[pic] | EUROPEAN COMMISSION |

Brussels, 28.5.2010

COM(2010) 260 final

2010/0154 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the Financial Regulation applicable to the general budget of the European Union

(Recast)

{SEC(2010) 639}

EXPLANATORY MEMORANDUM

1. INTRODUCTION

Budget is one of the key instruments to deliver EU policies. In 2011 more than EUR 130 billion is planned for allocation to EU policies benefitting the Union and its citizens. In the current economic context it is even more important that the delivery mechanisms of the budget operate in the most efficient way and facilitate the implementation of EU policies, while securing sound treatment of European taxpayers' money. In particular, it is important that these mechanisms are simple and transparent (especially to final recipients of EU funds), provide the possibility for leverage of non-EU budget resources and at the same time strengthen the Commission's accountability for implementation of the budget as set in Article 317 TFEU.

The Financial Regulation (hereinafter FR[1]) contains all the principles and rules which govern the implementation of the Union's Budget. It has a horizontal character, being applicable to all areas of expenditure and all revenue. The FR is subject to revision every three years, or whenever it proves necessary and the present proposal represents such a triennial revision. It also reflects the genuine necessity of revisiting budget delivery mechanisms in the current economic context and in view of the future policy challenges[2].

For the first time this triennial revision is handled in accordance with the ordinary legislative procedure foreseen in Article 322 TFEU. It is presented as a recast in accordance with the Interinstitutional Agreement of 28 November 2001 on a more structured use of the recasting technique for legal acts[3]. In order to allow the legislative authority to have a global view of the proposed modifications, the Implementing Rules of the FR (hereinafter IR[4]) are presented, in a Commission Staff working document, together with the FR in a single package. The Implementing Rules, which contain more detailed provisions complementing the FR, will be adopted under the delegated powers of the Commission according to Article 290 TFEU.

The present revision does not cover the changes stemming from the entry into force of the Lisbon Treaty, except for the obligations of Member States concerning internal control and audit and their resulting responsibilities in shared management which are included in the present revision. The Commission has treated other Lisbon-related changes, due to their very specific nature, in two separate ad hoc proposals: one related to the creation of the European External Action Service[5], and the other related to the new budgetary rules[6] (introduction of the multiannual financial framework in the Treaty and new annual budgetary procedure in particular).

This proposal builds on the results of the public consultation of 19 October 2009[7], which resulted in a total of 235 contributions of stakeholders who implement or receive Union funds: from citizens to public and private operators, regional and national administrations. The Commission has adopted its proposal on the basis of the results of that consultation, as well as the experience of its operational services and lessons learned from previous revisions.

2. CALENDAR

The FR revision will be negotiated while preparation for the post-2013 programmes will also be under way, and should be considered in this wider context. For this reason, it is important that all the actors concerned in the legislative process, in particular the European Parliament and the Council, agree on an ambitious timetable for the present revision and on the need to ensure coherence between the financial rules enshrined in the FR and on the content of sectoral basic acts. For this to be effective, they should aim at an agreement on the package (FR + IR) that could enter into application by the end of 2011, which is a very ambitious timetable given the inherent constraints of the ordinary legislative procedure.

3. BASIS FOR UNDERTAKING THE PRESENT REVISION

The FR should only contain the fundamental principles (FR, Title II) and the basic rules of budgetary and financial management, leaving the details to be specified in the IR and soft law such as internal guidelines. These principles must be respected in all legislative acts[8] and by all institutions; they should be kept stable and derogations to them limited to a strict minimum.

In terms of content, the key elements of the financial reforms should be preserved, in particular: the role of financial actors, the importance of the financing decision adopted by the College for operational expenditure, the integration of controls with operational services, the internal audit function, activity-based budgeting, and modernisation of accounting principles and basic rules applicable to grants. Procurement rules should be preserved in line with the procurement Directives.

Moreover, it should be borne in mind that not all problems encountered with the application of the rules require modifications of the FR. In the vast majority of cases, the difficulties raised during the public consultation do not find their source in the Financial Regulation or could be solved by interpretation of the rules. Difficulties also stem from sector-based regulations, whose level of detail and complexity increase significantly the risk of error or misinterpretation.

In terms of method, any modification of substance has been assessed against the following benchmarks:

- reduce the administrative burden for beneficiaries, contractors and implementing partners;

- facilitate, whenever possible, the leveraging of budget appropriations;

- facilitate the Commission’s obligation under Article 317 of the Treaty to implement the budget and accomplish the policy objectives by improving delivery instruments and simplifying the rules and procedures;

- ensure sound financial management and protect the financial interests of the Union against fraud and other illegal activities[9].

4. NEED FOR A REFORM

Reform is necessary with a view to adapting the financial rules to the new requirements of budget implementation (co-financing with other donors, specific financial instruments, PPPs) or where the basic principles create disproportionate workload (interests on pre-financing) or may unduly impede efficiency (prohibition of budget implementation through private sector bodies). The award of small grants and contracts also needs to be facilitated.

Furthermore, the new procedure applicable to the IR, as set out in the Lisbon Treaty, should lead to a new articulation between the FR and the IR, imposing a complete review of the whole set of financial rules. In this regard, some IR provisions which currently define exceptions or derogations to FR provisions should be introduced in the FR itself, while the IR should be limited to technical details and implementing modalities[10].

In this context, the Commission has based its proposal on the following objectives:

- to introduce more flexibility in the application of budgetary principles, which should better suit operational needs and alleviate unnecessary administrative burden for recipients of Union funds;

- to streamline relations with implementing partners to which the Commission entrusts the management of programmes or part of programming actions (projects), in particular taking account of the nature of the implementing partner (Member States, agencies, EIB, public and private operators, etc.) and the financial risks entailed (proportionality);

- to shift the regime of grants from a real-cost based management (inputs) towards a performance-based scheme (outputs), in order to better target policy objectives and achieve significant simplification of procedural and documentary requirements for the benefit of beneficiaries, and facilitate the use of lump sums;

- to ensure sound financial management while leaving significant room for manoeuvre for Authorising Officers so that they can adapt the means to their operational constraints and the financial risks they are faced with;

- to modernise the system of risk management and control measures so as to make them more proportional to the probability of errors and to the cost involved.

5. MODIFICATIONS PROPOSED BY THE COMMISSION

5.1. Exceptions to budgetary principles

Regarding the principle of unity of the budget , the rules governing interests generated by prefinancing should be simplified (Articles 5, 5a FR) as they generate excessive administrative burden on both sides and misunderstandings with operators and partners (particularly in the current period of low interest rates). These interests are collected in accordance with the principle of sound financial management and represent non negligible revenue of the Union Budget (+/- EUR50 M per year). Therefore, the changes proposed focus on grant beneficiaries and the obligation to generate pre-financing interest and to recover such interest is suppressed except otherwise foreseen in a delegation agreement. This means that national agencies will be allowed to re-use interest generated for the programmes they manage, and interests generated by EU bodies will continue to be recovered annually. This measure will entail a limited loss for the Union miscellaneous revenue (+/- EUR 15 M).

Regarding the principle of universality , a dual regime for assigned revenue is proposed (Article 18 FR) with the distinction between: 1. the re-use for the same purpose of funds initially assigned by the Budget Authority ( internal assigned revenue ), for which the current regime is maintained (carry over only for one year and once carried over it has to be used first before fresh appropriations) and; 2. revenue collected from and assigned by various donors to a specific programme or action ( external assigned revenue : contribution of EFTA and third countries to a Union programme, co-financing of external actions from Member States and other donors...), for which the carry over regime should be more flexible in order to guarantee the purpose assigned by the donor. An appropriate regime of reporting to the Budget Authority is provided.

In relation to the principle of specification of the budget , the rules governing transfers of appropriations should be clarified and more flexibility allowed in the adoption procedure of some transfers decided by the Commission (Articles 21, 23, 26 FR), to respond to the needs of better budget implementation, especially in relation to payments appropriations, assigned revenues and administrative appropriations which are common to several titles. It is also proposed to simplify the rules concerning transfers which require the budgetary authority to be informed in order to avoid recurrent delays in their carrying out.

