EXPLANATORY MEMORANDUM

1. CONTEXT OF THE PROPOSAL

Home affairs policies have been steadily growing in importance over the last years. These policies are at the heart of the European project to create an area without internal borders where EU citizens and third-country nationals may enter, circulate, live and work, bringing new ideas, capital, knowledge and innovation or filling gaps in the national labour markets, confident that their rights are fully respected and their security assured. The growing importance of home affairs policies has been confirmed by the Stockholm Programme. It is also one of the areas which have seen important changes under the Lisbon Treaty.

On 29 June 2011, the Commission adopted a proposal for the next multi-annual financial framework for the period 2014-2020[1]: a budget for delivering the Europe 2020 strategy. In the area of home affairs policies, covering security, migration and the management of external borders, the Commission proposed to simplify the structure of the expenditure instruments by reducing the number of programmes to a two-Fund structure: an Asylum and Migration Fund and an Internal Security Fund.

Simplification has been defined as a key objective in the EU Budget Review Communication[2], the Smart Regulation agenda[3] and the aforesaid communication on the next multi-annual financial framework. Experience suggests that in the current programming period, the diversity and fragmentation of rules governing spending programmes are often perceived as unnecessarily complicated and difficult to implement and control. This imposes a heavy administrative burden on beneficiaries as well as on the Commission and Member States, which can have the unintended effect of discouraging participation, increasing error rates and delaying implementation. This means that the potential benefits of Union programmes are not fully realised.

This Regulation is part of a package of four Regulations, jointly establishing the framework for Union funding on home affairs under the two Funds. This Regulation lays down rules on programming, management and control, financial management, clearance of accounts, closure of programmes and reporting and evaluation. Thus, it sets out the delivery mechanisms whereas the purpose and scope of the two Funds, the resources and means of implementation are defined in their respective specific Regulations. This horizontal instrument will ensure a common approach to the implementation of the two Funds and a uniform treatment of beneficiaries in relation to all Union support in the area of home affairs.

This overall structure of four Regulations is necessary in the light of Treaty obligations. Due to different voting rules in the Council stemming from variable geometry pursuant to Protocols 19 (on the Schengen acquis) and 21 (the position of the UK and Ireland in respect of the area of Freedom, Security and Justice) it is not legally possible to draw up one single comprehensive legislative proposal for an Internal Security Fund, despite the coherence of the policy objectives to be addressed. Moreover, it was considered important that, in line with the general objective of simplification and mainstreaming, the two Funds (the Internal Security Fund and the Asylum and Migration Fund) should have to the extent possible identical delivery mechanisms. Finally, by introducing a horizontal Regulation setting out common provisions, the overall number of provisions is reduced considerably than if they were replicated in each act.

This Regulation lays down obligations only of a financial and technical nature and leaves the choices on the definition of policy objectives, eligible actions, the allocation of resources and the scope of the intervention for each specific policy area to the respective legal basis (i.e. in the Specific Regulations).

Its mechanisms aim to cover the principal source of Union funding in the home affairs area. As such, it would then replace the myriad of provisions with varying degrees of detail and complexity currently found in the legal bases of the existing home affairs expenditure instruments: the four instruments of the General Programme "Solidarity and Management of Migration Flows", the External Borders Fund, European Refugee Fund, the European Fund for the Integration of third-country nationals, the European Return Fund, and the two Specific Programmes of the General Programme "Security and Safeguarding Liberties", ISEC (Prevention of and the fight against Crime) and CIPS (Prevention, Preparedness, and consequence management of Terrorism and other Security-related Risks).

2. RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS

In accordance with the greater emphasis placed on evaluation as a tool to inform policy making, this proposal is informed by evaluation results, stakeholder consultation and impact assessment.

Work on the preparation of the future financial instruments for home affairs started in 2010 and continued into 2011. As part of this preparatory work, an evaluation/impact assessment study was launched in December 2010 with the aid of an external contractor. This study was completed in July 2011 and brought together available evaluation results for the existing financial instruments and informed the problems, objectives and policy options, including their likely impact, examined in the impact assessment. Building upon this study, the Commission prepared an impact assessment report on which the Impact Assessment Board delivered its opinion on 9 September 2011.

The impact assessment identified problems in relation to the scope and priorities of the current home affairs spending programmes on the one hand and the problems regarding the delivery of funding on the other hand. In relation to the latter, the impact assessment examined options in relation to shared management, centralised management and the timely response to emergency situations.

· In relation to shared management, the impact assessment concluded that a multiannual programme preceded by a policy dialogue was the preferred option. Contrary to the status quo, which combines annual programmes within a multiannual framework, it would significantly reduce administrative workload. Although a shift to multiannual programming only would offer increased flexibility, it would not address the continuous need to respond to changing situations in the Member States and third countries, typical of the home affairs area. Multiannual programming combined with a regular policy dialogue, however, would address this need and allow for a more results-driven approach.

· In terms of improving the delivery of funding under centralised management, the status quo was discarded because it offers little or no prospect of simplification or reduction of administrative workload. The move to a procurement only approach was also rejected because it would eliminate completely the possibility of promoting policy-driven actions, stimulating transnational co-operation and supporting civil society through grants. Recourse to a more targeted, less resource-intensive and diversified centralised management is the preferred option because it is expected to improve relations with key stakeholders and to lead to an overall reduction in workload.

· In relation to the emergency response mechanism, the impact assessment concluded that the current mechanism clearly does not meet the need for a quicker and more effective response to crises in the areas of migration and security. An improved mechanism extended to both a wider range of migration-related crises and security-related crises was considered the preferred option.

The impact assessment takes into account the results of a dedicated on-line public consultation on the future of home affairs funding. The consultation ran from 5 January to 20 March 2011 and was open to all stakeholders. A total of 115 responses were received from individuals and on behalf of organisations, including eight position papers. Respondents from all Member States contributed to the consultation as well as respondents from some third countries.

In April 2011, the conference "The future of EU funding for Home Affairs: A fresh look" brought together key stakeholders (Member States, international organisations, civil society organisations etc) to discuss the future of EU funding for home affairs. The conference was also an occasion to validate the outcome of the stock taking and the public consultation.

The future of EU funding for home affairs was raised and discussed with institutional stakeholders on numerous occasions, including at an informal lunch discussion during the JHA Council on 21 January 2011, an informal breakfast with the political coordinators of the European Parliament on 26 January 2011, at the hearing of Commissioner Malmström before the Parliament's SURE Committee on 10 March 2011 and during an exchange of views between the Director-General of DG Home Affairs and the Parliament's LIBE Committee on 17 March 2011. Specific expert advice was also gathered through discussions with Member States' experts within the framework of the common Committee for the General Programme on Solidarity and Management of Migration Flows.

These consultations, conferences and expert discussions confirmed that there is general agreement among key stakeholders on the need for simplification of delivery mechanisms and greater flexibility, notably to respond to emergencies. Stakeholders supported the idea of reducing the number of financial instruments to a two-Fund structure on the condition that this would actually lead to simplification. They also agreed on the need for a flexible emergency response mechanism to allow the Union to respond quickly and effectively to migration and security-related crises. Shared management with a move to multi-annual programming with the definition of common targets at Union level was generally seen as the appropriate management method for all home affairs spending although non-governmental organisations were of the view that direct management should also be continued. Stakeholders also supported enhancing the role of the home affairs agencies in order to foster cooperation and increase synergies.

3. LEGAL ELEMENTS OF THE PROPOSAL

The right to act derives from Article 3(2) of the Treaty on European Union which states that "the Union shall offer its citizens an area of freedom, security and justice without internal frontiers, in which the free movement of persons is ensured in conjunction with appropriate measures with respect to external border controls, asylum, immigration and the prevention and combating of crime".

Pursuing simultaneously several objectives which are inseparably linked without each one being secondary and indirect in relation to the others, this Regulation is founded on substantive legal bases in Title V of the Treaty in the area of freedom, security and justice namely on Articles 78(2), 79(2 and 4), 82(1), 84 and 87(2). They constitute the legal bases for Union action in the areas of asylum, immigration, management of migration flows, fair treatment of third-country nationals residing legally in Member States, combating illegal immigration, removal and repatriation of persons residing without authorisation, trafficking in human beings, judicial cooperation in criminal matters, crime prevention, combating crime including terrorism, corruption, organised crime and police cooperation.

They constitute compatible legal bases in the light of the position of the United Kingdom, Ireland [and Denmark] with regard to the areas they cover, thus enabling voting on this text in the Council. As the ordinary legislative procedure applies to each of them, the combination of the legal bases chosen fully respects the prerogatives of the European Parliament.

Attention is also drawn to Article 80 of the TFEU which underlines that certain of these policies of the Union and their implementation shall be governed by the principle of solidarity and fair sharing of responsibility, including its financial implications, between the Member States.

