general budget of the Union (the "budget"), ensuring sound and effective management, control and protection of the Union's financial interests and increasing transparency, that are to be respected in all legal acts and by all institutions. The fundamental principles, the concept and the structure of that Regulation and the basic rules of budgetary and financial management should be maintained. Derogations to those fundamental principles 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. It is necessary to maintain and strengthen the key elements of the financial rules: the role of the financial actors, the integration of controls in operational services, the internal auditors, activity-based budgeting, the modernisation of accounting principles and rules, and the basic principles for grants.

(3) Due to the specific nature and tasks of the European Central Bank (ECB), in particular its independence as regards the management of its finances, it should be excluded from the scope of this Regulation, except where otherwise provided for in this Regulation.

(4) In the light of practical experience, rules should be included in this Regulation in order to follow evolving requirements of budget implementation such as co-financing with other donors, to increase the efficiency of external aid, to facilitate the use of specific financial instruments including those concluded with the European Investment Bank (EIB) and to facilitate budget implementation through public-private partnerships ("PPPs").

(5) Regulation (EC, Euratom) No 1605/2002 was confined to stating broad budgetary principles and financial rules in line with the Treaties while the implementing provisions were laid down in Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 (4) in order to produce a better hierarchy of rules and make Regulation (EC, Euratom) No 1605/2002 easier to read. Under Article 290 TFEU a legislative act may delegate to the Commission the power to adopt non-legislative acts only to supplement or amend certain non-essential elements of that legislative act. As a consequence, some provisions laid down in Regulation (EC, Euratom) No 2342/2002, should be incorporated into this Regulation.

(6) Police and judicial cooperation in criminal matters have become an integral part of other Union policies and internal actions. The specific financial provisions applicable to that policy area are thus no longer justified and should therefore not be included in this Regulation.

(7) In order to ensure transparency, the budget should record guarantees for borrowing-and-lending operations entered into by the Union, including the European Financial Stability Mechanism and Balance of Payment Facility operations.

(8) The existing rules governing interest generated by pre-financing payments should be simplified as they generate an excessive administrative burden both for recipients and Commission services and create misunderstandings between Commission services and recipients. In the interests of simplification, in particular with regard to beneficiaries, and in accordance with the principle of sound financial management, there should no longer be an obligation to generate interest on pre-financing payments and to recover such interest. However, it should be possible to include such an obligation in a delegation agreement in order to allow the re-use of interest generated by pre-financing payments for the programmes, the deduction of such interest from the payment requests or its recovery.

(9) Carry-over rules for assigned revenue should take into account the distinction between external and internal assigned revenue. In order to comply with the purpose assigned by the donor, external assigned revenue should be carried over automatically and used until all the operations relating to the programme or action to which it is assigned have been carried out. Where the external assigned revenue is received during the last year of the programme or action, it should also be possible to use it in the first year of the succeeding programme or action. It should be possible to carry over internal assigned revenue for one year only, except where this Regulation provides otherwise.

(10) The rules regarding provisional twelfths should be clarified with regard to both the number of additional twelfths that may be requested, and the cases where the European Parliament decides to reduce the amount of the additional expenditure in excess of the provisional twelfths adopted by the Council.

(11) The derogation from the principle of universality concerning assigned revenue should be modified to take into account the specificities of, on the one hand, internal assigned revenue which arises from appropriations authorised by the European Parliament and the Council, and, on the other hand, external assigned revenue which is collected from and assigned by various donors to a specific programme or action. Furthermore, external donors should be allowed to co-finance external action, in particular humanitarian operations, even in cases where the basic act does not expressly provide for such co-financing.

(12) The presentation of assigned revenue in the draft budget should be made more transparent by providing that amounts of assigned revenue are to be included in the draft budget for the amounts which are certain at the date of the establishment of the draft budget.

(13) As regards the principle of specification, since no distinction is now made between compulsory and non-compulsory expenditure, the rules governing transfers of appropriations should be adapted accordingly.

(14) The rules governing transfers of appropriations should also be adapted to the changes resulting from the entry into force of the Treaty of Lisbon. In addition, recent experience has shown the importance of increasing flexibility for end-of-the-year transfer of payment appropriations, in particular for structural funds. It is necessary to ensure better budget implementation, especially in relation to payment appropriations, assigned revenue and administrative appropriations that are common to several titles. To that end, the typology of transfers should be simplified and the adoption procedure of some transfers should be more flexible. In particular, it has proven to be relevant and efficient for the Commission to have the possibility of deciding on transfers of unused appropriations in cases of international humanitarian disasters and crises. That possibility should therefore be extended to similar events occurring after 1 December of a financial year. In such cases, for reasons of transparency, the Commission should inform the European Parliament and the Council immediately of its decision to transfer unused appropriations.

(15) Concerning provisions on sound financial management, the authorising officer by delegation should take account of the expected level of risk of error and cost and benefits of controls when preparing legislative proposals and when setting up the respective management and control systems. The authorising officer by delegation should report on the results of controls, and their costs and benefits in the annual activity report. Management declarations on such systems submitted by the bodies designated by the Member States to be responsible for the management and control of Union funds, are integral to the effectiveness of national management and control systems.

(16) The principle of transparency, enshrined in Article 15 TFEU which requires the institutions to work as openly as possible, implies, in the area of the implementation of the budget, that citizens are able to 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 and reinforces institutional control and scrutiny over Union expenditure. Such objectives should be achieved by the publication, preferably using modern communication tools, of relevant information concerning final contractors and beneficiaries of Union funds which takes into account such contractors' and beneficiaries' 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. 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.

(17) In accordance with Article 316 TFEU, the European Council and the Council should share the same section in the budget.