Regarding the principle of sound financial management which includes the concept of proportionality, the FR should introduce the notion of tolerable risk (Article 28b FR). The objective of this proposal, made during the last revision but now backed-up by solid analysis of the costs and benefits of control, is to decide on a level of tolerable risk of error per policy area , taking into account the costs of control, the risk or error and the benefits of the policy. This will mean in some areas fixing a tolerable risk level above the 2% materiality threshold used by the Court of Auditors across all policy areas to conclude on the legality and regularity of the underlying transactions. The tolerable risk levels would be decided by the Legislative Authority and would set a cost-effective level of control to provide a more appropriate basis for the Discharge Authority (i.e. the EP) to judge the quality of the Commission's management of risk.

Regarding the principle of annuality, no amendment to the FR is proposed except for carry over rules for external assigned revenue (Article 10 FR), in order to take into account the dual regime proposed for assigned revenue. However, the Commission is fully aware of the concerns expressed by some of its implementing partners in multi-annual programmes (EIB, ITER, Galileo, research programmes managed by Joint Technological Initiatives, etc) who request, before signing a contract or agreement with the Commission, assurance regarding the duration of the commitment of the Union budget towards a specific project sometimes going even beyond the current Multiannual Financial Framework. It should be noted that such assurance currently exists through annual instalments where the basic act fixes the annual amounts throughout the duration of the Multiannual Financial Framework (e.g. Structural Funds), or even beyond (e.g. ITER), in accordance with Article 76(3) FR. Although such financial programming[11] is indicative, it gives appropriate information on the annual amounts foreseen for important programmes, e.g. for the Joint Technological Initiatives and, most importantly, it gives the medium term perspective of Union funding that some of the Union’s implementing partners are looking for. Moreover, the degree of certainty provided by annual amounts which are enshrined in legal bases has increased with the extension of legislative codecision, which is now the ordinary legislative procedure.

Finally, no amendment is proposed regarding the principle of transparency.

5.2. Implementation of the budget

5.2.1. Streamline methods of implementation from 5 to 2 modes (Article 53 FR)

Provisions concerning methods of implementation are a key element of the 2001 Reform and govern the conditions of externalisation of budgetary tasks to third parties . Their objective is to ensure that, whatever the mode chosen, expenditure is executed with a level of control and transparency equivalent to that expected from Commission services as set out in the FR.

However, these provisions have become so complex over the years that their underlying rationale is lost. The Commission proposal therefore aims at establishing a clear distinction between:

- situations where the budget is implemented directly (by the Commission or executive agencies – Article 53(1) point (1));

- and situations where the budget is implemented indirectly in shared management with Member States or through other entities or persons (Articles 53 (1) point (2)).

The proposal sets out common requirements for all types of indirect management with specific provisions foreseen for indirect management with Member States (Article 53a FR).

The proposal aims in particular at finding the right balance between, on the one hand, facilitating the task of the authorising officer to determine the mode of budget implementation appropriate for the specific action, and, on the other hand, providing the AO with a more secure environment. This balance is established by the following two elements:

- operational needs of services are taken into account by introducing more proportionality in ex-ante controls, depending on the specific risks of the action and its overall control environment including the measures by the Commission to supervise and support the implementation. Furthermore, provisions are proposed to accommodate the needs of newly developing financial instruments such as those with the EIB and Private and Public Partnerships;

- the responsibility of Member States and entrusted entities or persons under indirect management is strengthened, and control and audit obligations of the Commission across all budget management types are streamlined.

At the same time, provisions are proposed to strengthen sound financial management in order to ensure the Commission accountability for the implementation of the budget. They concern:

- control and audit obligations, which Member States and entrusted entities have to comply with in order to provide for a sufficient level of protection of the Union's financial interests;

- management declarations of assurance for all indirect budget management types not subject to a separate discharge from the budgetary authority, which should strengthen the responsibility of Member States and the entrusted entities and give more assurance to the Authorising Officer, notably in his reporting duties;

- control and audit obligations for the Commission, including clearance of accounts procedures and the possibility to suspend or interrupt payments .

5.2.2. Control and audit obligations of Member States (Article 53a FR)

New provisions based on Article 317 TFEU are introduced in the present proposal and contain the following elements: a harmonised administrative structure in the Member States; common management and control obligations for these structures; annual management declaration of assurance with independent audit opinion thereon by which the accredited national body assumes responsibility for the management of Union funds it has been entrusted with; financial clearance, suspension and correction mechanisms operated by the Commission.

These provisions should apply only to the next generation of sector-specific regulations, i.e. post-2013 (Article 187 FR).

5.2.3. Payments and fiduciary accounts (Article 61(4) FR)

FR provisions only cover bank accounts opened for cash management under the responsibility of the Accountant. The creation of fiduciary accounts, dedicated to the implementation of a programme under indirect management by financial institutions, should be allowed. These fiduciary accounts would be opened under the responsibility of Authorising Officers with the agreement of the Accounting Officer.

Furthermore, the rules related to pre-financing have been reviewed (Article 81 FR) to allow a single pre-financing payment, which will have to be cleared in line with the progress of the action. This should provide recipients of EU grants with more security on the amount they receive, as the Commission would approve the eligibility of costs on a regular basis through interim payments.

5.2.4. Revenue operations (Article 73b, 74 FR)

The rules on recovery should be strengthened in order to bring more efficiency to safeguarding the financial interests of the Union. In particular, recoveries should be treated by Member States in the same way as they treat their own claims on their territory.

It is also proposed to simplify the regime of forecasts of revenue in line with budgetary needs. Registration should be required when the revenue is expected with a certain degree of probability and can be reasonably translated into figures.

5.2.5. Procurement (Articles 88-107 FR)

Within the limits authorised by the 2004 procurement Directive[12], provisions concerning procurement are reviewed in order to simplify the rules (thresholds, bank guarantees) take into account the specific status of the EIB in the Treaty and define the scope of some provisions more precisely, notably for the selection of experts. In addition, a vendor database should enable more efficient communication with potential tenderers for such contract values below the thresholds laid down in the procurement directive.

Concerning the rules on exclusion, derogation from the obligation of exclusion is introduced in Article 93 FR for overriding requirements of general interest, in particular to preserve service continuity of institutions. This provision aims at aligning FR rules with the relevant Directive. A provision is introduced in Articles 95 FR for the ECB and EIB to give them access to the central exclusion database on the same footing as EU institutions.

Finally a provision is inserted in Article 96(2) FR to provide for a sound legal basis for the publication of administrative decisions of exclusion and financial penalties, in line with data protection requirements.

5.2.6. Grants (Articles 108-120 FR)

Rules for grants were first introduced in the FR and IR in the 2002 recast. The 2006 revision made only limited modifications, which have proved insufficient to alleviate administrative burden imposed on operational services and beneficiaries.

This administrative burden prevents services from using their resources on policy objectives and on timely delivery, while it implies excessive red tape for beneficiaries. It has two direct causes: excessive similarity between procurement and grant rules/procedures, although the objectives are different (acquisition vs. support); and the fact that controls for grants focus on real costs (real-cost based grant) rather than on expected results (deliverables) of projects.

It is therefore proposed to shift the Union scheme towards a performance-based system, based on the definition of agreed indicators and objectives (outputs and outcomes), and to proceed to a robust simplification of lump sums (lump sums, standard scale of unit costs and flat rates), clearly disconnected from any verification of actual costs of implementation (Article 109 FR). This new approach should be essentially enshrined in the Implementing Rules and would encompass the methods of control (including operational audits), while ensuring the respect of common principles applicable to grants. For these reasons, the maximum threshold per lump sum (EUR 25,000) should be deleted and be left to the College to decide when adopting a specific lump sum framework.