In light of the above decision making procedure, the provisions of this Regulation lay down horizontal common provisions for the implementation of the Asylum and Migration Fund and one component of the Internal Security Fund, namely the instrument for financial support for police co-operation, preventing and combating crime, and crisis management.

For those home affairs policies covered by the Internal Security Fund the legal bases of which are not compatible with the above, this Regulation should become applicable on the basis of a specific clause in one of the specific Regulations, namely the instrument for financial support for external borders and visa based on Article 77(2) TFEU, as these policies constitute a development of the Schengen acquis in which the United Kingdom and Ireland do not participate.

Consequently, upon the joint adoption of this Regulation and the specific Regulations, the provisions of this Regulation will become equally applicable to all home affairs Union funding.

Overall, the home affairs area is an area where there is an obvious added value in mobilising the Union budget.

Union action is justified on the grounds of the objectives laid out in Article 67 of the Treaty on the Functioning of the Union (TFEU), setting out the means to constitute an area of freedom, security and justice. The implementation of financial assistance in partnership with the Member States through shared management is an important aspect of home affairs Union funding. The shared management method is considered appropriate for all home affairs policy areas and has therefore been extended to the area of internal security where it was not used previously. Centralised management is maintained for policy-driven activities.

Under shared management, the shift from annual programmes towards multiannual programming preceded by a policy dialogue within a strategic framework defined at Union level will ensure that the actions financed from the Union budget meet the needs of individual Member States whilst addressing Union priorities. This proposal lays down the general rules on programming, reporting, financial management, controls and evaluations which are necessary for the proper implementation of Union home affairs funding but -where possible- leaves the Member States the freedom to decide how to implement these rules at national level. For example, the eligibility of expenditure will be determined on the basis of national rules, subject to a limited number of common, simple principles which are laid down in this Regulation.

Thus, interventions take place at the appropriate level and the role of the Union does not go beyond what is necessary. As the Budget Review has highlighted, the "EU budget should be used to finance EU public goods, actions that Member States and regions cannot finance themselves, or where it can secure better results".[4]

Detailed justifications for Union action in relation to the various policy areas covered by this Regulation are included in the explanatory memorandum to the Specific Regulations.

4. BUDGETARY IMPLICATION

The Commission's proposal for the Multi-Annual Financial Framework includes a proposal of EUR 3,869 million for the Asylum and Migration Fund and of EUR 4,648 million for the Internal Security Fund (current prices).

5. MAIN ELEMENTS

As a new general framework for implementing Union funding in the area of home affairs policies, this Regulation sets outs general rules on the financing of expenditure including rules on partnership, programming, reporting, monitoring and evaluation, the management and control systems to be put in place by the Member States and the clearance of accounts:

– The rules on partnership, programming, monitoring and evaluation have been designed on the basis of lessons learnt with the current four Funds of the General Programme "Solidarity and Management of Migration Flows";

– The rules on management and control systems, financial management, clearance of accounts and reporting and closure of programmes are inspired by Part II of the Commission proposal for a Regulation common provisions for Funds covered by the Common Strategic Framework ("hereafter CSF Funds Regulation")[5] and the Commission proposal for a Regulation on the financing, management and monitoring of the common agricultural policy[6], whilst ensuring, where useful, continuity with rules applied for the current four Funds.

The Regulation seeks to lay down the conditions for

(1) a more policy-driven and results-oriented funding, including through reinforced strategic programming;

(2) a significant simplification of the delivery mechanisms compared to the current situation;

(3) more flexibility in financial management and in the implementation, in light of the need to be able to address new and unforeseen circumstances typical of home affairs;

(4) an enhanced monitoring and evaluation framework, ensuring accountability, transparency and informed reflection on future support in the area of home affairs.

5.1. A policy-driven and results-oriented agenda

For shared management

· At the beginning of the next Multiannual Financial Framework, there will be a single, overarching home affairs policy dialogue with each Member State on their use of the Funds, i.e. how each individual Member State will contribute to achieving the objectives of the area of freedom, security and justice using the Union budget. These dialogues will be preceded by a Communication from the Commission on the overall expectations and framework for the dialogue. This Communication will also present the Commission's intentions for the Union actions and the framework for their implementation (e.g. different management methods to be used).

· Taking into account the outcome of the policy dialogue, the programmes agreed between the Commission and the Member State will describe the baseline situation and lay down the objectives Member States are to achieve in the policy area and the objectives for the use of Union funding. The national programme will identify targets and examples of actions per objective. In addition, a seven-year financial plan will indicate how the allocated resources are to be committed and spent, within the ceilings available. In case of actions to be implemented in and in relation to third countries, such actions should not be directly development-oriented and the policy dialogue should seek full coherence with the principles and general objectives of the Union external action and foreign policy related to the country or region in question.

· While every effort will be made to ensure that the national programmes are adopted in 2014, it is not excluded that some programmes would not be adopted until 2015. In order to avoid the loss of the related commitment appropriations for 2014, the Commission will therefore amend its proposal for a Council Regulation laying down the multiannual financial framework for the years 2014-2020 [COM(2011) 398 of 29.06.2011] in order to extend the provisions of Article 7 of the said Regulation to programmes implemented under shared management uder the Asylum and Migration and Internal Security Funds.

· Member States will report annually on financial management and the results achieved under the programmes.

· There will be a mid-term review in 2017 to re-examine the situation in each Member State. At this occasion, new resources can be allocated for the period 2018-2020.

For direct and indirect management

· The objectives to be achieved under the national programmes will be complemented by "Union actions" as well as a rapid response mechanism to deal with emergency situations. Union actions will support the implementation of Union policies through grants and procurement. They will include actions in and in relation to third countries as indicated in the Communication on the Multiannual Financial Framework[7]. Such actions shall not be directly development oriented and shall complement, as appropriate, the financial assistance provided through the EU's external aid instruments, which remain the main source of funding to help third countries build their relevant capacities. In implementing such support, full coherence will be sought with the principles and general objectives of the EU external action and foreign policy related to the country or region in question. Complementarity will be ensured through enhanced coordination with the EEAS and the relevant Commission services.

· Union actions and emergency assistance measures may also be carried out by Union Agencies in the area of home affairs (Cepol, Europol, EASO, Frontex and the IT Agency), where this is in the interest of the Union, where the actions are of an ad hoc nature, and where their successful implementation relies on the operational and technical expertise of the Agency concerned. Such actions will be implemented within the framework of their missions, in accordance with their legal bases, in complementarity with their work programmes and without prejudice to the overall staff reductions foreseen.

· Technical assistance at the initiative of the Commission will be used to support Member States and beneficiaries, to encourage mutual learning and improve communication (including corporate communication where appropriate) and evaluation. These appropriations will also support adequate control measures in the Union and in third countries relating to actions funded and run the IT system used for the communication between Member States and the Commission under shared management.

5.2. Simplification of delivery mechanisms

For shared management

· Each Member State will be required to have a single national programme per Fund, thus bringing together various policy areas, resulting in support from the Union budget for respectively an integrated migration policy, including integration, asylum and return as regards the Asylum and Migration Fund, and a comprehensive internal security strategy, including police co-operation, border security, fight against serious cross border crime, document fraud etc, as regards the Internal Security Fund.

· The new framework represents a major simplification and reduction of administrative burden compared to the current four Funds, which work with both a multiannual strategy and annual programmes. The maximum number of programmes will be 26 for the AMF (excluding Denmark, if the United Kingdom and Ireland were to opt in) and 27 for the ISF (all Member States). Moreover, the Schengen associated States will also participate in the ISF as regards the external borders and visa and the police cooperation components.

· A low number of revisions of national programmes are expected: programmes will concentrate on objectives and targets and not on an exhaustive identification of actions. The objective is that, as far as possible, and except for new or unforeseen circumstances, there should be, per Member State and per Fund, one decision to approve the multiannual programme and, if needed, one decision to revise the programme in the context of the mid-term review.

· As under the CSF Funds, the partnership principle should be implemented through a monitoring committee.

· Each Member States will set up a single management and control system per Fund, with the possibility of having one system to cover both Funds. To take into account national institutional particularities, Member States may create delegated authorities, to whom the responsible authorities can delegate particular (programming and implementation) tasks.

· The eligibility of expenditure shall be determined on the basis of national rules, subject to a limited number of common, simple principles. This approach should constitute an important simplification in project management at the level of the beneficiaries. Simplified cost options such as flat rates and lump sums provide the means for Member States to introduce performance-oriented management at the level of beneficiaries.

Fordirect and indirect management

· Financial assistance will be available in the event of emergency situations, as defined in the relevant provisions of the specific Regulations. The mechanism shall be triggered by the Commission, also following the initiative of Member States, the Article 71 Committee (COSI) represented by the respective Union Presidency or other stakeholders such as international organisations (United Nations High Commissioner for Refugees, International Organisation for Migration, etc) and Union agencies in home affairs.