(18) The annual budgetary procedure under the TFEU should be reflected in this Regulation.

(19) With regard to the establishment of the budget, it is important to clearly define the structure and the presentation of the draft budget drawn up by the Commission. The content of the general introduction preceding the draft budget should be described more precisely. It is also necessary to include a provision on financial programming for future years as well as a provision on the possibility for the Commission to submit working documents to support budget requests.

(20) With regard to the specific features of the Common Foreign and Security Policy, the forms which basic acts can take under the TFEU and under Title V and VI of the TEU should be updated. In addition, the adoption procedure for preparatory measures in the area of external action should be adapted to the TFEU.

(21) The rules on methods of implementation of the budget, which govern in particular the conditions of externalisation of implementing powers to third parties, have become too complex over the years and should be simplified. At the same time, the initial objective of externalisation, namely that whatever the method of implementation, expenditure is implemented with a level of control and transparency equivalent to that expected from the Commission services, should be maintained.

(22) A clear distinction should be made between situations in which the budget is implemented directly, by the Commission or its executive agencies, situations in which the budget is implemented by Member States under shared management and situations in which the budget is implemented indirectly through third parties. This should allow for the establishment of a harmonised regime for shared and indirect management which can be adapted in accordance with sector-specific rules, in particular where the budget is implemented by Member States under shared management. Such a harmonised regime should include in particular the basic principles to be respected by the Commission when it decides to implement the budget under shared management or indirectly and the basic principles to be respected by parties entrusted with budget implementation tasks. The Commission should be able to apply Union rules and procedures or to accept the application of the rules and procedures of the entrusted party, provided the latter guarantees an equivalent protection of the Union's financial interests. As part of the supervision tasks of the Commission, it is also necessary to provide for a set of control and audit obligations, including the examination and acceptance of accounts, for all methods of implementation.

(23) Rules on ex ante assessment of entities and persons entrusted with budget implementation tasks under indirect management, should be adapted to ensure that all entrusted entities and persons provide a level of protection of the Union's financial interests equivalent to that required under this Regulation.

(24) The experience of having PPPs institutionalised as Union bodies under Article 185 of Regulation (EC, Euratom) No 1605/2002 demonstrates that additional categories of PPPs should be provided for in order to increase the choice of instruments and include bodies whose rules are more flexible and accessible for private partners than those applicable to the Union institutions. Those additional categories should cover bodies governed by the private law of a Member State and bodies that are established by a basic act and which have financial rules that respect the principles necessary to ensure sound financial management of Union funds.

(25) For the purposes of Article 317 TFEU, this Regulation should strengthen Member States' basic control and audit obligations where they implement the budget under shared management, since such obligations currently exist only in sector-specific rules. It is necessary, therefore, to include provisions, setting out a coherent framework for all policy areas concerned, on harmonised administrative structures at national level. That framework should not create any additional control structures but should allow the Member States to designate bodies entrusted with the management and control of Union funds. Furthermore, this Regulation should contain provisions on common management and control obligations for those structures, the annual management declaration by which managers assume the responsibility for the management of Union funds they are entrusted with, examination and acceptance of the accounts, and suspension and correction mechanisms operated by the Commission in order to create a coherent legislative framework which also improves the overall legal certainty and efficiency of controls and remedial action, as well as the protection of the Union's financial interests. Detailed provisions should remain in sector-specific Regulations. Within the context of the single audit approach and with the objective of reducing additional administrative burden stemming from multiple controls, Member States may provide the Commission with declarations, signed at the appropriate national or regional level in accordance with their respective constitutional requirements.

(26) Some provisions regarding the duties of the authorising officer by delegation should be clarified, in particular those concerning the ex ante and ex post controls that the authorising officer by delegation puts in place as well as the latter's reporting duties. In this respect, the content of the authorising officer by delegation's annual activity report should be updated in line with practice which consists of including therein the required financial and management information to support the authorising officer by delegation's declaration of assurance on the performance of his or her duties.

(27) The responsibilities of the accounting officer of the Commission should be clarified. In particular, it should be specified that the accounting officer of the Commission is the only person who is entitled to define the accounting rules and harmonised charts of accounts, while accounting officers of all other institutions define accounting procedures applicable in their institutions.

(28) In order to facilitate the implementation of certain programmes or actions entrusted, in particular, to financial institutions, the possibility of opening fiduciary accounts should be provided for in this Regulation. Such bank accounts should be opened in the name, or on behalf, of the Commission in the books of a financial institution. They should be managed by that financial institution under the responsibility of the authorising officer and it should be possible to open them in currencies other than euro.

(29) Concerning revenue operations, it is necessary to streamline the rules on estimates of amounts receivable in order to take into account budgetary needs. Registration should be required when an expectation of revenue has a certain degree of probability and can be translated into figures with a reasonable degree of approximation. In the interests of simplification, some specific provisions on procedures of adjustment or cancellation of an estimate of amount receivable should be introduced.

(30) The rules on recovery should be both clarified and strengthened. In particular, it should be specified that the cancellation of an established amount receivable does not imply a waiver of an established Union entitlement. Moreover, in order to reinforce the safeguarding of the Union's financial interests, Union funds claimed for reimbursement should be treated by Member States no less favourably than claims of public bodies on their territory.

(31) Taking into account the need to reduce the risk associated with the management of amounts received on a temporary basis by way of fines, penalties and sanctions, as well as any income generated by them, those amounts should be recorded as budget revenue as soon as possible and at the latest in the financial year following the exhaustion of all remedies against the decisions imposing them.