To ensure that the recourse to lump sums is part of a risk assessment made by the Authorising Officer and to safeguard equal treatment between beneficiaries, the framework to be used for the determination of lump sums (consistency with the funded activities, maximum amount, basis and methods of calculation) should be adopted by the Commission, except for schemes of low value grants (≤ EUR 50,000). The Authorising Officer would then be able, within the programme duration, to establish lump sums, scales of unit costs and flat rates on the basis of a provisional budget submitted by the applicant taking into account its internal accounting practices, including only acceptable cost categories, which are consistently applied to similar operations by the applicant (no bias detrimental to EU Funds).

In parallel, the real-cost regime, maintained as the default regime, should be reviewed (clarification of various types of costs, costs actually incurred, in kind contributions, profit) and the possible profit of an action should be recovered on a prorata basis (where EU funds 50% of the costs, only 50% of the profit should be recovered).

Concerning the gradual decrease of operating grants (Article 113(2) FR), it is proposed to review the application of this rule over four years, rather than completely abandoning it, because it is justified in principle.

Procedures for the award of grants in the IR are reviewed to leave the choice of modalities as much as possible to the Authorising Officer (decision vs. agreement, bank guarantees and documents serving to assess operational and financial capacity). Furthermore, the award of low value grants should be made easier, by removing excessive administrative requirements in line with the principle of proportionality and increasing the current threshold (from EUR 25,000 to EUR 50,000). This follows the trend started in 2006.

Rules authorising exceptionally cascading grants have proven too strict and should be eased (Article 120(2) FR) in order to allow a beneficiary to redistribute its grant by way of subsidies to third parties. This should improve the implementation of programmes targeting a large group of physical persons which can only be reached through two levels of dispatch (Universities for Erasmus, NGOs for cash transfer programmes in external actions). The Commission proposes to facilitate cascading grants by removing or relaxing some of the current restrictions where the redistribution of funds is the primary aim of the action, and, if appropriate guarantees are presented by the first ranking beneficiary as regards the recovery of the amounts. The principle which limits discretion in the redistribution of grants by the primary beneficiary is preserved.

Furthermore, flexibility should be given to Authorising Officers to consider as a sole beneficiary a group of implementing partners such as a consortium being part of a network. Procedural flexibility is also given, in Article 109(6) FR when awarding grants to the EIB reflecting its special position under the Treaty.

Finally, provisions are proposed for the extension of findings for systemic errors within the real-costs regime when such errors have been detected during an ex-post audit. In these cases, the responsible Authorising Officer should be entitled to apply the same proportion of financial correction to other non audited projects implemented by the same beneficiary and recover the relevant amounts if the beneficiary cannot demonstrate that the error does not affect non audited projects.

5.2.7. Prizes (New Title VIa , Article 120a FR)

Prizes are given as a reward after a contest and constitute a different instrument of Union contribution than grants. It is therefore proposed to introduce provisions related to prizes in a separate Title of the FR. The Union contribution in this context would be completely disconnected from any reference to predictable costs.

5.2.8. Financial instruments managed by IFIs (New Title VI B , Articles 120b, 120c FR)

Financial instruments are increasingly identified as an adequate means of leverage of EU funds, in particular when they are pooled with others funds (guarantee funds, risk capital, blended instruments mixing a Community grant with a loan or a guarantee).

It is proposed to provide for a new type of financial contribution because these financial instruments, currently mostly implemented by EIB and EIF, cannot be assimilated to services or grants. They should be subject to specific provisions to take into account the specificities of their implementation (revolving funds, cascade of contributions through banking networks) while respecting the principles of responsibility (such as the share of risks or co-financing, and penalties for non-performance) and sound financial management (limitation of the risks incurred by public funds).

5.2.9. Court of Auditors' reports and statements of preliminary findings. (Articles 143 and 144)

A series of amendments is proposed concerning the annual and special reports of the Court of Auditors, in order to reflect the current practices (the contradictory procedure, the publication of the replies of each Institution next to or after the observations of the ECA, the transmission of the Member States replies) or aimed at streamlining the timetable. Finally, a new provision formalises the practice of the statement of preliminary findings sent by the ECA to Commissioners, bodies and Member States.

5.2.10. Union trust funds (Article 164 FR)

It is proposed to authorise the Commission to set up and manage Union trust funds for external actions, which would intervene in emergency, post-emergency crisis operations (e.g. Haiti), or for thematic actions, and would pool the contribution of the Union budget with funds from other donors.

The main objective of such delivery instrument is to allow the Union to act as a major and more visible player in the field of development aid.

5.2.11. Possibility to raise loans to finance the acquisitions of buildings (Article 179(3)b FR)

For both transparency and cost-efficiency reasons, the Commission proposes to introduce the possibility to raise loans, in the sole case where institutions envisage buying their premises. This would considerably simplify the current system, be more cost-efficient as institutions could profit from lower interest rates due to the Union AAA rating in the financial market and would allow institutions to develop a long term real estate policy (in particular for delegations, OIB and OIL).

In practice, only annual loan instalments (reimbursement of the loan) would appear in the budget, but the "building" loans themselves are to be considered outside the budget since they do not finance the budget but the acquisition of assets. For this reason, the modification is introduced in Article 179 FR instead of Article 14 FR. Article 96 IR, which defines administrative expenditure covered by provisional commitments, is also modified, as the payment of each annual (or periodic) instalment is to be treated as recurring administrative expenditure, similar to a rent payment.

5.2.12. A flexible approach for Public and Private Partnerships (PPPs)

The Commission proposal aims at facilitating a wider use of PPPs, notably in the research field, which is a strong request of most operators concerned. The flexibility proposed should accommodate a vast range of PPPs, depending on their structure and on the precise definition of the funded activity (clearly identified projects or R&D themes). It is thus proposed to add to the existing two possibilities of structure (community bodies under Article 185 FR , as the Joint Technological Initiatives are today, consortium of partners structured under a private legal entity or purely contractual network, which receive a grant-Art.108 FR ) two new ones. In particular, it is foreseen to:

- allow private bodies to be entrusted with the implementation of a PPP and to manage EU funds (e.g. awarding grants) to that effect in the framework of indirect management ( Article 53(1) 2(g) FR );

- provide for the adoption under delegated powers of a separate light model financial regulation applicable to bodies created in a basic act and charged with the implementation of a PPP ( Article 185a FR ). Such model financial regulation will comprise a common set of principles which will be mandatory in order to ensure sound management of EU funds and adequate protection of the Union's financial interests. However, PPPs would be able to apply their own rules (accounting, internal and external audit, procurement...) within the framework of applicable national law and the basic act.

It would thus be possible to choose the structure best adapted to the objectives and nature of the activities to be implemented, in a range varying from contractual to institutionalised ("incorporated") arrangements, the latter including a Union body (Article 185 FR), a private sector body (Article 53(1) 2(g) FR) and a mixed body (Article 185a and 53(1) 2(e) FR).

5.3. Final provisions (Articles 182-187 FR)

The regular triennial revision of the FR as currently foreseen does not ensure enough legal security and stability of the financial rules. Additionally, the revision mechanism is very rigid and does not take into account the multiannual programming cycle of the EU budget and related sector legislation. As a consequence, it is proposed that future revisions of the Financial Regulation are made whenever it proves necessary without resorting to specific time frames.