· All possible means will be used to avoid fragmentation by concentrating resources on a limited number of Union objectives and using the expertise of key stakeholders, where appropriate, on the basis of partnership agreements and framework agreements.

· For the financial support to the development of new IT systems ("the smart borders package"), the current annual financial decisions enabling the Commission to develop the central parts will be replaced by a multiannual framework.

5.3. Flexibility

For shared management

· The impact of the mid-term review will depend on the situation in the Member States. Member States which are deemed to have additional risks or which obtain additional resources to implement Union specific priorities would be invited to revise the amounts in their financial plan and where appropriate to add elements in their programme.

· Financial flexibility is part and parcel of the current Interinstitutional Agreement on Budgetary Discipline and of the Commission proposal for the Regulation on the 2014-2020 MFF. It is also reflected in the proposal for the revision of the Financial Regulation and for its implementing rules. It will therefore be implemented notably through the different mechanisms provided by these proposals, bearing in mind as central phases for their implementation the multiannual financial programing and its annual update, the annual budget allocation and the annual budget implementation.

· The specific Regulations lay down the amounts that will be allocated to the national programmes, Union actions and other activities. However, in the overall package of this Regulation and the specific Regulations, it is foreseen that the Commission can, by delegated acts, change certain amounts in order to ensure optimal use of the Union budget.

For direct and indirect management

· Annual appropriations for Union actions, emergency assistance and, subject to annual ceilings, the technical assistance at the initiative of the Commission, are considered as one "envelope", thereby allowing maximum flexibility to decide from one financial year to another where the resources will be allocated, depending on the specific needs.

· Union actions are defined very broadly so as to give the Commission all the necessary tools to fulfil its law making and policy coordination tasks.

– They focus on transnational aspects (co-operation, comparative analysis, networks), which require concerted actions across all Member States and actively support collective and mutually reinforcing actions of Member States and other actors which consolidate Union co-operation and bring about mutual learning and innovation.

– They also allow actions that are not transnational but that are of a particular interest for the policy development in these areas for the Union as a whole.

– They can cover actions in and in relation to third countries.

– The specific Regulations foresee implementation in relation to all the policies and objectives supported by the Funds and even financing policy-related aspects of the operation of the Funds. In the case of the borders and visa component of the Internal Security Fund, this could include the implementation of the Schengen evaluation and monitoring mechanism.

· Accordingly, the specific Regulations foresee support to the development of civil society and transnational networks (in particular for the Asylum and Migration Fund) and testing and validating research, e.g. applied research projects to bridge the gap from the Horizon 2020 Programme to operational use (in particular for the Internal Security Fund).

5.4. A coherent and efficient reporting, monitoring and evaluation framework

For shared management

· Member States will report annually on the implementation of the multiannual programme, as an integral part of the clearance of accounts' exercise. To feed into the mid term review process, they will be requested in 2017 to provide additional information on the progress made in achieving the objectives. A similar exercise will be undertaken in 2019, to allow, where appropriate, adjustments during the last financial year (2020).

· Supporting the development of a evaluation-based culture in the area of home affairs, the Funds will have a common evaluation and monitoring framework with broad policy related indicators which underline the result-oriented approach to the Funds and the essential role they could play in the policy mix to achieve the objectives towards an area of freedom, security and justice. These indicators relate to the impact the Funds could make: the development of a common culture of border security, police cooperation and crisis management; effective management of migration flows into the Union; fair and equal treatment of third-country nationals; solidarity and co-operation between Member States in addressing migration and internal security issues and a common Union approach on both migration and security towards third countries.

· To ensure adequate application of the principles on evaluation, and bearing in mind the practical experience with evaluation in Member States under the current Union funding on home affairs, the Commission and the Member States will work together to develop through implementing measures the common evaluation and monitoring framework, inter alia by defining templates and common output and result indicators.

· All measures will be established at the beginning of the programming period, thus enabling Member States to set up their reporting and evaluation systems on the basis of the agreed principles and requirements.

· To reduce the administrative burden and ensure synergies between reporting and evaluation, the information required for evaluation reports will build on and complete the information provided by Member States in the annual implementation reports of the national programmes.

· The interim evaluation report is due in 2018 and should feed into the reflection on the subsequent programming period.

2011/0367 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

laying down general provisions on the Asylum and Migration Fund and on the instrument for financial support for police cooperation, preventing and combating crime, and crisis management

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 Articles 78(2), 79(2), 79(4), 82(1), 84 and 87(2) 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 European Economic and Social Committee[8],

Having regard to the opinion of the Committee of the Regions[9],

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1) The European Union's home affairs policy is to create an area of freedom, security and justice: an area without internal borders where people may enter, move, live and work freely, confident that their rights are fully respected and their security assured, bearing in mind common challenges such as the development of a comprehensive Union immigration policy to enhance competitiveness and social cohesion of the Union, the creation of a common European Asylum System and the prevention and combating of threats of serious and organised crime, cybercrime and terrorism.

(2) Union funding to support the development of this area should constitute a tangible sign of the solidarity and responsibility sharing that are indispensable in responding to the common challenges.

(3) The existence of a common framework should ensure the necessary coherence, simplification and uniform implementation of that funding across the policy areas concerned.

(4) A common framework should lay down the principles of assistance and identify the responsibilities of the Member States and the Commission in ensuring the application of those principles.

(5) This Union funding would be more efficient and better targeted if co-financing of eligible actions were based on strategic multiannual programming, drawn up by each Member State in dialogue with the Commission.

(6) Measures in and in relation to third countries supported through the Specific regulations should be taken in synergy and coherence with other actions outside the Union supported through Union external assistance instruments, both geographic and thematic. In particular, in implementing such actions full coherence should be sought with the principles and general objectives of the Union external action and foreign policy related to the country or region in question. They should not be intended to support actions directly development-oriented and they should complement, when appropriate, the financial assistance provided through external aid instruments. Coherence will also be ensured with the Union humanitarian policy, in particular as regards the implementation of emergency assistance.

(7) External action should be consistent and coherent as set out in article 18(4) of TEU.

(8) Prior to the preparation of multi-annual programmes as a means to achieve the objectives of this Union funding, Member States and the Commission should engage in a policy dialogue and thereby establishing a coherent strategy for each individual Member State.

(9) The strategy should be subject to a mid term review, to ensure appropriate funding in period 2018-2020.

(10) Member States should establish a partnership with the authorities and bodies concerned to prepare, implement and monitor on their national programmes throughout the entire multiannual period. Member States should set up monitoring committees to monitor the national programmes and assist them in reviewing the implementation and progress made in achieving the objectives.

(11) Eligibility of expenditure under the national programmes should be determined by national law, subject to common principles. The starting and closing dates for the eligibility of expenditure should be defined so as to provide for uniform and equitable rules applying to the national programmes.

(12) Technical assistance should enable the Member States to support the implementation of their national programmes and assist beneficiaries in complying with their obligations and Union law.

(13) To ensure an adequate framework for providing rapidly emergency assistance, this Regulation should allow support for actions the expenditure of which was incurred before the application for such assistance was made, in accordance with the provision in the Financial Regulation[10] which allows such flexibility in duly substantiated exceptional cases.

(14) The financial interests of the European Union should be protected through proportionate measures throughout the expenditure cycle, including the prevention, detection and investigation of irregularities, the recovery of funds lost, wrongly paid or incorrectly used and, where appropriate, penalties.

(15) Member States should adopt adequate measures to guarantee the proper functioning of the management and control system and the quality of implementation. To this end, it is necessary to establish the general principles and necessary functions which these systems should fulfil.

(16) The obligations on the Member States as regards management and control systems, the prevention, detection and correction of irregularities and infringements of Union law should be specified in order to guarantee the efficient and correct implementation of their national programmes.

(17) In accordance with the principles of subsidiarity and proportionality, Member States should have the primary responsibility, through their management and control systems, for the implementation and control of national programmes.

(18) Only Responsible authorities accredited by the Member States offer reasonable assurance that the necessary controls have been carried out before granting support from the Union budget to beneficiaries. It should therefore be explicitly laid down that only expenditure effected by accredited responsible authorities can be reimbursed from the Union budget.

(19) The powers and responsibilities of the Commission to verify the effective functioning of the management and control systems, and to require Member State action, should be laid down.

(20) Union budget commitments should be effected annually. In order to ensure effective programme management, it is necessary to lay down common rules for the payment of the annual balance, and the final balance.

(21) The pre-financing payment at the start of programmes ensures that the Member State has the means to provide support to beneficiaries in the implementation of the programme once the programme is approved. Therefore, provisions should be made for initial pre-financing amounts. Initial pre-financing should be totally cleared at closure of the programme.