(32) Clarification of the various types of payments should, in accordance with the principle of sound financial management, be provided. Moreover, pre-financing payments should be cleared regularly by the authorising officer responsible in accordance with the accounting rules defined by the accounting officer of the Commission. To this effect, appropriate provisions should be included in contracts, grant decisions, grant agreements as well as in delegation agreements.

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

(34) The possibility of conducting joint procurement procedures with the European Free Trade Association (EFTA) states or Union candidate countries should be allowed under certain conditions.

(35) The rules for exclusion from, in particular, participation in procurement procedures should be improved in order to strengthen the protection of the Union's financial interests.

(36) Given that the use of the ECB and the EIBown resources is of financial interest to the Union, they should be given access to the information contained in the central exclusion database, which was created to protect the Union's financial interests.

(37) A sound legal basis for the publication of decisions applying administrative and financial penalties, in particular relating to public procurement, should be introduced, in line with data protection requirements. Such publication should remain optional for reasons of data protection and security.

(38) The requirement for contractors to lodge guarantees should no longer be automatic, but should be based on a risk analysis.

(39) For reasons of legal certainty, the scope of grants and financial instruments should be clarified. A more detailed definition of the specific conditions applicable to grants, on the one hand, and to financial instruments, on the other, should also contribute to maximising the impact of those two types of financial support.

(40) The grant rules applicable to entities specifically established for the purpose of an action should be adjusted so as to facilitate access to Union funding and management of grants by applicants and beneficiaries having decided to work together within a partnership or grouping constituted in accordance with relevant national law, in particular where the legal form chosen offers a solid and reliable cooperation environment. In addition, in the light of the limited financial risks for the Union and the need to avoid adding a layer of contractual requirements to existing structural arrangements, entities affiliated to a beneficiary through permanent capital or legal links should be entitled to declare eligible costs without having to comply with all the obligations of a beneficiary.

(41) Experience gained in the use of lump sums or flat-rate financing has shown that, such forms of financing significantly simplified administrative procedures and reduced the risk of error substantially. In addition, output-based funding has proved appropriate for certain types of actions. In this context, the conditions for using simplified forms of grants determined on the basis of lump sums, unit costs and flat rates should be made more flexible. In particular, amounts determined by the application of a beneficiary-by-beneficiary approach should be allowed, including where such amounts are declared by the beneficiary in accordance with its usual cost accounting practices, in order to alleviate the administrative burden and the costs borne by that beneficiary specifically for the purpose of financial reporting to the Union.

(42) In order to remove the barriers to participation in Union grant programmes by persons having the necessary expertise but who are not paid in the form of a salary, as may be the case for those working in small structures, grant rules should take account of the specific remuneration schemes applied by small and medium-sized enterprises (‧SMEs‧), as defined in Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (5).

(43) The principles of no-profit and co-financing should be adjusted in the light of practical experience and of the diverging interpretations and application of such principles, which results in errors and occasionally in counterproductive effects. In particular, the definition of profit should focus on eligible costs and the receipts specifically financing those costs, in order to simplify reporting by beneficiaries and to encourage them to diversify their sources of funding. Moreover, the Commission should not presume that other donors will not recover any surplus generated by their own contributions, and should, therefore, only recover profit in proportion to its grant. Finally, the degressivity principle has not proved to be an effective tool in limiting the risk of dependence of beneficiaries of operating grants on Union funds. In addition, the applicability of the principle of degressivity has been considerably reduced following the necessary introduction of exceptions in a number of basic acts and in the case of simplified forms of grants. In view of these drawbacks, the degressivity requirement applicable to operating grants should be removed.

(44) Access to Union funding for entities with limited administrative resources, which can represent a priority target population for certain grant schemes and be indispensable to achieving Union policy objectives, should be facilitated by further simplifying procedures applicable to low value grants.

(45) In order to ensure legal certainty and establish a single set of basic financial rules which beneficiaries can refer to throughout Union programmes, this Regulation should lay down the cost eligibility criteria and specific conditions governing certain categories of costs and should provide for their consistent application.

(46) The conditions for accepting contributions in kind from third parties as co-financing and for determining the value of those contributions should be harmonised so as to reduce the risks of error and litigation.

(47) For the sake of transparency and in order to take account of the planning constraints specific to them, grant applicants should be informed in the call for proposals of the expected time it will take for grant agreements to be signed or grant decisions to be notified to them. For the same purpose, this Regulation should lay down a reference time, based on experience and on the anticipated effects of the simplification measures introduced.

(48) Where systemic or recurrent errors, having a material impact on a number of grants, are detected, extension of audit findings to the non-audited grants that are impacted should be authorised under strict conditions, so as to alleviate the financial and administrative burden created by on-the-spot controls and audits. The Commission should only resort to extrapolation of the reduction or recovery rate applied to grants for which systemic or recurrent errors have been demonstrated, where it is not possible or practicable with proportionate effort to quantify precisely the amount of ineligible costs for each grant concerned.

(49) This Regulation should establish standard periods for which documents relating to Union grants should be kept by beneficiaries so as to avoid divergent or disproportionate contractual requirements while still providing for sufficient time for the Commission and the Court of Auditors to obtain access to such data and documents and perform the ex post checks and audits necessary to protect the Union's financial interests.

(50) The possibility for a beneficiary to award financial support to third parties should be extended under certain conditions in order to facilitate the correct implementation of programmes targeting, inter alia, numerous natural persons who can only be reached through cascading grants. Nevertheless, the principle according to which a beneficiary may not exercise discretion when awarding financial support to third parties should be maintained, in particular to avoid any confusion between the possibility offered to beneficiaries to design and implement, under their responsibility, actions which involve financial support as an eligible activity and the possibility to entrust budget implementation tasks under shared or indirect management to certain bodies, entities or persons.