ê 1605/2002 (adapted)

ð new

2010/0154 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the Financial Regulation applicable to the general budget of the European Communities ð the general budget of the European Union ï

(Recast)

CONTENTS |

PART 1 | COMMON PROVISIONS … |

TITLE I | SCOPE … |

TITLE II | BUDGETARY PRINCIPLES … |

Chapter 1 | Principles of unity and of budget accuracy … |

Chapter 2 | Principle of annuality … |

Chapter 3 | Principle of equilibrium … |

Chapter 4 | Principle of unit of account … |

Chapter 5 | Principle of universality … |

Chapter 6 | Principle of specification … |

Chapter 7 | Principle of sound financial management … |

Chapter 8 | Principle of transparency … |

TITLE III | ESTABLISHMENT AND STRUCTURE OF THE BUDGET … |

Chapter 1 | Establishment of the budget … |

Chapter 2 | Structure and presentation of the budget … |

TITLE IV | IMPLEMENTATION OF THE BUDGET … |

Chapter 1 | General provisions … |

Chapter 2 | Methods of implementation … |

Chapter 3 | Financial actors … |

Section 1 | Principle of separation of duties … |

Section 2 | Authorising officer … |

Section 3 | Accounting officer … |

Section 4 | Imprest administrator … |

Chapter 4 | Liability of the financial actors … |

Section 1 | General rules … |

Section 2 | Rules applicable to authorising officers by delegation and subdelegation … |

Section 3 | Rules applicable to accounting officers and imprest administrators … |

Chapter 5 | Revenue operations … |

Section 1 | Making available of own resources … |

Section 2 | Estimate of amounts receivable … |

Section 3 | Establishment of amounts receivable … |

Section 4 | Authorisation of recovery … |

Section 5 | Recovery … |

Chapter 6 | Expenditure operations … |

Section 1 | Commitment of expenditure … |

Section 2 | Validation of expenditure … |

Section 3 | Authorisation of expenditure … |

Section 4 | Payment of expenditure … |

Section 5 | Time limits for expenditure operations … |

Chapter 7 | IT systems … |

Chapter 8 | Internal auditor … |

TITLE V | PROCUREMENT … |

Chapter 1 | General provisions … |

Section 1 | Scope and award principles … |

Section 2 | Publication … |

Section 3 | Procurement procedures … |

Section 4 | Guarantees and control … |

Chapter 2 | Provisions applicable to contracts awarded by the Community institutions Ö of the Union Õ on their own account … |

TITLE VI | GRANTS … |

Chapter 1 | Scope and form of grants … |

Chapter 2 | Principles … |

Chapter 3 | Award procedure … |

Chapter 4 | Payment and control … |

Chapter 5 | Implementation … |

TITLE VII | PRESENTATION OF THE ACCOUNTS AND ACCOUNTING … |

Chapter 1 | Presentation of the accounts … |

Chapter 2 | Information on the implementation of the budget … |

Chapter 3 | Accounting … |

Section 1 | Common provisions … |

Section 2 | General accounts … |

Section 3 | Budgetary accounts … |

Chapter 4 | Property inventories … |

TITLE VIII | EXTERNAL AUDIT AND DISCHARGE … |

Chapter 1 | External audit … |

Chapter 2 | Discharge … |

PART TWO | SPECIAL PROVISIONS … |

TITLE I | EUROPEAN AGRICULTURAL GUARANTEE FUND … |

TITLE II | STRUCTURAL FUNDS, COHESION FUND, EUROPEAN FISHERIES FUND, AND EUROPEAN AGRICULTURAL FUND FOR RURAL DEVELOPMENT … |

TITLE III | RESEARCH … |

TITLE IV | EXTERNAL ACTIONS … |

Chapter 1 | General provisions … |

Chapter 2 | Implementation of actions … |

Chapter 3 | Procurement … |

Chapter 4 | Grants … |

Chapter 5 | Auditing of accounts … |

TITLE V | EUROPEAN OFFICES … |

TITLE VI | ADMINISTRATIVE APPROPRIATIONS … |

TITLE VII | EXPERTS … |

PART THREE | TRANSITIONAL AND FINAL PROVISIONS … |

TITLE I | TRANSITIONAL PROVISIONS … |

TITLE II | FINAL PROVISIONS … |

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 322 thereof, in conjunction with the Treaty establishing the European Atomic Energy Community, and in particular Article 106a thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the Court of Auditors[13],

After transmission of the draft legislative act to the Court of Justice of the European Union, the European Economic and Social Committee, the Committee of the Regions, the Ombudsman and the Data Protection Officer,

After transmission of the draft legislative act for information to the national Parliaments,

After transmission of the draft legislative act for information to the European Central Bank and the European Investment Bank,

Acting in accordance with the ordinary legislative procedure[14],

Whereas:

ò new

(1) Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities[15] has been substantially amended several times. Since further amendments are to be made, it should be recast in the interests of clarity.

ê 1605/2002 recital 1 (adapted)

(2) Since times have changed considerably since the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities[16] was adopted, in particular as a result of a financial perspective forming a framework for the development of the budget, developments in the institutional structure and a series of enlargements, that Financial Regulation has been substantially amended several times. In order to take account, in particular, of the requirements of simplification in legislative and administrative matters and the tightening up of management of Community finances, the Financial Regulation of 21 December 1977 should be recast in the interests of clarity.

ò new

(3) Regulation (EC, Euratom) No 1605/2002 laid down the budgetary principles and financial rules to be respected in all legislative acts and by all institutions. The fundamental principles, the concept and the structure of that Regulation and the basic rules of budgetary and financial management need to be maintained. Derogations to those fundamental principles should be reviewed and simplified as far as possible, taking into account their continuing relevance, their added-value for the Union's annual budget, hereinafter “the budget”, and the burden they impose on stakeholders. It is necessary to maintain and strengthen the key elements of the financial reform - the role of the financial actors, the integration of controls in operational services, the internal auditors, the Activity Based Budgeting (ABB), the modernisation of accounting principles and rules and the basic principles for grants.

ê 1995/2006 Recital 4 (adapted)

(4) Account should be taken of provisions implementing the revenue and expenditure of the budget, contained in the basic legal acts adopted for the period 2007 to 2013, in order to ensure coherence between those acts and Ö this Õ the Financial Regulation.

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(5) In the light of practical experience, some amendments should be made to the Financial Regulation in order to adapt it to evolving requirements of budget implementation such as co-financing with other donors, to increase the efficiency of external aid and to facilitate the use of specific financial instruments like those concluded with the European Investment Bank or implementation through public and private partnerships.

ê 1605/2002 Recital 2 (adapted)

ð new

(6) This Regulation Ö (EC, Euratom) No 1605/2002 Õ should be Ö was Õ confined to stating the broad principles and basic rules governing the whole budgetary sector covered by the Treaty Ö Treaties Õ , while the implementing provisions should be moved to a Regulation on rules for the implementation of this Regulation Ö were laid down in Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities[17] Õ in order to produce a better hierarchy of rules and make the Financial Regulation Ö (EC, Euratom) No 1605/2002 Õ easier to read. The Commission should therefore be authorised to adopt the implementing rules. ð However, the Treaty on the Functioning of the European Union limits the possibility to delegate to the Commission the power to adopt implementing measures only for the purposes of supplementation or amendment of non-essential elements of legislative acts. As a consequence, some provisions laid down in Regulation (EC, Euratom) No 2342/2002 , should be incorporated into this Regulation. The implementing measures adopted by the Commission should be confined to technical details and implementing modalities. ï

ê 1605/2002 recital 3

(7) The establishment and implementation of the budget should respect the four fundamental principles of budgetary law (unity, universality, specification, annuality), and the principles of budget accuracy, equilibrium, unit of account, sound financial management and transparency.

ê1605/2002 recital 4

(8) This Regulation should reassert those principles and keep exceptions to a strict minimum subject to strict conditions.

ê 1605/2002 recital 5 (adapted)

ð new

(9) As regards the principle of unity, this Regulation should specify that it also applies to operational expenditure on implementing the European Union Treaty provisions on the common foreign and security policy and on police and judicial cooperation in criminal matters, where this is charged to the budget. The principle of unity and budget accuracy Ö implies Õ means that all Community revenue and expenditure, and that of the Union, when this is charged to the budget, are entered in the budget.