(22) The triennial revision of the Financial Regulation[11] introduces changes in the shared management principles which have to be taken into account.

(23) With a view to strengthening accountability for expenditure co-financed by the Union budget in any given year, an appropriate framework should be created for the annual clearance of accounts. Under this framework, the Responsible Authority should submit to the Commission, in respect of a national programme, a management declaration accompanied by the annual accounts, a summary report and an independent audit opinion and control report.

(24) To support the assurance underlying the annual clearance of accounts across the Union, common provisions should be laid down on the nature and level of the controls to be carried out by Member States.

(25) In order to ensure the sound financial management of Union resources, it may be necessary for the Commission to make financial corrections. To ensure legal certainty for the Member States, it is important to define the circumstances under which breaches of applicable Union or national law can lead to financial corrections by the Commission. In order to ensure that financial corrections which the Commission may impose on Member States are related to the protection of the Union's financial interests, they should be confined to cases where the breach of Union or national law concerns directly or indirectly the eligibility, regularity, management or control of actions and the corresponding expenditure. To ensure proportionality it is important that the Commission considers the nature and the gravity of the breach in deciding the amount of financial correction. In this regard, it is appropriate to set out the criteria for applying financial corrections by the Commission and the procedure that may lead to a decision on the financial correction.

(26) In order to establish the financial relationship between the Responsible Authorities and the Union budget, the Commission should clear the accounts of these authorities annually. The clearance of accounts decision should cover the completeness, the accuracy and veracity of the accounts but not the conformity of the expenditure with the Union legislation.

(27) The Commission, which is responsible for the proper application of Union law under Article 17 of the Treaty on European Union, should decide whether the expenditure incurred by the Member States complies with Union legislation. Member States should be given the right to justify their decisions to make payments. In order to give Member States legal and financial assurances as to expenditure effected in the past, a maximum period should be set for the Commission to decide which financial consequences should follow from non-compliance.

(28) In order to encourage financial discipline, it is appropriate to define the arrangements for decommitment of any part of the budget commitment in a national programme, in particular where an amount may be excluded from the decommitment, notably when delays in the implementation result from a legal proceeding or an administrative appeal having suspending effect or from reasons of force majeur.

(29) To ensure the appropriate application of the general rules on decommitment, the rules established should detail how the deadlines for decommitment are established and how the respective amounts are calculated.

(30) It is important to bring the achievements of Union funding to the attention of the general public. Citizens have a right to know how the Union's financial resources are spent. The responsibility to ensure that the appropriate information is communicated to the public should lie with both the Responsible Authorities and the beneficiaries. To ensure more efficiency in communication to the public at large and stronger synergies between the communication activities undertaken at the initiative of the Commission, the budget allocated to communication actions under this Union funding shall also contribute to cover corporate communication of the political priorities of the European Union provided that these are related to the general objectives of this Union funding.

(31) For the purpose of ensuring a wide dissemination of information about this Union funding and to inform potential beneficiaries about funding opportunities, detailed rules relating to information and communication measures, as well as certain technical characteristics of such measures should be defined on the basis of this Regulation and each Member State should establish a website or website portal with the necessary information.

(32) The effectiveness of actions supported also depend on their evaluation and the dissemination of their results. The responsibilities of the Member States and the Commission in this regard, and arrangements to ensure the reliability of evaluation and the quality of the related information, should be formalised.

(33) In order to amend provisions of this Regulation on the common principles on the eligibility of expenditure, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(34) In order to ensure uniform conditions for the implementation of this Regulation, it should confer implementing powers on the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers[12].

(35) The examination procedure should be be used for implementing acts that lay down common obligations on Member States, in particular on the provision of information to the Commission, and the advisory procedure should be used for the adoption of implementing acts relating to the model forms for the provision of information to the Commission, given their purely technical nature.

(36) Since the objective of this Regulation, namely to lay down general provisions cannot be sufficiently achieved by the Member States and can be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective. In accordance with Articles 1 and 2 of the Protocol on the position of the United Kingdom and Ireland, annexed to the Treaty on European Union and to the Treaty establishing the European Community and without prejudice to Article 4 of the said Protocol these Member States are not participating in the adoption of this Regulation and are not bound by or subject to its application. [OR] [In accordance with Article 3 of the Protocol on the position of the United Kingdom and Ireland, annexed to the Treaty on European Union and to the Treaty establishing the European Community, the United Kingdom and Ireland gave notice of their wish to take part in the adoption and application of this Regulation.]

(37) In accordance with Articles 1 and 2 of the Protocol of the position of Denmark annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union, Denmark is not taking part in the adoption of this Regulation and is not bound by it or subject to its application;

HAVE ADOPTED THIS REGULATION:

CHAPTER I

GENERAL PROVISIONS

Article 1

Purpose and scope

This Regulation sets outs general rules for the implementation of the Specific Regulations with regard to:

(a) the financing of expenditure;

(b) partnership, programming, reporting, monitoring and evaluation;

(c) the management and control systems to be put in place by the Member States;

(d) the clearance of accounts.

Article 2

Definitions

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

(a) "Specific Regulations" means

– Regulation ../2012/EU [establishing the Asylum and Migration Fund for the period 2014-2020];

– Regulation …/2012/EU [establishing, as part of the Internal Security Fund, the instrument for financial support for police cooperation, preventing and combating crime, and crisis management; and

– Any other Regulation which provides for the application of this Regulation.

(b) "programming" means the process of organisation, decision making and financing in several stages intended to implement, on a multiannual basis, the joint action by the Union and the Member States to achieve the objectives of the Specific Regulations;

(c) "action" means a project or group of projects selected by the Responsible Authority of the national programme concerned, or under its responsibility, contributing to the general and specific objectives pursued by the Specific Regulations;

(d) "Union action" means a transnational action or action of particular interest to the Union as defined in the Specific Regulations;

(e) "project" means the specific, practical means deployed to implement all or a part of an action by a beneficiary of the Union contribution;

(f) "emergency assistance" means a project or group of projects addressing an emergency situation as defined in the Specific Regulations;

(g) "beneficiary" means the recipient of an Union contribution under a project, whether a public or private body, international organisations or the Red Cross (ICRC), the International Federation of National Red Cross and Red Crescent Societies.

CHAPTER II

PRINCIPLES OF ASSISTANCE

Article 3

General principles

1. The Specific Regulations shall provide support, through national programmes, Union actions and emergency assistance, which complements national, regional and local intervention, pursuing the objectives of the Union.

2. The Commission and the Member States shall ensure that the support provided under the Specific Regulations and by the Member States is consistent with the activities, policies and priorities of the European Union and complementary to other instruments of the European Union.

3. The support provided under the Specific Regulations shall be implemented in close cooperation between the Commission and the Member States.

4. In accordance with their respective responsibilities, the Commission and the Member States, together with the EEAS as regards actions in and in relation to third countries, shall ensure coordination among this Regulation and the Specific Regulations, and with other Union policies and instruments, including those in the framework of the Union's external action.

5. The Commission and the Member States shall apply the principle of sound financial management in accordance with Article [26] of the Financial Regulation.

6. The Commission and the Member States shall ensure the effectiveness of the support provided under the Specific Regulations, in particular through monitoring, reporting and evaluation.

7. The Commission and the Member States shall carry out their respective roles in relation to this Regulation and the Specific Regulations with the aim of reducing the administrative burden for beneficiaries.

Article 4

Compliance with Union and national law

Actions financed by the Specific Regulations shall comply with applicable Union and national law.

Article 5

Protection of the financial interests of the European Union

1. The Commission shall take appropriate measures ensuring that, when actions financed under the Specific Regulations are implemented, the financial interests of the European Union are protected by the application of preventive measures against fraud, corruption and any other illegal activities, by effective controls and, if irregularities are detected, by the recovery of the amounts wrongly paid and, where appropriate, by effective, proportionate and deterrent penalties.

2. Member States shall prevent, detect and correct irregularities and shall recover amounts unduly paid together with any interest of late payments. They shall report these to the Commission and shall keep the Commission informed of the progress of administrative and legal proceedings.

3. When amounts unduly paid to a beneficiary cannot be recovered and this is as a result of fault or negligence on the part of a Member State, the Member State shall be responsible for reimbursing the amounts concerned to the general budget of the Union.

4. Member States shall offer effective prevention against fraud, especially as regards the areas with a higher level of risk, and which shall act as a deterrent, having regard to the benefits as well as the proportionality of the measures.

5. The Commission shall be empowered to adopt delegated acts in accordance with the procedure referred to in Article 54, concerning the obligations of Member States specified in the paragraph 4.

6. The Commission or its representatives and the Court of Auditors shall have the power of audit, on the basis of documents and on-the-spot, over all grant beneficiaries, contractors and subcontractors who have received Union funds.