(51) As a valuable type of financial support, the use of prizes should be facilitated and the applicable rules clarified by separating prizes from the grant regime and removing any reference to predictable costs. Nevertheless, prizes are not well-suited to all Union policy objectives and should, therefore, be seen as complementing, not substituting, other funding instruments such as grants.

(52) Financial instruments can be valuable in multiplying the effect of Union funds when those funds are pooled with other funds and include a leverage effect. Since such financial instruments cannot be assimilated to services or grants, a new type of financial support should be established. Financial instruments should only be implemented under strict conditions, so that there are no budgetary risks for the budget and no risk of market distortion which is inconsistent with state aid rules.

(53) Within the framework of the annual appropriations authorised by the European Parliament and the Council for a given programme, financial instruments should be used on a complementary basis, on the basis of an ex ante evaluation demonstrating that they are more effective for the achievement of the Union's policy objectives than other forms of Union funding, including grants.

(54) Financial instruments should be authorised by means of a basic act, defining in particular their objectives and duration. Where financial instruments are established without a basic act in duly justified cases, they should be authorised by the European Parliament and the Council in the budget.

(55) The instruments that potentially fall under Title VIII of Part One, 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.

(56) Annual repayments, including capital repayments, guarantees released and repayments of the principal of loans should constitute internal assigned revenue. Revenue including dividends, capital gains, guarantee fees and interest on loans and on amounts on fiduciary accounts should be entered in the budget after deduction of management costs and fees. This Regulation should lay down the principles and conditions for financial instruments and 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.

(57) The presentation of accounts should be simplified by providing that the Union's accounts comprise only the consolidated financial statements and the aggregated budgetary accounts. It should also be clarified that the consolidation process only concerns the institutions, bodies which are set up under the TFEU and the Euratom Treaty and which have legal personality and receive contributions charged to the budget, and other bodies whose accounts are required to be consolidated in accordance with the accounting rules adopted by the accounting officer.

(58) As required by the internationally accepted accounting standards on which Union accounting rules are based, pension liability, together with other employee benefits liabilities, should be recorded in the Union accounts, separately disclosed on the face of the Union balance sheet and explained further in the notes to the financial statements.

(59) In order to clearly separate the duties and responsibilities of the Commission's accounting officer from those of the accounting officers of institutions or bodies which are set up under the TFEU and the Euratom Treaty and which have legal personality and receive contributions charged to the budget, and other bodies whose accounts are required to be consolidated in accordance with the accounting rules adopted by the accounting officer, the report on budgetary and financial management of the financial year should be prepared by each institution or body and then sent to the European Parliament, the Council and the Court of Auditors by 31 March of the following financial year.

(60) It is necessary to update the Union rules and principles on accounting in order to ensure their consistency with the rules of the International Public Sector Accounting Standard Board.

(61) The Court of Auditors should ensure that any of its findings that could have an impact on the final accounts of auditees or the legality or regularity of their underlying transactions, are transmitted to the institution or body concerned in good time in order to allow such auditees sufficient time to address those findings.

(62) The provisions concerning provisional and final accounts should be updated, in particular, in order to specify the reporting information that should accompany the accounts sent to the Commission's accounting officer for the purpose of consolidation.

(63) As regards the information which is to be submitted by the Commission in the context of discharge, the Commission should, in particular, submit to the European Parliament and to the Council an evaluation report on the Union's finances, in accordance with Article 318 TFEU.

(64) As regards the specific provisions of this Regulation concerning the structural funds, cohesion funds, the European Fisheries Fund, the European Agricultural Fund for Rural Development and funds in the area of Freedom, Security and Justice managed in shared management, the provision for repayment of pre-financing payments, and making appropriations available again, contained in the Commission declaration annexed to Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds (6) should be retained. Moreover, by way of derogation from the carry-over rule, the Commission should be allowed to carry over commitment appropriations available at the end of the financial year, arising from repayments of pre-financing payments, until the closure of the programme, and to use those commitment appropriations when other commitment appropriations are no longer available.

(65) The participation of the Joint Research Centre (JRC) in procurement and grant procedures should be clarified. Moreover, in order to carry out the related activities effectively, revenue stemming from participation in such procedures should exceptionally be considered external assigned revenue.

(66) The specific provisions relating to the implementation of external actions should be adapted to the changes in the methods of implementation and a differentiated approach should be provided for when the Union is required to respond to humanitarian emergencies, international crises or the needs of third countries undergoing a process of democratic transition.

(67) This Regulation should establish general conditions under which budget support may be used as an instrument in external action. Such conditions should relate to ensuring a sufficiently transparent, reliable and effective management of public finances. Furthermore, the Commission should decide in a financing decision on the objectives and expected results to which the payment of budget support should be linked. Such elements, as well as the conditions under which budget support is to be reimbursed, should be contained in the financing agreement concluded with the beneficiary country.

(68) In order to strengthen the international role of the Union in external actions and development and to increase its visibility and efficiency, the Commission should be authorised to create and manage Union trust funds for emergency, post-emergency or thematic actions. Although not integrated in the budget, those trust funds should be managed in accordance with this Regulation to the extent necessary for the security and transparency of the use of Union funds. For that purpose, the Commission should chair the governing board established for each trust fund to ensure the representation of donors and to decide upon the use of the funds. Moreover, the accounting officer of each trust fund should be the accounting officer of the Commission.

(69) The period for the conclusion of contracts and grant agreements by entities entrusted, under indirect management, with implementing external actions should be limited to three years following the signature of the delegation agreement, unless specific exceptional and external circumstances exist. However, that deadline should not apply to multiannual programmes implemented under the structural funds procedures. Detailed rules for decommitment of appropriations in the case of such multiannual programmes should be laid down in sector-specific rules.