(10) ð The rules governing interest generated by pre-financing should be simplified as they generate excessive administrative burden on both recipients of Union funds and Commission services and create misunderstandings between the Commission services and operators and partners. For reasons of simplification, in particular in respect of grant beneficiaries, and in line with the principle of sound financial management, there should no longer be an obligation to generate interest on pre-financing and to recover such interest. However, it should be possible to include such obligation in a delegation agreement in order to allow the re-use of interests generated by pre-financing for the programmes managed by some delegates, or its recovery. ï

ê 1605/2002 recital 8 (adapted)

(11) As regards the principle of annuality, the distinction between differentiated appropriations and non-differentiated appropriations should be retained. Decisions on carryovers of commitment and payment appropriations should be taken by each institution. The additional periods should be confined exclusively to the cases where they are absolutely necessary, namely EAGGF payments.With regard to the principle of annuality, m M ore Ö The current level of Õ flexibility and transparency should be Ö maintained Õ introduced to respond to functional needs. The carry-over of appropriations should exceptionally be permitted in the case of expenditure on direct payments to farmers under the European Agricultural Guarantee Fund (EAGF) set up by Council Regulation (EC) No 1290/2005 of 21 June 2005, on the financing of the common agricultural policy[18].

ê 1995/2006 Recitals 9 and 10 (adapted)

ð new

(12) Payment requests from the Member States under the agricultural rRegulations Ö in the area of agriculture tend to Õ will be concentrated overwhelmingly at the beginning of the budget year n . Therefore, the maximum threshold for advance commitments against the EAGF (from 15 November of year n-1 ) to cover routine management expenditure (charged to the budget of year n ) should be increased to three quarters of corresponding appropriations in the last adopted agricultural budget. As regards Ö The provisions concerning Õ the limit on advance commitment of administrative expenditure, the text should be amended so that it refers Ö should refer Õ to appropriations decided by the budgetary authority, therefore excluding transfers of appropriations.

(13) The use of non-differentiated appropriations for veterinary measures, charged against the EAGF, unduly hampers the implementation of such measures, especially in respect of the limits placed on the possibilities for carry-overs. The use of differentiated appropriations for such expenditure should therefore be permitted, as this is more in keeping with the multi-annual nature of the actions.

ò new

(14) Carry over rules for assigned revenue should take into account the distinction between external and internal assigned revenue. In order to respect the purpose assigned by the donor, external assigned revenues should be carried over automatically and used until all the operations relating to the programme or action to which it is assigned have been carried out. Where the external assigned revenue is received during the last year of the programme or action, it should also be possible to use it in the first year of the succeeding programme or action. Internal assigned revenue may be carried over for one year only, unless specified otherwise in the basic act applicable or in duly justified circumstances.

ê 1605/2002 recital 9 (adapted)

(15) The principle of equilibrium constitutes a basic budgetary rule. In this connection, it should be emphasised that recourse to loans is not compatible with the system of Community Ö Union's Õ own resources. However, the principle of equilibrium Ö should not be interpreted Õ is not such as to hinder the borrowing and lending operations guaranteed by the general budget of the Union.

ê 1605/2002 recital 10 (adapted)

(16) In accordance with Article Ö 320 Õ 277, first paragraph, of the EC Treaty Ö on the Functioning of the European Union, Õ and Article 181, first paragraph, of the Euratom Treaty the unit of account in which the budget is drawn up, and which is also used for purposes of implementation and for presentation of the accounts, should be determined.

ê 1605/2002 recital 6 (adapted)

ð new

(17) As regards the principle of universality, the practices of repayment of payments on account and reuse Ö was Õ should be discontinued; Ö and Õ in some cases they should be replaced by assigned revenue and ways of reconstituting decommitted appropriations. These amendments do not affect the Ö The Õ special rules applicable to the Structural Funds Ö were not affected Õ.

(18) ð The derogation concerning assigned revenue should be modified to take into account the specificities of, on the one hand, "Internal assigned revenue" arising from appropriations authorised by the budgetary authority and, on the other hand, "external assigned revenue" collected from and assigned by various donors to a specific programme or action. Furthermore, external donors should continue to be allowed to co-finance external actions, in particular humanitarian actions, even in cases where the basic act does not expressly provide therefore. To facilitate the management of real estate stock, the list of internal assigned revenue should include revenue from the sale of buildings or assimilated operations. ï

ò new

(19) As regards the presentation of assigned revenues in the draft budget, more transparency should be introduced by providing that amounts of assigned revenue shall be included in the draft budget for the amounts which are certain at the date of its establishment.

ê 1995/2006 Recital 12 (adapted)

(20) At present, the Commission must be authorised by the budgetary authority before accepting any donations, such as gifts or bequests, which involve a charge. To avoid unnecessary and cumbersome procedures before the Commission Ö is allowed to Õ can accept any donations, such as gifts or bequests, which involve a charge, authorisations by the budgetary authority should be made compulsory only in the case of donations exceeding a certain value and involving significant charges.

ê 1605/2002 recital 7

(21) As regards the principle of specification, the institutions need to have some degree of management flexibility for transfers of appropriations. This Regulation should allow integrated presentation of the allocation of financial and administrative resources by purpose. The procedures for transferring appropriations should also be harmonised for all the other institutions so that transfers of staff and operating appropriations are a matter for each institution. As regards transfers of appropriations concerning operational expenditure, the Commission may make transfers between chapters within one and the same title within a total limit of 10 % of the appropriations for the financial year which appear on the line from which the transfer is made. The budgetary authority should be allowed to constitute reserves in only two cases: where there is no basic act or where it is not certain that appropriations are adequate.

ê 1995/2006 Recitals 13 and 14

ð new

(22) The rules governing transfers of appropriations should be simplified and clarified on certain points because they have proved cumbersome or unclear in practice. ð It is necessary to ensure better budget implementation, especially in relation to payments appropriations, assigned revenues and administrative appropriations which are common to several titles. Therefore more flexibility should be allowed in the adoption procedure of some transfers. ï

(23) For reasons of efficiency, the Commission should be allowed to decide autonomously on transfers from the reserve in cases where no basic act exists for the action concerned at the time when the budget is established, but where the basic act is adopted in the course of the year. ð Moreover, in order to avoid recurrent delays in carrying out of transfers, information on which needs to be transferred to the budgetary authority, it is necessary to simplify procedure and typology of those transfers. In particular, the possibility for the Commission to decide on transfers of unused budgetary appropriations in cases of international humanitarian disasters and crisis has proved to be relevant and efficient. That possibility should therefore be extended to similar events occurring after 1st December. In those cases, for reasons of transparency, the Commission should inform immediately the budgetary authority of its decision. The Commission should also decide autonomously, within certain limits, on transfers from the emergency aid reserve. ï

ê 1995/2006 Recitals 15 (adapted)

(24) The rules on the Commission's administrative transfers should be adapted to the new Activity-Based Budgeting (ABB) Ö coherent with the ABB Õ structure. Thus, provision should be made for an exemption from the ‘notification procedure’. During the last month of the financial year, the Commission should be allowed to decide autonomously on transfers of appropriations concerning staff expenditure, within certain limits.

ê 1605/2002 recital 11 (adapted)

(25) The principle of sound financial management should be defined by reference to the principles of economy, efficiency and effectiveness, and compliance with those principles checked by means of performance indicators established per activity and measurable in such a way that results can be assessed. The institutions should carry out ex ante and ex post evaluation, in accordance with the guidelines Ö guidance Õ determined by the Commission.

ê 1995/2006 Recital 5 (adapted)

ð new

(26) It should Ö also Õ be clarified that sound financial management requires effective and efficient internal control, and the main features and objectives of internal control systems should be defined.

(27) ð Concerning provisions on proportionality, the notion of tolerable risk of error should be introduced as part of the risk assessment made by the Authorising Officer. The institutions should be able to move away from the general 2% materiality threshold used by the Court of Auditors to conclude on the legality and regularity of the underlying transactions. Tolerable risk levels would be a more appropriate basis for the Discharge Authority to judge the quality of the management of risk by the Commission. The legislative authority should therefore determine the level of tolerable risk of error per policy area, taking into account the costs and benefits of controls. ï

ê 1605/2002 recital 12 (adapted)

(28) Finally, Aas regards the principle of transparency, information on implementation of the budget and the accounts should be improved. A strict deadline should also be set for the publication of the budget without prejudice to provisional publication by the Commission between the declaration of definitive adoption by the President of the European Parliament and publication in the Official Journal of the European Ö Union Õ Communities. The possibility of a negative reserve Ö should Õ is also to be retained.