The European Anti-fraud Office (OLAF) may carry out on-the-spot controls and inspections on economic operators concerned directly or indirectly by such funding in accordance with the procedures laid down in Regulation (Euratom, EC) No 2185/96 with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the European Union in connection with a grant agreement or grant decision or a contract concerning Union funding.

Without prejudice to the first and second sub-paragraphs, cooperation agreements with third countries and international organisations and grant agreements and grant decisions and contracts resulting from the implementation of this Regulation and the Specific Regulations shall expressly empower the Commission, the Court of Auditors and OLAF to conduct such audits, on-the-spot controls and inspections.

Article 6

Programming

The objectives of the Specific Regulations shall be pursued within the framework of the multiannual programming period from 2014 to 2020, subject to a mid-term review in accordance with Article 15.

CHAPTER III

FINANCIAL FRAMEWORK FOR UNION ACTIONS, EMERGENCY AND TECHNICAL ASSISTANCE

Article 7

Implementation framework

1. The Commission shall establish the overall amount made available for Union actions, emergency assistance and technical assistance at the initiative of the Commission under the annual appropriations of the Union budget.

2. The Commission shall adopt, by way of implementing act, the work programme for Union actions and emergency assistance. That implementing act shall be adopted in accordance with the examination procedure referred to in Article 55(3).

3. To ensure a timely availability of resources, the Commission may separately adopt a work programme for emergency assistance.

4. Union actions, emergency assistance and technical assistance at the initiative of the Commission may be implemented

– directly, by the Commission or through executive agencies;

– indirectly, by entities and persons other than Member States in accordance with Article [57] of the Financial Regulation.

Article 8

Emergency assistance

1. In response to an emergency situation as defined in the Specific Regulations, the Commission may decide to provide emergency assistance.

2. Within the limits of the available resources, the emergency assistance may amount to 100% of the eligible expenditure.

3. It may consist of assistance in Member States and in third countries in accordance with the objectives and actions defined in the Specific Regulations.

4. Emergency assistance may support expenditure which was incurred prior to the date of submission of the grant application or the request for assistance, when this is necessary for the implementation of the action.

Article 9

Union actions and emergency assistance in or in relation to third countries

1. The Commission may decide to finance Union actions and emergency assistance in or in relation to third countries in accordance with the objectives and actions defined in the Specific Regulations.

2. When such actions are implemented directly, the following entities shall be allowed to submit applications:

(a) Member States;

(b) third countries;

(c) joint bodies set up by the third countries and the Union or by Member States;

(d) international organisations, including regional organisations, UN bodies, departments and missions, international financial institutions and development banks and institutions of international jurisdiction in so far as they contribute to the objectives of the Specific Regulation(s) concerned;

(e) the International Committee of the Red Cross (ICRC), the International Federation of National Red Cross and Red Crescent Societies;

(f) Non-governmental organisations established and registered in the Union and in the countries associated with the implementation, application and development of the Schengen acquis.

Article 10

Technical assistance at the initiative of the Commission

1. At the initiative of or on behalf of the Commission, the Specific Regulations may support the preparatory, monitoring, administrative and technical assistance, evaluation, audit and control measures necessary for the implementation of this Regulation and the Specific Regulations.

2. Those measures may include but are not limited to:

(a) assistance for project preparation and appraisal;

(b) support for institutional strengthening and administrative capacity building for the effective management of this Regulation and the Specific Regulations;

(c) measures related to the analysis, management, monitoring, information exchange and implementation of this Regulation and the Specific Regulations, as well as measures relating to the implementation of control systems and technical and administrative assistance;

(d) evaluations, expert reports statistics and studies, including those of a general nature concerning the operation of the Specific Regulations;

(e) actions to disseminate information, support networking, carry out communication activities, raise awareness and promote cooperation and exchange of experience, including with third countries. To bring about greater efficiency in communication to the public at large and stronger synergies between the communication activities undertaken at the initiative of the Commission, the resources allocated to communication actions under this Regulation shall also contribute to covering the corporate communication of the political priorities of the European Union provided that these are related to the general objectives of this Regulation and the Specific Regulations;

(f) the installation, operation and interconnection of computerised systems for management, monitoring, audit, control and evaluation;

(g) the design of a common framework for evaluation and monitoring as well as a system of indicators, taking into account, where appropriate, national indicators;

(h) actions to improve evaluation methods and the exchange of information on evaluation practices;

(i) conferences, seminars, workshops and other common information and training measures on the implementation of this Regulation and the Specific Regulations for designated authorities and beneficiaries;

(j) actions related to audit.

3. The actions may concern the preceding and subsequent financial frameworks.

CHAPTER IV

NATIONAL PROGRAMMES

Section 1 Programming and Implementation framework

Article 11

Subsidiary and proportional intervention

1. Member States and the bodies designated by them for that purpose ("designated authorities") shall be responsible for implementing programmes and carrying out their tasks under this Regulation and the Specific Regulations at the appropriate level, in accordance with the institutional, legal and financial framework of the Member State and subject to compliance with this Regulation and the Specific Regulations.

2. Arrangements for the implementation and use of the support provided under the Specific Regulations, and in particular the financial and administrative resources required in relation to the reporting, evaluation, management and control, shall take into account the principle of proportionality having regard to the level of support allocated.

Article 12

Partnership

1. Each Member State shall organise, in accordance with its national rules and practices, a partnership with the authorities and bodies concerned to develop and implement national programmes.

Such authorities and bodies shall include the competent regional, local, urban and other public authorities, and, where appropriate, international organisations and bodies representing civil society, such as non-governmental organisations or social partners.

2. Partnership shall be conducted in full compliance with the respective institutional, legal and financial jurisdiction of each partner category.

3. The partners shall be involved in the preparation, implementation, monitoring and evaluation of national programmes.

4. Each Member State shall set up a monitoring committee to support the implementation of national programmes.

5. The Commission may participate in the work of the monitoring committee in an advisory capacity.

Article 13

Policy dialogue

1. To launch the programming period, the Commission and each Member State shall have a policy dialogue on the national requirements and the contribution that the Union budget could provide to achieving these requirements, bearing in mind the base line situation in the Member State concerned and the objectives of the Specific Regulations. The policy dialogue shall result in the conclusion of agreed minutes or an exchange of letters which shall identify the specific needs and priorities of the Member State concerned and serve as the framework for the preparation of the national programmes.

In case of actions to be implemented in and in relation to third countries, such actions shall not be directly development oriented and the policy dialogue shall seek full coherence with the principles and general objectives of the Union external action and foreign policy as regards the country or region concerned.

2. In the context of the examination of the payment request referred to in Article 39 and the implementation report referred to in Article 49, the Member State concerned and the Commission shall review the progress made in the implementation of the national programme, bearing in mind the conclusions of the policy dialogue.

Article 14

Preparation and approval of national programmes

1. Each Member State shall propose, on the basis of the conclusions of the policy dialogue referred to in Article 13(1), a national programme in accordance with the Specific Regulations.

2. Each proposed national programme shall cover the financial years of the period from 1 January 2014 to 31 December 2020 and consist of the following elements:

(a) a description of the baseline situation in the Member State;

(b) an analysis of requirements in the Member State and the national objectives designed to meet those requirements during the period covered by the programme;

(c) an appropriate strategy identifying the objectives to be pursued with the support of the Union budget, with targets for their achievement, an indicative time table and examples of actions envisaged to meet these objectives;

(d) the mechanisms that ensure coordination between the instruments established by the Specific Regulations and other Union and national instruments;

(e) information on the monitoring and evaluation framework to be put in place and the indicators to be used to measure the progress in the implementation of the objectives pursued in relation to the baseline situation in the Member State;

(f) arrangements to ensure the effective and efficient implementation of the support of the Union budget, including the planned use of technical assistance and the approach chosen for the implementation of the partnership principle laid down in Article 12;

(g) a draft financing plan broken down by each financial year of the period;

(h) the mechanisms and methods to be used to publicise the national programme;

(i) the implementing provisions for the national programme containing the identification of the designated authorities.

3. Member States shall submit the proposed national programmes to the Commission no later than three months after the policy dialogue referred to in Article 13(1) is concluded.

4. The national programmes shall be drawn up according to the model adopted by the Commission. That implementing act shall be adopted in accordance with the advisory procedure referred to in Article 55(2).

5. Before approving a proposed national programme, the Commission shall examine:

(a) its consistency with the objectives of the Specific Regulations and the conclusions of the policy dialogue referred to in Article 13(1);

(b) the relevance of the objectives, targets, indicators, the time table and examples of actions envisaged in the proposed national programme in the light of the strategy which is proposed;

(c) the relevance of the implementing provisions referred to in point (i) of paragraph 2 in the light of the actions envisaged;

(d) the compliance of the proposed programme with Union law;

(e) the complementarity with support provided by other Union Funds including the European Social Fund;

(f) Where applicable under a Specific Regulation, for objectives and examples of actions in or in relation to third countries, coherence with the principles and objectives of the Union external action and foreign policy related to the country or region concerned.