(70) With regard to specific rules on procurement applicable to external actions, third country nationals established in beneficiary countries should be allowed to participate in tendering procedures, also in the case of implementation of a programme without a basic act and where there are duly justified exceptional circumstances.

(71) The manner in which the institutions currently report on building projects to the European Parliament and the Council should be improved. Institutions should inform the European Parliament and the Council in advance of their future building projects and at the different stages of those projects. The approval rather than just the opinion of the European Parliament and the Council should be required for building projects which have a significant impact on the budget.

(72) Institutions should be allowed to develop a long-term real estate policy and profit from lower interest rates resulting from the favourable credit rating of the Union on the financial market. To this end, they should be authorised to raise loans to acquire real estate assets. This would allow the possibility of addressing the complexity of the current system, while saving costs and introducing more transparency.

(73) In the light of experience, this Regulation should clarify the scope of activities, the selection procedure and the payment conditions of natural persons selected as experts.

(74) In order to supplement and amend certain aspects of this Regulation the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission. The content and scope of each delegation is set out in detail in the relevant Articles. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work for delegated acts, including at expert level. The Commission, when preparing and drawing up delegated acts, should ensure the simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and the Council.

(75) This Regulation should be revised only when necessary, and at the latest two years before the end of the first post-2013 multiannual financial framework. Excessively frequent revisions generate a disproportionate cost in adjusting administrative structures and procedures to the new rules. Furthermore, time may be too short to allow for valid conclusions to be drawn from the application of the rules in force.

(76) Transitional provisions should be set out. This Regulation should only apply following the adoption of the delegated acts, containing the rules of application, which are expected to enter into force in December 2012. In order to avoid the application of this Regulation in the last month of the year, it is appropriate to defer its application to 1 January 2013. Moreover, in order to ensure coherence with the sector-specific rules, it is appropriate to defer application of the provisions on the methods of implementation and financial instruments to 1 January 2014. Finally, in order to allow for their application already to the 2012 budget, it is appropriate that the provisions on the transfer of payment appropriations for Structural Funds for the end of the year apply from the date of entry into force of this Regulation.

(77) This Regulation should enter into force on the day following that of its publication in the Official Journal of the European Union in order to allow for the timely adoption of the delegated acts under this Regulation. The timely entry into force of this Regulation is necessary for the application of the rules set out in the delegated acts from 1 January 2013, in order to avoid the difficulties linked to a modification of financial rules during the financial year.

(78) The European Data Protection Supervisor was consulted in accordance with Article 28(2) of Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (7) and delivered an opinion on 15 April 2011 (8),

HAVE ADOPTED THIS REGULATION:

PART ONE

COMMON PROVISIONS

TITLE I

SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1

Subject matter

1. This Regulation lays down the rules for the establishment and the implementation of the general budget of the European Union and the presentation and auditing of the accounts.

2. This Regulation shall apply to the implementation of the budget for the Euratom Supply Agency.

Article 2

Definitions

For the purposes of this Regulation:

(a) "Union" means the European Union, the European Atomic Energy Community, or both, as the context may require;

(b) "institution" means the European Parliament, the European Council, the Council, the European 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 and the European External Action Service (the "EEAS"); the European Central Bank shall not be considered as an institution of the Union;

(c) "budget" means the instrument which, for each financial year, forecasts and authorises all revenue and expenditure considered necessary for the Union;

(d) "basic act" means a legal act which provides a legal basis for an action and for the implementation of the corresponding expenditure entered in the budget. A basic act may take any of the following forms: (i) 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 (ii) in implementation of Title V of the Treaty on European Union (TEU), one of the forms specified in Articles 26(2), 28(1), 29, 31(2), 33 and 37 TEU. Recommendations and opinions shall not constitute basic acts;

(e) "method of implementation" means the method of budget implementation described in Articles 58, 59 or 60;

(f) "delegation agreement" means an agreement concluded with entities and persons entrusted with budget implementation tasks pursuant to points (i) to (viii) of Article 58(1)(c);

(g) "beneficiary" means a natural or legal person with whom a grant agreement has been signed or to whom a grant decision has been notified;

(h) "contractor" means a natural or legal person with whom a procurement contract has been concluded;

(i) "recipient" means a beneficiary, contractor, or any natural or legal person that receives prizes or funds under a financial instrument;

(j) "prize" means a financial contribution given as a reward following a contest.

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

(l) "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;

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

(n) "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. Quasi-equity investments can be structured as debt, typically unsecured and subordinated and in some cases convertible into equity, or as preferred equity;

(o) "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;

(p) "financial instruments" means Union measures of financial support provided on a complementary basis from the budget in order to address one or more specific policy objectives of the Union. Such instruments may take the form of equity or quasi-equity investments, loans or guarantees, or other risk-sharing instruments, and may, where appropriate, be combined with grants;

(q) "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 Council Regulation (EEC, Euratom, ECSC) No 259/68 (9);

(r) "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 described in the first sentence;

(s) "check" means the verification of a specific aspect of a revenue or expenditure operation.

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 respect the budgetary principles set out in Title II of Part One.

2. Without prejudice to paragraph 1, any proposal or amendment to a proposal submitted to the legislative authority containing derogations from provisions other than those in Title II of Part One 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.

Article 4

Periods, dates and time limits

Unless otherwise provided, Council Regulation (EEC, Euratom) No 1182/71 of 3 June 1971 determining the rules applicable to periods, dates and time limits (10) shall apply to deadlines set by this Regulation.

Article 5

Protection of personal data

This Regulation is without prejudice to the requirements of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (11) and of Regulation (EC) No 45/2001.