ê 1995/2006 Recital 6

(29) In order to ensure the transparency of the use of funds deriving from the budget, it is necessary to make available information on the beneficiaries of these funds within certain limits necessary to protect legitimate public and private interests and taking into account the particular accounting period for the European Agricultural Guarantee Fund.

ê 1605/2002 recital 13 (adapted)

ð new

(30) As regards the establishment and presentation of the budget, the current provisions should be harmonised and simplified by eliminating the distinction, which has no practical impact, between supplementary budgets and amending budgets.

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

ê 1605/2002 recital 14

(32) The Commission section of the budget should present appropriations and resources by purpose, i.e. activity-based budgeting, with a view to enhancing transparency in the management of the budget with reference to the objectives of sound financial management and in particular efficiency and effectiveness.

ê 1605/2002 recital 15 (adapted)

(33) The institutions should enjoy a measure of flexibility in the management of statutory posts in relation to what is authorised in the budget, especially as the emphasis in management is now to be on results and not on means. This Ö flexibility should Õ freedom will , however, continue to be restricted by the dual limit of budget appropriations for a financial year and the total number of posts allocated.; Iin addition there Ö should Õ will be no latitude as regards grades Ö AD 16, AD 15 and AD 14 Õ A 1, A 2 and A 3 posts.

ê 1995/2006 Recital 19 (adapted)

(34) As regards the implementation of the budget, some adjustments are necessary in order to better reflect the specific features of the Common Foreign and Security Policy (CFSP) Ö should be reflected Õ . For reasons of legal clarity, the forms basic acts can take under the EC Treaty Ö on the Functioning of the European Union Õ and under Title V and VI of the Treaty on European Union should be identified in the Financial Regulation instead of in the implementing rules. In addition, a specific provision should be Ö made Õ added in order to properly reflect the types of preparatory measures that may be undertaken in the field of the CFSP.

ê 1605/2002 recital 16 (adapted)

ð new

(35) As regards implementation of the budget, there should be clarification of the various possible methods of implementing the budget, either on a centralised basis by the Commission or on a shared basis with the Member States or on a decentralised basis with third countries receiving external aid or jointly with international organisations. It should be possible for centralised management either to be performed directly by Commission departments or indirectly by delegation to bodies governed by Community law or by national public law. The implementation methods should guarantee that the procedures for protecting Community funds are complied with, whatever the entity responsible for all or part of this implementation and must confirm that final responsibility for budgetary implementation lies with the Commission in accordance with Article 274 of the Treaty.

(36) ð As regards methods of implementation, which govern in particular the conditions of externalisation of implementing powers to third parties, the rules have become too complex over the years and should be simplified. At the same time, the initial objective of externalisation – to ensure that whatever the method of implementation, expenditure should be implemented with a level of control and transparency equivalent to that expected from the Commission services - should be maintained. Therefore, a clear distinction should be made between situations where the budget is implemented directly, by the Commission or its executive agencies and situations where the budget is implemented indirectly through third parties. This should allow establishment of a common regime for indirect management with the possibility to adapt it in accordance with sector specific rules, in particular where the budget is implemented indirectly by Member States under shared management. Such common regime should include in particular the basic principles to be respected by the Commission where it decides to implement the budget indirectly and the basic principles to be respected by entrusted parties. The Commission should be able to apply Union rules and procedures or to accept the application of the rules and procedures of the entrusted entity, provided the latter guarantees an equivalent protection of the financial interests of the Union. ï

ê 1605/2002 recitals 17 and 18 (adapted)

ð new

(37) As the Commission is responsible for implementation of the budget, it may not delegate any tasks of public authority involving the use of discretionary powers. This Regulation should restate this principle and specify the scope of the tasks that may be delegated. It should also be stipulated that private-sector bodies, other than those which have a public-service mission and under specific conditions, should not be able to undertake any budgetary implementation measure but only provide specialist technical or administrative services or perform preparatory or ancillary tasks.

(38) For the sake of compliance with the principles of transparency and sound financial management, the public-sector bodies or bodies with a public-service mission to which implementing tasks are delegated on behalf of the Commission should have transparent procurement procedures, effective internal controls, a system for presentation of the accounts which is separate from their other activities and an external audit.

(39) ð Rules on 'ex ante assessment' of entities -other than Member States which are not subject to ex-ante assessment- should be adapted to ensure that all entrusted entities and persons provide a level of protection of the financial interests of the Union equivalent to that required under this Regulation. As part of the supervision tasks of the Commission, a set of control and audit obligations, including clearance of accounts procedures for all budget management types should be provided for. ï

ò new

(40) In order to take account of operational needs and to facilitate implementation by potential beneficiaries or implementing partners, requirements should remain proportionate to the specific risks of the action and its overall control environment. The nature of the tasks and the measures carried out by the Commission as part of the supervision and support of the implementation of the action should be taken into account when assessing the capacity of the third party or entity to comply with such requirements. Furthermore, this Regulation should accommodate new financial instruments such as financial instruments and Private and Public Partnerships in order to improve budget and policy delivery.

ò new

(41) The experience with Public Private Partnerships (PPPs) institutionalised as Union bodies under Article 185 of Regulation (EC, Euratom) No 1605/2002 demonstrates that further alternatives should be added in order to increase the choice of instruments to include bodies whose rules are more flexible and accessible to the private partners than those applicable to the Union institutions. Such alternatives should operate under indirect management. An alternative should be a body established by a basic act and endowed with financial rules which should take into account the principles necessary to ensure sound financial management of Union funds. These principles should be adopted in a delegated regulation and should be based on those with which third entities entrusted with budget implementation tasks have to comply. Another alternative should be the implementation of PPPs by bodies governed by private law of a Member State.

ò new

(42) Basic control and audit obligations of Member States where they implement the budget indirectly in shared management, which currently exist only in sector specific Regulations, should be, in accordance with Article 317 of the Treaty, introduced in this Regulation. Therefore it is necessary to include provisions, setting out a coherent framework for all policy areas concerned, on a harmonised administrative structure at national level, common management and control obligations for those structures, annual management declaration of assurance with independent audit opinion thereon and an annual declaration by Member States by which they assume the responsibility for the management of Union funds they are entrusted with, financial clearance, suspension and correction mechanisms operated by the Commission. Detailed provisions should remain in sector specific Regulations.

ê 1605/2002 recital 19 (adapted)

(43) In accordance with Article Ö 322 Õ 279(c) of the Treaty, this Regulation Ö should define Õ defines the powers and responsibilities of Ö financial actors, in particular Õ authorising officers, the accounting officers and the internal auditor.

Authorising officers Ö should be Õ are made fully responsible for all revenue and expenditure operations executed under their authority and Ö should Õ must be held accountable for their actions, including, where necessary, through disciplinary proceedings. This empowerment should therefore be strengthened by the removal of centralised prior controls and in particular ending the advance approval of revenue and expenditure operations by the financial controller and the check by the accounting officer that payment constitutes valid discharge.

The accounting officer Ö should continue Õ continues to be responsible for the proper execution of payments, the collection of revenue and the recovery of receivables. He/She manages Ö should manage Õ the treasury, keeps the accounts and is Ö be Õ responsible for drawing up the institution's financial statements.

The internal auditor Ö should perform Õ performs his duties in accordance with international audit standards. His role is Ö should be Õ to verify the proper functioning of the management and control systems put in place by the authorising officers.

The internal auditor is not an actor involved in the financial operations and does not have the role of exercising control over these operations ahead of the decisions by the authorising officers; the authorising officers should now assume full responsibility for these decisions.

ò new

(44) With regard to the duties of the authorising officer by delegation, some provisions should be clarified, in particular concerning the internal control procedures that he puts into place ex ante and ex post and his reporting duties. In this respect, the content of his annual activity report should be updated in line with practice which consists in including the required financial and management information to support his declaration of assurance on the performance of his duties.