6. The Commission shall make observations within three months of the date of submission of the proposed national programme. Where the Commission considers that a proposed national programme is inconsistent with the objectives of the Specific Regulations, insufficient in light of the strategy or does not comply with Union law, it shall invite the Member State concerned to provide all necessary additional information and, where appropriate, to revise the proposed national programme. The Member State shall provide to the Commission all necessary additional information and, where appropriate, revise the proposed national programme.

7. The Commission shall approve, by implementing act, each national programme no later than six months following the formal submission by the Member State, provided that any observations made by the Commission have been satisfactorily taken into account.

8. In the light of new or unforeseen circumstances, at the initiative of the Commission or the Member State concerned, an approved national programme may be re-examined and, if necessary, revised for the rest of the programming period.

Article 15

Mid term review

1. In 2017 the Commission and each Member State shall re-examine the situation, in the light of the developments in Union policies and in the Member State concerned.

2. Following this re-examination, Member States may revise their national programmes. National programmes shall be revised for those Member States which will receive additional allocations in accordance with the Specific Regulations.

3. The rules laid down in Article 14 on the preparation and approval of national programmes shall apply mutatis mutandis to the preparation and approval of the revised national programmes.

4. The Commission shall allocate, by implementing acts, to Member States the resources for national programmes which are available in the framework of the mid-term review under the Specific Regulations. After the completion of the mid term review, the Commission shall submit to the European Parliament, the Council the European and Economic and Social Committee and the Committee of the Regions a report on the mid term review carried out in accordance with the provisions of this Regulation and the Specific Regulations.

Article 16

Financing structure

1. Financial contributions provided under the national programmes shall take the form of grants.

2. Actions supported under the national programmes shall be co-financed by public or private sources, shall be of a non-profit nature and shall not be subject to funding from other sources covered by the Union budget.

3. The contribution from the Union budget shall not exceed 75 % of the total eligible expenditure of a project.

4. The contribution from the Union budget may be increased to 90% under specific actions or strategic priorities as defined in the Specific Regulations.

5. The contribution from the Union budget may also be increased to 90% in duly justified circumstances, in particular if projects could otherwise not have been implemented and the objectives of the national programme would not have been achieved.

Article 17 General Principles of Eligibility

1. The eligibility of expenditure shall be determined on the basis of national rules, except where specific rules are laid down in this Regulation or in the Specific Regulations.

2. In accordance with the Specific Regulations, for it to be eligible, expenditure must be:

(a) within the scope of the Specific Regulations and their objectives;

(b) needed to carry out the activities covered by the project concerned;

(c) reasonable and comply with the principles of sound financial management, in particular value for money and cost-effectiveness.

3. Expenditure shall be eligible for support under the Specific Regulations if

– it has been incurred and paid by a beneficiary between 1 January 2014 and 31 December 2022; and

– it has been actually paid by the accredited Responsible Authority between 1 January 2014 and 30 June 2023.

4. Expenditure included in payment requests from the beneficiary to the Responsible Authority shall be supported by invoices or accounting documents of equivalent probative value, except for forms of support under Article 18(1)(b), (c) and (d). For such forms of support, by way of derogation from paragraph 3, the amounts included in the payment request shall be the cost reimbursed to the beneficiary by the Responsible Authority.

5. Net revenue directly generated by a project during its implementation which has not been taken into account at the time of approval of the project, shall be deducted from the eligible expenditure of the project in the final payment request submitted by the beneficiary.

Article 18

Eligible expenditure

1. Eligible expenditure can be reimbursed in the following ways:

(a) Reimbursement of eligible costs actually incurred and paid, together with, where applicable, depreciation;

(b) standard scale of unit costs;

(c) lump sums;

(d) flat-rate financing determined by the application of a percentage to one or several defined categories of costs.

2. The options referred to in paragraph 1 may be combined when each covers a different category of costs or where they are used for different projects forming a part of an action or for successive phases of an action.

3. Where a project is implemented exclusively through the procurement of works, goods or services, only paragraph 1 (a) shall apply.

4. The amounts referred to in paragraph 1 (b), (c) and (d) shall be established in advance in one of the following ways:

(a) a fair, equitable and verifiable calculation method based on:

(i) statistical data or other objective information; or

(ii) the verified historical data of individual beneficiaries or the application of their usual cost accounting practices;

(b) methods and corresponding scale of unit costs, lump sums and flat rates applicable in Union policies for a similar type of action/project and beneficiary;

(c) methods and corresponding scale of unit costs, lump sums and flat rates applied under schemes for grants funded entirely by the Member State for a similar type of action/project and beneficiary;

5. The document setting out the conditions for support for each project/action shall set out the method to be applied for determining the costs of the action and the conditions for the payment of the grant.

6. Where the implementation of a project gives rise to indirect costs, they may be calculated as a flat rate in one of the following ways:

(a) a flat rate of up to 20% of eligible direct costs, where the rate is calculated on the basis of a fair, equitable and verifiable calculation method or a method applied under schemes for grants funded entirely by the Member State for a similar type of action/project or beneficiary;

(b) a flat rate of up to 15% of eligible direct staff costs; or

(c) a flat rate applied to eligible direct costs based on existing methods and corresponding rates, applicable in Union policies for a similar type of action/project and beneficiary.

7. Grants for which the support from the Union budget does not exceed 50,000 EUR shall take the form of lump sums or standard scale of unit costs.

8. Flat rate financing, standard scale of unit costs and lumpsums referred to in paragraph 4 may be calculated on a project-by-project approach by reference to a draft budget agreed ex ante by the Responsible Authority for grants for which the contribution from the Union budget does not exceed 100,000 EUR.

9. Depreciation costs may be considered as eligible under the following conditions:

(a) the expenditure is eligible in accordance with the eligibility rules of the national programme;

(b) the amount of the expenditure is duly justified by supporting documents having equivalent probative value to invoices where reimbursed in the form referred to in point (a) of paragraph(1);

(c) the costs relate exclusively to the period of support for the project;

(d) support from the Union budget has not contributed towards the acquisition of the depreciated assets.

Article 19

Ineligible expenditure

The following expenditure shall not be eligible for a contribution from the Union budget under the Specific Regulations:

(a) interest on debt;

(b) the purchase of land not built on;

(c) the purchase of land built on, where the land is necessary for the implementation of the project, in the amount exceeding 10% of the total eligible expenditure for the project concerned;

(d) value added tax. However VAT amounts shall be eligible where they are not recoverable under national VAT legislation and are paid by a beneficiary other than non-taxable person as defined in the first subparagraph of Article 13(1) of Directive 2006/112/EC, provided that such VAT amounts are not incurred in relation to the provision of infrastructure.

Article 20

Technical assistance at the initiative of the Member States

1. At the initiative of a Member State for each national programme, the Specific Regulations may support actions for preparation, management, monitoring, evaluation, information and communication, networking, control and audit, as well as measures for the reinforcement of the administrative capacity for the implementation of this Regulation and the Specific Regulations.

2. Those measures may include

(a) expenditure relating to the preparation, selection, appraisal, management and monitoring of actions or projects;

(b) expenditure relating to audits and on-the-spot controls of actions or projects;

(c) expenditure relating to evaluations of actions or projects;

(d) expenditure relating to information, dissemination and transparency in relation to actions or projects;

(e) expenditure on the acquisition, installation and maintenance of computerised systems for the management, monitoring and evaluation of this Regulation and the Specific Regulations;

(f) expenditure on meetings of monitoring committees and sub-committees relating to the implementation of actions; this expenditure may also include the costs of experts and other participants in these committees, including third-country participants, where their presence is essential to the effective implementation of actions or projects;

(g) expenditure for the reinforcement of the administrative capacity for the implementation of this Regulation and the Specific Regulations.

3. The appropriations may be used by the Member States to support actions for the reduction of administrative burden for beneficiaries, including electronic data exchange systems, and actions to reinforce the capacity of Member State authorities and beneficiaries to administer and to use the support provided for under the Specific Regulations.

4. The actions may concern the preceding and subsequent financial frameworks.

Section 2 Management and Control

Article 21 General principles of management and control systems

Management and control systems shall provide for:

(a) a description of the functions of each body concerned in management and control, and the allocation of functions within each body;

(b) compliance with the principle of separation of functions between and within such bodies;

(c) procedures for ensuring the correctness and regularity of expenditure declared;

(d) computerised systems for accounting, for the storage and transmission of financial data and data on indicators, for monitoring and for reporting;

(e) systems for reporting and monitoring where the Responsible Authority entrusts execution of tasks to another body;

(f) arrangements for auditing the functioning of the management and control systems;

(g) systems and procedures to ensure an adequate audit trail;

(h) the prevention, detection and correction of irregularities, including fraud, and the recovery of amounts unduly paid, together with any interest.