TITLE II

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 which requires effective and efficient internal control, and transparency as set out in this Regulation.

CHAPTER 1

Principles of unity and of budgetary accuracy

Article 7

Scope of the budget

1. The budget shall comprise:

(a) the revenue and expenditure of the Union, including administrative expenditure occasioned for the institutions by the provisions of the TEU relating to the Common Foreign and Security Policy, and the operational expenditure occasioned by implementation of those provisions where this is charged to the budget;

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

2. The budget shall record the guarantees for borrowing-and-lending operations entered into by the Union, including the European Financial Stability Mechanism and Balance of Payment Facility operations, in accordance with point (d) of Article 49(1).

Article 8

Specific rules on the principles of unity and budgetary accuracy

1. Without prejudice to Article 83, no revenue shall be collected and no expenditure effected unless booked to a line in the budget.

2. No expenditure may be committed or authorised in excess of the authorised appropriations.

3. An appropriation may 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 for in the delegation agreements, with the exception of those agreements concluded with third countries or the bodies they have designated. In cases in which it is provided for, such interest shall either be re-used for the corresponding action, deducted from payment requests in accordance with point (c) of the first subparagraph of Article 23(1) or recovered.

The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on the accounting of interest generated by pre-financing payments.

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

Type of appropriations

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

2. Commitment appropriations shall cover the total cost of the legal commitments entered into during the financial year, subject to Article 86(4) and Article 189(2).

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

4. Paragraphs 1 and 2 of this Article are without prejudice to the special provisions of Titles I, IV and VI of Part Two and shall not prevent appropriations being committed globally or budgetary commitments being made in annual instalments.

Article 11

Accounting for revenue and appropriations

1. The revenue of a financial year shall be entered in the accounts for the financial year on the basis of the amounts collected during that financial year. However, the own resources for the month of January of the following financial year may be made available in advance pursuant to Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 2007/436/EC, Euratom on the system of the European Communities' own resources (12).

2. The entries in respect of value-added-tax own resources, of the additional resource based on gross national income and of any financial contributions may be adjusted in accordance with Regulation (EC, Euratom) No 1150/2000.

3. The appropriations authorised for a financial year shall be used solely to cover expenditure committed and paid in that financial year and to cover amounts due against commitments from preceding financial years.

The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules for appropriations for the financial year.

4. Commitments shall be entered in the accounts on the basis of the legal commitments entered into up to 31 December. By way of exception, the global budgetary commitments referred to in Article 86(4) and the financing agreements referred to in Article 189(2) and concluded with third countries shall be entered in the accounts on the basis of the budgetary commitments up to 31 December.

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

6. By way of derogation from paragraphs 3, 4 and 5, the expenditure of the European Agricultural Guarantee Fund shall be entered in the accounts for a financial year in accordance with the rules laid down in Title I of Part Two.

Article 12

Commitment of appropriations

The appropriations entered in the budget may be committed with effect from 1 January, once the budget has been definitively adopted, except as otherwise provided for in Title I and Title VI of Part Two.

Article 13

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.

However, they may be carried over, but only to the following financial year, by a decision taken by 15 February by the institution concerned, in accordance with paragraphs 2 and 3, or they may be carried over automatically in accordance with paragraph 4.

2. Differentiated commitment appropriations and non-differentiated appropriations not yet committed at the end of the financial year may be carried over in respect of:

(a) amounts corresponding to commitment appropriations, or to non-differentiated appropriations relating to building projects, for which most of the preparatory stages of the commitment procedure have been completed by 31 December. Such amounts may then be committed up to 31 March of the following year, or up to 31 December of the following year for amounts relating to building projects;

(b) amounts 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 this purpose by 31 December.

3. Payment appropriations may be carried over in respect of amounts 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 not sufficient to cover requirements.

The 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.

4. Non-differentiated appropriations corresponding to obligations duly contracted at the end of the financial year shall be carried over automatically to the following financial year only.

5. The institution concerned shall inform the European Parliament and the Council by 15 March of the carry-over decision it has taken and shall state, for each budget line, how the criteria in paragraphs 2 and 3 have been applied to each carry-over.

6. Without prejudice to Article 14, appropriations placed in reserve and appropriations for staff expenditure shall not be carried over. For the purpose of this Article, staff expenditure comprises the remuneration and allowances for members and staff of the institutions to which the Staff Regulations apply.

7. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules for the cancellation and carry-over of appropriations.

Article 14

Carry-over rules for assigned revenue

Carry-over of assigned revenue referred to in Article 21, and of appropriations not used and available at 31 December arising from such revenue, shall comply with the following rules:

(a) external assigned revenue shall be carried over automatically and shall be fully used by the time all the operations relating to the programme or action to which it is assigned have been carried out. External assigned revenue received during the last year of the programme or action may be used in the first year of the succeeding programme or action;

(b) internal assigned revenue shall be carried over for one year only, with the exception of internal assigned revenue defined in point (g) of Article 21(3), which shall be carried over automatically.

Article 15

Decommitment of appropriations

Without prejudice to Articles 178 and 182, where appropriations are decommitted in any financial year after that in which the appropriations were entered in the budget as a result of total or partial non-implementation of the actions for which they were earmarked, the appropriations concerned shall be cancelled.

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 previous 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 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 preceding financial year, as specified 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 action by the Union and management needs so require, the Council, acting by qualified majority on a proposal of the Commission, may authorise expenditure in excess of one provisional twelfth but not exceeding the 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. It shall forward the decision on authorisation without delay to the European Parliament.