ê 1995/2006 Recital 24

ð new

(45) ð The responsibilities of the Accounting Officer of the Commission should be clarified, in particular it should be specified that he is the only person who is entitled to define the accounting rules and harmonised charts of accounts, while Accounting Officers of all other institutions define accounting procedures applicable in their institutions. ï Accounting officers' responsibility for certifying the accounts on the basis of the financial information supplied to them by the authorising officers should be clarified. To this end, accounting officers should be empowered to check the information received by the authorising officer by delegation and to enter reservations, if necessary.

ò new

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

ê 1605/2002 Recital 20 (adapted)

(47) The liability of authorising officers, accounting officers and imprest administrators Ö should Õ is not Ö be Õ different from that of other officials and staff and should be subject, under the Staff Regulations of officials of the European Communities, and the Conditions of employment of other servants of the European Communities, to the application of the existing disciplinary and financial compensation measures. Ö However Õ On the other hand, certain specific provisions identifying cases of misconduct of accounting officers and imprest administrators, given the special nature of their duties, should be retained; t hey will no longer have any special allowance or insurance. Furthermore, the liability of the authorising officer should be clarified. In cases not involving fraud, in order to provide the appointing authority with the necessary expertise, each institution Ö should Õ will set up a specialised financial irregularities panel which Ö should Õ will determine whether or not an irregularity has occurred which could make the official or other servant liable to disciplinary action or payment of compensation and, if it has detected problems with systems, to report to the authorising officer and the internal auditor. For cases of fraud, however, this Regulation should refer to the provisions in force on the protection of the European Communities' financial interests Ö of the Union Õ and on the fight against corruption involving officials of the Ö Union Õ European Communities or officials of Member States of the European Union.

ê 1995/2006 Recital 23

(48) The establishment by several institutions of joint financial irregularities panels should be made possible.

ò new

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

ê 1995/2006 Recital 26 (adapted)

ð new

(50) A period of limitation on the validity of claims should be Ö determined Õ introduced. The Ö Union Õ Community, unlike many of its Member States, is not subject to a period of limitation under which financial claims are extinguished after a certain period of time. Nor is the Ö Union Õ Community restricted by a period of limitation in the pursuit of its claims against third persons. The introduction of such a period of limitation corresponds to sound financial management.

(51) ð The rules on recovery should both be clarified and strengthened. In particular, clarification is needed in order to specify that the cancellation of an established amount receivable does not imply a waiver of a European Union's established entitlement. Moreover, in order to reinforce the safeguarding of the financial interests of the Union, Union funds claimed for reimbursement should be treated by Member States in the same way as claims of public companies on their territory. ï

(52) Taking into account Commission Communication on the management of fines temporarily collected[19], fines, penalties and sanctions and any income generated by them should be recorded as budget revenue in the year following the exhaustion of all remedies against the decisions imposing them. As an exception to this rule, a portion limited to 2% of the total amounts of fines or penalties to be entered in the budget should be withheld to supply the Fund created by that Communication.

ê 1605/2002 recital 21 (adapted)

(53) The concepts of budgetary and legal commitment of expenditure and the conditions for applying them should be defined. In order to restrict the volume of dormant commitments, the period during which individual legal commitments may be made on the basis of overall budget commitments should be limited. Moreover, a decommitment provision must Ö should Õ be Ö made Õ provided for individual commitments which have not given rise to any payment over a three-year period.

ò new

(54) As regards payments and in line with the principle of sound financial management, clarification of the various types of payments should be provided. Moreover, prefinancing payments should be cleared regularly by the responsible authorising officer in accordance with the accounting rules defined by the Accounting Officer of the Commission. To this effect, appropriate provisions should be included in contracts, grant decisions, grant agreements as well as in delegation agreements with third parties.

ê 1605/2002 recital 22 (adapted)

(55) This Regulation should define the typology of payments which may be made by authorising officers. Such payments must Ö should Õ be made principally as a function of the effectiveness of the action and the results which flow from it. The rather vague concepts of advance and payment on account should be removed; Ppayments should be made in the form of pre-financing, interim payments and payments of the final balance, when the entire amount is not paid in one instalment.

ê 1605/2002 recital 23 (adapted)

(56) This Regulation should stipulate that Tthe operations of validation, authorisation and payment Ö should Õ must be completed within a time limit which will be set in the implementing rules and that in the event of failure to respect thatis time limit creditors Ö should Õ will be entitled to default interest to be charged to the budget.

ò new

(57) Institutions should be allowed to give their prior agreement in order to officially accept the transmission of documents by electronic procedure. Moreover, in accordance with Commission decisions on electronic and digitised documents, financial provisions on verifications applicable to commitments should be updated and recognise explicitly the legal value of electronic order forms and invoices for the registration of legal commitments.

ê 1995/2006 Recital 25

(58) The relationship between the Commission's internal auditor and bodies set up by the Communities should be clarified. Those bodies should have their own internal audit function reporting to their own management boards, whereas the Commission's internal auditor reports to the College of Commissioners on the procedures and systems of the Commission. It should be necessary for the Commission's internal auditor only to confirm that the bodies' internal audit functions meet international standards, and for that purpose he should be able to conduct assessments of the quality of the internal audit activity.

ê 1995/2006 Recital 27 (adapted)

(59) Thise Financial Regulation should reflect the importance of framework contracts in the management of public procurement. It should encourage the use of interinstitutional procurement procedures and allow for the possibility of joint procurement procedures between an institution and a contracting authority from a Member State.

ê 1605/2002 recital 24 (adapted)

(60) As regards contracts awarded by the institutions of the Communities on their own account, provision should be made for the rules contained in the Directives of the European Parliament and of the Council coordinating the procedures for the award of public works, service and supply contracts to apply: the rules applicable to contracts awarded on behalf of third parties should also be consistent with the principles posited by those Directives.

ê 1995/2006 Recital 28 (adapted)

ð new

(61) Ö With regard to the rules on public procurement, Õ certain adjustments should be made to ensure that this Regulation is Ö should be Õ in line with the Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts[20]. The possibility, open to Member States under that Directive, to determine specific procedures for contracts declared secret when their performance must be accompanied by special security measures or when the protection of the Member State so requires, should be made available to Ö Union Õ Community institutions.

ê 1605/2002 recital 25

(62) In order to prevent irregularities and to combat fraud and corruption and promote sound and efficient management, candidates or tenderers who are guilty of such acts or have conflicting interests should be excluded from the award of contracts.

ê 1995/2006 Recital 29 (adapted)

ð new

(63) In line with Directive 2004/18/EC, the rules on exclusion from a procurement procedure need to be clarified. In addition, For reasons of legal certainty and proportionality, a maximum period of exclusion should be specified in thise Financial Regulation. Ö Moreover, Õ in the light of Directive 2004/18/EC, an exception to the rules on exclusion should be made for the purchase of supplies on particularly advantageous terms from either a supplier which is definitively winding up its business activities, from the receivers or liquidators of a bankruptcy, through an arrangement with creditors, or through a similar procedure under national law.

(64) ð The rules for exclusion should also be improved in order to strengthen the protection of financial interests of the Union. The reference to money laundering should be added, as provided for in the Directive 2004/18/EC. Moreover, situations of exclusion concerning candidates or tenderers convicted by a judgment having the force of res judicata for an offence concerning their professional conduct, or for fraud, corruption, involvement in a criminal organisation, money laundering or similar criminal infringements detrimental to the financial interests of the Union, should be extended to persons having powers of representation, decision making or control over these candidates and tenderers. However, for reasons of proportionality, exclusion should not apply to candidates and tenderers who can demonstrate that they have taken adequate measures against the concerned persons having powers of representation. Finally, in order to ensure the continuity of service of the institution, derogation from the obligation of exclusion based on the grounds of bankruptcy or analogous situations, grave professional misconduct and non compliance with social obligations should be introduced in case of negotiated procedures where, for technical or artistic reasons or for reasons connected with the protection of exclusive rights, the contract can be awarded only to a particular economic operator. ï

ê 1995/2006 Recital 30 (adapted)

(65) It should be made obligatory under the Financial Regulation for cCandidates or tenderers in procurement procedures Ö should be obliged Õ to certify, if so requested, the ownership or the management, control and power of representation of the legal entity submitting a tender and that this ownership, or their subcontractors, are not in one of the situations Ö giving rise to exclusion from participation in tenders Õ referred to in Article 93 of the Financial Regulation. Tenderers should not be required to certify that they are not in one of the situations giving rise to exclusion when they participate in a procurement procedure for the award of very low-value contracts.