Article 22 Responsibilities of Member States

1. Member States shall fulfil the management, control and audit obligations and assume the resulting responsibilities laid down in the rules on shared management set out in the Financial Regulation and this Regulation. In accordance with the principle of shared management, Member States shall be responsible for the management and control of national programmes.

2. Member States shall ensure that their management and control systems for programmes are set up in accordance with the provisions of this Regulation and that the systems function effectively.

3. Member States shall allocate adequate resources for each body to carry out their functions throughout the programming period.

4. Member States shall set up rules and procedures for the selection and implementation of projects in accordance with this Regulation.

5. All official exchanges of information between the Member State and the Commission shall be carried out using an electronic data exchange system established by the Commission.

Article 23 Designated authorities

1. For the implementation of its national programme each Member State shall designate the following bodies:

(a) an accrediting authority as defined in Article [56] of the Financial Regulation;

(b) an accredited Responsible Authority: a public sector body of the Member State, which shall be solely responsible for the proper management and control of the national programme and shall handle all communication with the Commission;

(c) an Audit Authority: a national public authority or body, which is functionally independent of the Responsible Authority and the accrediting authority and which shall be responsible for verifying the effective functioning of the management and control system;

(d) where appropriate, a Delegated Authority: any public or private body which carries out certain tasks of the Responsible Authority under the responsibility of that Authority.

2. Each Member State shall lay down rules governing its relations with the authorities referred to in paragraph 1 and their relations with the Commission.

Article 24 Accreditation of Responsible Authorities

1. In accordance with Article [56(3)] of the Financial Regulation, each Responsible Authority responsible for the management and control of expenditure under this Regulation shall be accredited by formal decision of an accrediting authority at ministerial level.

2. The accreditation shall be granted subject to the body complying with the accreditation criteria on internal environment, control activities, information and communication, and monitoring laid down in or on the basis of this Regulation.

3. The accreditation shall be based on an opinion of an independent audit body that assesses the Responsible Authority’s compliance with accreditation criteria. The independent audit body shall carry out its work in accordance with internationally accepted audit standards.

4. The accrediting authority shall supervise the accredited Responsible Authority and withdraw its accreditation by formal decision if one or more of the accreditation criteria are no longer met, unless the Responsible Authority takes the necessary remedial actions within a period of probation to be determined by the accrediting authority according to the severity of the problem. The accrediting body shall notify the Commission immediately of the setting of any probation period for an accredited Responsible Authority and of any withdrawal decision.

5. To ensure the sound operation of this system, the Commission shall be empowered to adopt delegated acts in accordance with the procedure referred to in Article 54 concerning:

(a) minimum conditions for the accreditation of the Responsible Authorities with regard to the internal environment, control activities, information and communication, and monitoring, as well as rules on the procedure for issuing and withdrawing accreditation;

(b) rules relating to supervision and the procedure for reviewing accreditation of Responsible Authorities;

(c) the obligations of the Responsible Authorities as regards public intervention, as well as on the content of their management and control responsibilities.

Article 25 General principles on controls by Responsible Authorities

1. Responsible Authorities shall carry out a systematic administrative control of all payment requests from the beneficiaries and shall supplement them by on-the-spot controls of the expenditure related to the final payment requests from the beneficiaries that are declared in the annual accounts in view of obtaining a sufficient level of assurance.

2. As regards the on-the-spot controls, the Responsible Authority shall draw its control sample from the entire population of beneficiaries comprising, where appropriate, a random part and a risk-based part, in order to obtain a representative error rate and a minimum confidence level, while targeting also highest errors.

3. The Responsible Authority shall draw up a control report on each on-the-spot control.

4. Where problems detected appear to be systemic in nature and may therefore entail a risk to other projects, the Responsible Authority shall ensure that further examination is carried out, including additional controls where necessary, to establish the scale of such problems and whether the error rate is above the materiality level. The necessary preventive and corrective measures shall be taken by the Responsible Authority and communicated to the Commission in the summary report referred to in Article 39(1)(c).

5. The Commission shall, by means of implementing acts, adopt the necessary rules aiming at reaching a uniform application of this Article. These rules may in particular relate to the following:

(a) the rules concerning administrative and on-the-spot controls to be conducted by the Member States with regard to the respect of obligations, commitments and eligibility rules resulting from the application of this Regulation and the Specific Regulations;

(b) the rules on the minimum level of on-the-spot controls necessary for an effective management of the risks, as well as the conditions under which Member States have to increase such controls, or may reduce them where the management and control systems function properly and the error rates are at an acceptable level;

(c) the rules and methods on the reporting of the controls and verification carried out and their results.

Those implementing acts shall be adopted by the Commission in accordance with the examination procedure referred to in Article 55(3).

Article 26 Payment to beneficiaries

Responsible Authorities shall ensure that the beneficiaries receive the total amount of the public support as quickly as possible and in full. No amount shall be deducted or withheld and no specific charge or other charge with equivalent effect shall be levied that would reduce these amounts for the beneficiaries.

Article 27 Functions of the audit authority

1. The audit authority shall ensure that audits are carried out on the management and control systems, on an appropriate sample of the expenditure included in the annual accounts.

The Commission shall be empowered to adopt delegated acts in accordance with the procedure referred to in Article 54 on the status of the Audit Authorities and the conditions which their audits shall fulfil.

2. Where audits are carried out by a body other than the Audit Authority, the Audit Authority shall ensure that any such body has the necessary functional independence.

3. The Audit Authority shall ensure that audit work takes account of internationallyaccepted audit standards.

Article 28 Cooperation with audit authorities

1. The Commission shall cooperate with audit authorities to coordinate their respective audit plans and methods and shall immediately exchange the results of audits carried out on management and control systems.

2. The Commission and the audit authorities shall meet on a regular basis and at least once a year, unless otherwise agreed, to examine the annual control report and the opinion, and to exchange views on issues relating to improvement of the management and control systems.

Article 29 Controls and audits by the Commission

1. The Commission shall rely on available information, including the accreditation procedure, annual management declarations, annual control reports, annual audit opinions, annual implementation reports and audits carried out by national and Union bodies, to assess that the Member States have set up management and control systems that comply with this Regulation and that those systems function effectively during the implementation of national programmes.

2. Without prejudice to audits carried out by Member States, Commission officials or authorised Commission representatives may carry out on-the-spot audits or controls upon giving adequate prior notice. Officials or authorised representatives of the Member State may take part in such audits or controls.

3. The scope of the audits or controls may include, in particular:

(a) the verification of the effective functioning of management and control systems in a national programme or a part thereof;

(b) the compliance of administrative practices with Union rules;

(c) the existence of the required supporting documents and their correlation with the actions supported under the national programmes;

(d) the terms on which the actions have been undertaken and controlled;

(e) an assessment of the sound financial management of actions and/or the national programme.

4. Commission officials or authorised Commission representatives, duly empowered to carry out on-the-spot audits, shall have access to all records, documents and metadata, irrespective of the medium in which they are stored, relating to expenditure or to management and control systems. Member States shall provide copies of such records, documents and metadata to the Commission upon request.

The powers set out in this paragraph shall not affect the application of national provisions which reserve certain acts for agents specifically designated by national legislation. Commission officials and authorised representatives shall not take part, inter alia, in home visits or the formal questioning of persons within the framework of national legislation. However, they shall have access to the information thus obtained.

5. At the request of the Commission and with the agreement of the Member State, additional controls or inquiries into the actions covered by this Regulation shall be undertaken by the competent bodies of that Member State. Commission agents or persons delegated by the Commission may take part in such controls.

In order to improve controls, the Commission may, with the agreement of the Member States concerned, request the assistance of the authorities of those Member States for certain controls or inquiries.

6. The Commission may require a Member State to take the actions necessary to ensure the effective functioning of its management and control systems or the correctness of expenditure in accordance with the applicable rules.

Section 3 Financial Management

Article 30 Budget commitments

1. The budget commitments of the Union in respect of each national programme shall be made in annual instalments during the period from 1 January 2014 to 31 December 2020.

2. The Commission decision approving each national programme shall constitute the financing decision within the meaning of Article [81(2)] of the Financial Regulation, and once notified to the Member State concerned, a legal commitment within the meaning of that Regulation.

3. For each national programme, the budget commitment for the first instalment shall follow the approval of the national programme by the Commission.