The decision shall enter into force 30 days following its adoption unless the European Parliament:

(a) acting by a majority of its component Members, decides to reduce that expenditure within that time limit, in which case the Commission shall submit a new proposal;or

(b) informs the Council and the Commission that it does not wish to reduce that 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 action by the Union 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 of 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, may 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 bodies referred to in Article 208, may 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 case of a surplus or as a payment appropriation in the case of a deficit.

2. The estimates of such revenue or payment appropriations shall be entered in the budget during the budgetary procedure and in a letter of amendment presented pursuant to Article 39. The estimates shall be drawn up in accordance with Regulation (EC, Euratom) No 1150/2000.

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 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 68(1), 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 as laid down in the delegated acts adopted pursuant to this Regulation.

2. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on the rate of conversion between euro and other currencies.

CHAPTER 5

Principle of universality

Article 20

Definition and scope

Without prejudice to Article 21, total revenue shall cover total payment appropriations. Without prejudice to Article 23, all revenue and expenditure shall be entered 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) financial contributions from Member States to certain research programmes pursuant to Regulation (EC, Euratom) No 1150/2000;

(b) financial contributions from Member States and third countries, including in both cases their public agencies, entities or natural persons, to certain external aid projects or programmes financed by the Union and managed by the Commission on their behalf;

(c) interest on deposits and the fines provided for in Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (13);

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

(e) financial contributions, not covered by point (b), to Union activities from third countries or from non-Union bodies;

(f) assigned revenue referred to in Articles 181(2) and 183(2);

(g) internal assigned revenue referred to in paragraph 3, to the extent that it is ancillary to the other revenue under this paragraph.

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) proceeds from the sale of vehicles, equipment, installations, materials, and scientific and technical apparatus which are replaced or scrapped when the book value is fully depreciated;

(c) revenue arising from the repayment, in accordance with Article 80, of amounts wrongly paid;

(d) revenue arising from interest on pre-financing payments, subject to Article 8(4);

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

(f) insurance payments received;

(g) revenue from lettings;

(h) revenue from the sale of publications and films, including those on an electronic medium;

(i) repayments to financial instruments pursuant to Article 140(6);

(j) revenue arising from subsequent reimbursement of taxes pursuant to point (b) of Article 23(3).

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

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

Assigned revenue may be included in the draft budget only for the amounts which are certain at the date of the establishment of the draft budget.

6. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning the establishment of the structure to accommodate external and internal assigned revenue and the provision of the corresponding appropriations, and concerning rules for the contribution from Member States to research programmes. Furthermore, the Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning the proceeds of sanctions imposed pursuant to Article 126(11) TFEU, and concerning assigned revenue resulting from the participation of EFTA states in certain Union programmes.

Article 22

Donations

1. The Commission may accept any donation made to the Union, such as 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, both of which shall act on the matter within two months of receiving the request from the Commission. If no objection is made within that period, the Commission shall take a final decision regarding the acceptance of the donation.

3. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on the acceptance of donations made to the Union.

Article 23

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 procurement 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 the Member States pursuant to the Protocol on the Privileges and Immunities of the European Union, 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:

(a) the ex-tax amount; or

(b) the tax-inclusive amount. In such a case, subsequently reimbursed taxes shall be treated as internal assigned revenue.

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

5. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on the accounts for recoverable taxes.

CHAPTER 6

Principle of specification

Article 24

General provisions

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

Article 25

Transfers by institutions other than the Commission

1. Any 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 year shown on the line from which the transfer is made;

(b) from one chapter to another and from one article to another without limit.

2. Three weeks before making a transfer, as referred to in paragraph 1, the institution shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified reasons are raised within that period by either the European Parliament or the Council, the procedure laid down in Article 27 shall apply.

3. Any institution other than the Commission may propose to the European Parliament and the Council, within its own section of the budget, transfers from one title to another exceeding the limit of 10 % of the appropriations for the year shown on the line from which the transfer is to be made. Those transfers shall be subject to the procedure laid down in Article 27.

4. Any 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.

5. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on the calculation of percentages of transfers by institutions other than the Commission.

Article 26

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 year shown on the line from which the transfer is made, and up to a maximum of 30 % of the appropriations for the year shown on the 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 year shown on the line from which the transfer is made.

Three weeks before making the transfers referred to in point (b) of the first subparagraph, the Commission shall inform the European Parliament and the Council of its intention to do so. In the event that duly justified reasons are raised within that period by the European Parliament or the Council, the procedure laid down in Article 27 shall apply.

By way of exception from the second subparagraph, the Commission may, during the last two months of the financial year, autonomously transfer appropriations concerning expenditure on staff, external staff and other agents from one title to another within the total limit of 5 % of the appropriations for the 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 transfer 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 46, 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 unused appropriations for that financial year still available in the budget titles falling under heading 4 of the multiannual financial framework to the budget titles concerning crisis management aid and humanitarian aid operations.

3. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on the calculation of percentages of internal transfers by the Commission, and grounds for transfer requests.

Article 27

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

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

2. The European Parliament and the Council shall take decisions on transfers of appropriations as provided for in paragraphs 3 to 6 of this Article, except as otherwise provided for in Title I of Part Two.

3. 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.

4. The transfer proposal shall 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) the European Parliament and the Council refrain from acting or do not take a decision to amend or refuse the transfer proposal.

5. The six-week period referred to in paragraph 3 shall be reduced to three weeks, unless either the European Parliament or the Council requests otherwise, in the following cases:

(a) the transfer represents less than 10 % of the appropriations of the 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.

6. 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 institution concerned withdraws its transfer proposal.

Article 28

Specific rules on transfers

1. Appropriations may only be transferred to budget lines for which the budget has authorised appropriations or which carry a token entry "pro memoria".

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

Article 29

Transfers subject to special provisions

1. Transfers within the titles of the budget devoted to the European Agricultural Guarantee Fund, the Structural Funds, the Cohesion Fund, the European Fisheries Fund, the European Agricultural Fund for Rural Development and Research shall be the subject of special provisions under Titles I, II and III of Part Two.

2. Decisions on transfers to allow the use of the Emergency Aid Reserve shall be taken by the European Parliament and the Council on a proposal from the Commission. A separate proposal shall be submitted for each emergency action.

For the purposes of this paragraph, the procedure provided for in Article 27(3) and 27(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 this reserve, they shall refrain from acting on the Commission's transfer proposal.

3. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on requests for transfers from the Emergency Aid Reserve.

CHAPTER 7

Principle of sound financial management

Article 30

Principles of economy, efficiency and effectiveness

1. Appropriations shall be used in accordance with the principle of sound financial management, namely in accordance with the principles of economy, efficiency and effectiveness.

2. The principle of economy requires that the resources used by the institution in the pursuit of its activities shall be made available in due time, in appropriate quantity and quality and at the best price.

The principle of efficiency concerns the best relationship between resources employed and results achieved.

The principle of effectiveness concerns the attainment of the specific objectives set and the achievement of the intended results.

3. Specific, measurable, achievable, relevant and timed objectives shall be set for all sectors of activity covered by the budget. The achievement of those objectives shall be monitored by performance indicators for each activity, and the information referred to in point (e) of Article 38(3) shall be provided by the spending authorities to the European Parliament and the Council. That information shall be provided annually and at the latest in the documents accompanying the draft budget.

4. In order to improve decision-making, institutions shall undertake both ex ante and ex post evaluations in line with guidance provided by the Commission. Such evaluations shall be applied to all programmes and activities which entail significant spending and evaluation results shall be disseminated to the European Parliament, the Council and spending administrative authorities.

5. The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on ex ante, mid-term and ex post evaluations.

Article 31

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 and by an ex-ante evaluation as provided for in Article 30(4).

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

The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on the requirements of the financial statement.

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 and irregularities, the financial statement referred to in paragraph 1 shall provide information on the internal control system set up, an estimate of the costs and benefits of the controls implied by such system and an assessment of the expected level of risk of error, as well as existing and planned fraud prevention and protection measures.

Such analysis 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.

Article 32

Internal control of budget implementation

1. The budget shall be implemented in compliance with effective and efficient internal control as appropriate in each method of implementation, and in accordance with the relevant sector-specific rules.

2. For the purposes of the implementation of the budget, internal control is defined as a process applicable at all levels of management and 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:

(a) segregation of tasks;

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

(c) avoidance of conflicts of interests;

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

(e) procedures for monitoring of performance and for follow-up of identified internal control weaknesses and exceptions;

(f) 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 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;

(f) the elimination of multiple controls;

(g) improving 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 re-design of the programme or delivery systems.

Article 33

Cost-effective control systems

When presenting revised or new spending proposals, the Commission shall estimate the costs and benefits of control systems, as well as the level of risk of error as referred to in Article 31(3).

CHAPTER 8

Principle of transparency

Article 34

Publication of accounts, budgets and reports

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.

The consolidated annual accounts and the report on budgetary and financial management drawn up by each institution shall be published in the Official Journal of the European Union.

The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning detailed rules on the provisional publication of the budget.

Article 35

Publication of information on recipients and other information

1. Information on borrowing-and-lending operations contracted by the Union for third parties shall appear in an Annex to the budget.

2. The Commission shall make available, in an appropriate and timely manner, information on recipients, as well as the nature and purpose of the measure financed from the budget, where the latter is implemented directly in accordance with point (a) of Article 58(1), and information on recipients as provided by the entities, persons and Member States to which budget implementation tasks are entrusted under other methods of implementation.

The obligation set out in the first subparagraph shall also apply to the other institutions with regard to their recipients.

3. This information shall be made available with due observance of the requirements of confidentiality and security, in particular the protection of personal data.

Where natural persons are concerned, the publication shall be limited to the name and locality of the recipient, the amount awarded and the purpose of the award.The disclosure of those data shall be based on relevant criteria such as the periodicity of award, or the type or importance of the award. The criteria for disclosure and the level of detail published shall take into account the specificities of the sector and of each method of implementation.

The Commission shall be empowered to adopt delegated acts in accordance with Article 210 concerning the establishment of detailed rules on the publication of information on recipients. Where applicable, the level of detail and criteria shall be defined in the relevant sector-specific rules.

TITLE III

ESTABLISHMENT AND STRUCTURE OF THE BUDGET

CHAPTER 1

Establishment of the budget

Article 36

Estimates of revenue and expenditure

1. Each 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 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 and international cooperation, humanitarian aid and crisis response, regarding their respective responsibilities.

3. The Commission shall draw up its own estimates, which it shall also send, directly after their adoption, to the European Parliament and the Council.

In preparing its estimates, the Commission shall use the information referred to in Article 37.

Article 37

Estimated budget of the bodies referred to in Article 208

By 31 March each year, each body referred to in Article 208 shall, in accordance with the instrument establishing it, send the Commission, the European Parliament and the Council an estimate of its revenue and expenditure, including its establishment plan, and its draft work programme.

Article 38

Draft budget

1. The Commission shall submit a proposal containing the draft budget to the European Parliament and 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, also 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 36. It may also contain different estimates from those drawn up by the institutions.

The draft budget shall follow the structure and presentation set out in Articles 44 to 49.

Each section of the draft budget shall be preceded by an introduction drawn up by the 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 a financial programming for the following years.

The financial programming shall be updated after the adoption of the budget, to inco