4. The budget commitments for subsequent instalments shall be made by the Commission before 1 May of each year, on the basis of the decision referred to in paragraph 2 of this Article, except where Article [13] of the Financial Regulation applies.

Article 31 Common rules for payments

1. Payments by the Commission of the contribution from the Union budget to the national programme shall be made in accordance with budget appropriations and subject to available funding. Each payment shall be posted to the earliest open budget commitment concerned.

2. Payments shall take the form of initial pre-financing, payments of the annual balance and the payment of the final balance.

3. Article [87] of the Financial Regulation shall apply.

Article 32 Accumulation of initial pre-financing and annual balances

1. The total of the initial pre-financing payment and the payments of the annual balance shall not exceed 95 % of the contribution from the Union budget to the national programme.

2. When the ceiling of 95 % is reached, the Member States shall continue transmitting requests for payment to the Commission.

Article 33 Initial pre-financing arrangements

1. Following the Commission decision approving the national programme, an initial pre-financing amount for the whole programming period shall be paid by the Commission. This shall represent 4% of the contribution from the Union budget to the national programme concerned. It may be split into two instalments depending on budget availability.

2. If a national programme is approved in 2015 or later, the instalments shall be paid in the year of approval.

3. Pre-financing shall be used only for making payments to beneficiaries implementing the national programme. It shall be made available without delay to the Responsible Authority for this purpose.

4. The total amount paid as prefinancing shall be reimbursed to the Commission if no payment request in accordance with Article 39 is sent within 24 months of the date on which the Commission pays the first instalment of the initial prefinancing amount.

5. Interest generated on the initial prefinancing shall be posted to the national programme concerned and deducted from the amount of public expenditure indicated on the final payment request.

6. The amount paid as initial pre-financing shall be totally cleared from the Commission accounts in accordance with Article 36 at the latest when the national programme is closed.

Article 34 Definition of the financial year

For the purpose of this Regulation the financial year shall cover expenditure paid and revenue received and entered into the accounts of the Responsible Authority in the period beginning on 16 October in the year "N-1" and ending on 15 October of year "N".

Article 35 Payment of the annual balance

1. The Commission shall pay the annual balance, subject to resource availability, on the basis of the financial plan in force, the annual accounts for the corresponding financial year of the national programme and the corresponding clearance decision.

2. The annual accounts shall cover the payments made by the Responsible Authority during the financial year for which the control requirements referred to in Article 25 have been met.

3. The annual balance shall be paid not later than six months after the information and documents mentioned in Article 39(1) and Article 49 are considered admissible by the Commission and the latest annual account have been cleared.

Article 36 Closure of the programme

1. Member States shall submit the following documents by 31 December 2023 at the latest:

(a) The information required for the last annual accounts, in accordance with Article 39(1);

(b) a request for payment of the final balance; and

(c) the final implementation report for the national programme as referred to in Article 49(1).

2. The payments made by the Responsible Authority from 16 October 2022 to 30 June 2023 shall be included in the last annual accounts.

3. After receiving the documents listed in paragraph 1, the Commission shall pay the final balance, subject to resource availability, on the basis of the financial plan in force, the last annual accounts and the corresponding clearance decision.

4. The final balance shall be paid no later than three months after the date of clearance of accounts of the final financial year or one month after the date of acceptance of the final implementation report, whichever date is later. The amounts still committed after the balance is paid shall be decommitted by the Commission within a period of six months, without prejudice to Article 47.

Article 37 Interruption of the payment period

1. The payment period following a request for payment may be interrupted by the authorising officer by delegation within the meaning of the Financial Regulation for a maximum period of nine months, when at least one of the following conditions is met:

(a) following information provided by a national or Union audit body, there is evidence to suggest a significant deficiency in the functioning of the management and control system;

(b) the authorising officer by delegation has to carry out additional verifications following information coming to his attention alerting him that expenditure in a payment request is linked to an irregularity having serious financial consequences;

(c) one or more documents required under Article 39(1) were not submitted.

2. The authorising officer by delegation may limit the interruption to the part of the expenditure covered by the payment request affected by the elements referred to in paragraph 1. The authorising officer by delegation shall inform the Member State and the Responsible Authority immediately of the reason for interruption and shall ask them to remedy the situation. The interruption shall be ended by the authorising officer by delegation as soon as the necessary measures have been taken.

Article 37a Suspension of payments

1. All or part of the annual balance may be suspended by the Commission where:

(a) there is a serious deficiency in the management and control system of the programme which affects the reliability of the procedure for certification of payments and for which corrective measures have not been taken; or

(b) expenditure in a certified statement of expenditure is linked to a serious irregularity which has not been corrected; or

(c) there is a serious breach by a Member State of its obligations under Article 22(1) and (2).

2. The Commission may decide to suspend all or part of annual balance after having given the Member State the opportunity to present its observations within a period of two months.

3. The Commission shall end suspension of all or part of annual balance where the Member State has taken the necessary measures to enable the suspension to be lifted. Where the required measures are not taken by the Member State, the Commission may adopt the decision to cancel all or part of the Union contribution to the operational programme in accordance with Article 42.

Article 38 Use of the euro

1. Amounts set out in programmes submitted by Member States, forecasts of expenditure, statements of expenditure, payment requests, annual accounts and expenditure mentioned in the annual and final implementation reports shall be denominated in euro.

2. Member States which have not adopted the euro as their currency on the date of a payment request shall convert the amounts of expenditure incurred in national currency into euro. This amount shall be converted into euro using the monthly accounting exchange rate of the Commission in the month during which the expenditure was registered in the accounts of the Responsible Authority of the national programme concerned. The rate shall be published electronically by the Commission each month.

3. When the euro becomes the currency of a Member State, the conversion procedure set out in paragraph 2 shall continue to apply to all expenditure recorded in the accounts by the Responsible Authority before the date of entry into force of the fixed conversion rate between the national currency and the euro.

Section 4 Clearance of accounts and financial corrections

Article 39 Submission of information

1. By 1 February of the year following the financial year, each Member State shall submit the following documents and information to the Commission in accordance with Article [56] of the Financial Regulation:

(a) the annual accounts of the Responsible Authority;

(b) the management declaration of assurance as to the completeness, accuracy and veracity of the annual accounts, the proper functioning of the internal control systems as well as to the legality and regularity of the underlying transactions and the respect of the principle of sound financial management;

(c) a summary report of all available audits and controls carried out, including an analysis of systematic or recurrent weaknesses as well as corrective actions taken or planned;

(d) an audit opinion by the Audit Authority on the management declaration of assurance covering all its elements, accompanied by a control report setting out the findings of the audits carried out relating to the financial year covered by the opinion.

2. If requested to do so by the Commission the Member State shall provide further information to the Commission. If a Member State does not provide the requested information by the deadline for its submission set by the Commission, the Commission may take its decision on the clearance of the accounts on the basis of the information in its possession.

3. The documents foreseen in paragraph 1 shall serve as the request for payment of the annual balance.

4. The documents listed in paragraph 1 shall be drawn up according to the models adopted by the Commission by means of implementing acts. Those implementing acts shall be adopted by the Commission in accordance with the advisory procedure referred to in Article 55(2).

Article 40 Annual clearance of accounts

1. By 30 April of the year following the financial year, the Commission shall decide on the clearance of the annual accounts for each national programme. The clearance decision shall cover the completeness, accuracy and veracity of the annual accounts submitted and be without prejudice to any subsequent financial corrections.

2. The Commission shall, by means of implementing acts, lay down the modalities for the implementation of the annual clearance of accounts procedure, as regards the measures to be taken in connection to the adoption of the decision and its implementation, including on the exchange of information between the Commission and the Member States and the deadlines to be respected. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 55(3).

Article 41 Financial corrections by the Member States

Member States shall make financial corrections where irregularities or negligence are detected under the national programmes by cancelling all or part of the contribution from the Union budget concerned. Member States shall take into account the nature and gravity of the irregularities and the financial loss to the Union budget and shall apply a proportionate correction.

Amounts cancelled and amounts recovered, as well as the interest thereon, shall be reallocated to the national programme concerned, excluding the amounts resulting from irregularities identified by the European Court of Auditors and the Commission services including OLAF.

After the closure of the national programme, the Member State shall refund the sums recovered to the Union budget.

Article 42 Conformity clearance and financial corrections by the Commission

1. The Commission shall make financial corrections by cancelling all or part of the Union contribution to a national programme and effecting recovery from the Member State in order to exclude from Union financing expenditure which is in breach of applicable Union and national law, including in relation to deficiencies in the management and control systems of Member States which have been detected by the Commission or the European Court of Auditors.

2. A breach of applicable Union or national law shall lead to a financial correction only where one of the following conditions is met:

(a) the breach has or could have affected the selection of projects under the national programme;

(b) there is a risk that the breach has or could have affected the amount of expenditure declared for reimbursement