ê 1995/2006 Recital 31 (adapted)

ð new

(66) In order to enhance the effectiveness of procurement procedures, the database of candidates or tenderers in situations of exclusion should be common to the institutions, executive agencies and bodies referred to in the Financial Ö this Õ Regulation.

(67) ð Although the European Central Bank (ECB) and the European Investment Bank (EIB) have their own specific status within the Union framework, the use of their own resources is of financial interest to the Union. Therefore, they should have access to the information contained in the central exclusion database, which was created to protect the financial interests of the Union, and should take it into account under their responsibility for the award of contracts under their procurement rules. The ECB and the EIB should also communicate to the Commission information on tenderers which are subject to a definitive judgment for fraud or similar criminal infringements detrimental to the financial interests of the Union. ï

ê 1605/2002 Recitals 26 and 27 (adapted)

(68) For the sake of transparency, candidates and tenderers should be informed in an appropriate manner about the award of contracts.

(69) Finally, as part of the process of empowerment of authorising officers, prior checking by the current Advisory Committee on Procurement and Contracts should be dispensed with.

ê 1995/2006 Recitals 32 and 33 (adapted)

(70) In order to take account of the interests of unsuccessful tenderers, it is appropriate to provide that a contract covered by Directive 2004/18/EC cannot be signed before the end of a reasonable standstill period.

(71) The obligations of the institutions to suspend a procurement procedure or a contract under the Financial Ö this Õ Regulation in cases of fraud and irregularities should be clarified in order to enhance the Ö application Õ operation of Ö other Õ the relevant provisions of that Regulation.

ò new

(72) Concerning administrative and financial penalties, a sound legal basis for the publication of decisions applying such penalties should be introduced, in line with data protection requirements. Such publication should remain facultative for reasons of data protection and legal security.

ê 1605/2002 recital 28 (adapted)

ð new

(73) As regards grants, a framework for the award and monitoring of Ö Union Õ Community grants involving specific provisions for implementing the principles of transparency, equal treatment, co-financing, ð non-profit, degressive award for operating grants, ï prohibition of retrospective awards and control should be put in place.

ê 1605/2002 recital 29 (adapted)

(74) In order to avoid any cumulation, it should not be possible for grants to be awarded to finance twice the same action or for operating expenditure for the same year.

ê 1605/2002 recital 30 (adapted)

(75) In a similar manner to the rules concerning the award of public contracts, grounds for excluding certain parties from the award of grants should be laid down in order to give the institutions appropriate means of combating fraud and corruption.

ê 1605/2002 recital 31 (adapted)

(76) To ensure that the rights and obligations of the institution and of the beneficiary are clear and are observed, the grant award should be the subject of a written agreement.

ê 1995/2006 Recitals 34, 35 and 36 (adapted)

(77) Ö However, for reasons of simplicity, Õ As regards grants, simplification of the rules is needed. Tthe requirements for checks and guarantees should be more proportionate to the financial risks involved. The definition of grants needs to Ö should Õ be clarified, in particular as regards financing related to loan activities or shareholdings and expenditure relating to fisheries markets. To Ö ensure the sound Õ improve the management of grants and to simplify procedures, it should be possible to award grants either by a decision of the institution or by a written agreement with the beneficiary.

(78) For reasons of clarity and transparency, the use of lump-sum and flat-rate payments should be authorised alongside the more traditional method of reimbursing costs actually incurred.

(79) For reasons of legal clarity, the exceptions to the non-profit rule which are currently provided for in the implementing rules should be included in the Financial Regulation. Furthermore, it should be made clear that the purpose of awarding grants to certain actions is to help reinforce financial capacity or generate an income.

ê 1525/2007 Recitals 1, 4 and 5 (adapted)

(80) Regulation (EC) No 2004/2003 of the European Parliament and of the Council of 4 November 2003 on the regulations governing political parties at European level and the rules regarding their funding[21] lays down, inter alia , rules governing the financing of political parties at European level from the Union budget. These rules governing the financing of political parties at European level should be adapted to take better account of the special conditions under which political parties operate, including shifting political challenges and agendas creating budgetary impacts that political parties cannot predict when drawing up their annual work programmes and budgets. To that end limited possibilities to carry over funding from one year to the first quarter of the following year should be introduced.

(81) In order to enhance parties' long-term financial planning capabilities, to take account of funding needs that vary from one year to another, and to strengthen the incentives for parties not to rely on public funding alone, political parties at European level should be allowed to establish limited financial reserves based on own resources generated from sources other than the Union budget. The abovementioned derogations from the non-profit rule should be exceptional and should not constitute a precedent.

ê 1995/2006 Recitals 37, 38, 41 (adapted)

(82) The rule that grants should be awarded on the basis of calls for proposals has proved its worth. Experience has shown, however, that in certain cases the nature of the action leaves no choice in the selection of beneficiaries; such cases should thus be exempted from Ö that Õ this rule.

(83) The rule that the same action should not give rise to more than one grant to any one beneficiary should be adjusted. Some basic legal acts do permit Community Ö Union Õ funding from different sources to be combined, and such cases may Ö become more common Õ increase in Ö the Õ future Ö with the view Õ in order to ensure the effectiveness of expenditure. However, it should be made clear in thise Financial Regulation that the same costs cannot be financed twice by the Union budget.

(84) Certain restrictions on the eligibility of beneficiaries should Ö not apply in certain cases Õ be removed in order to allow for grants to natural persons and certain types of entity which lack legal personality. In line with the principle of proportionality, for very low-value grants, the authorising officer Ö should be allowed to Õ may refrain from requesting applicants to certify that they are not in one of the situations of exclusion under the relevant provisions of the Financial Ö this Õ Regulation.

(85) As regards the procurement standards to be applied by beneficiaries of grants, the current rule in thise Financial Regulation is unclear and should be simplified. Moreover, express provision should be made for the case in which the implementation of an action necessitates financial support to third parties.

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(86) In the light of practical experience, the lump sums regime should be clarified (lump sums, standard scale of unit costs and flat rates) and clearly distinguished from any ex-post verification of real costs. Control measures should be adjusted to this new approach with the possibility to request operational audits and to extend findings to non audited projects of same beneficiary where recurrent errors have been detected in similar projects. Finally, the possibility for a beneficiary to redistribute its grant by way of subsidies to third parties should be extended under certain conditions in order to facilitate the correct implementation of programmes dedicated to numerous physical persons who can only be reached through two levels of dispatch. This redistribution should be authorised as long as appropriate guarantees are presented by the first rank beneficiary and adequate clauses to limit the margin of appreciation for the choice of sub-beneficiaries and the amount of the award are introduced in the grant agreement.

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(87) As a new type of financial support, prizes should be regulated separately from the grant regime with specific rules not containing any reference to predictable costs. Prizes should be part of the annual work programme and, above a certain threshold, should be awarded by a beneficiary or by a contractor after their award conditions and criteria have been approved by the Commission.

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(88) Financial instruments are increasingly valuable to multiply the effect of Union funds when those funds are pooled with others funds or include a leverage effect. Since such financial instruments cannot be assimilated to services or grants, a new type of financial support should be established.

ê 1605/2002 recital 32

(89) As regards accounting and the presentation of accounts, it should be stipulated that the accounts comprise general accounts and budget accounts and it should be added that the general accounts are based on a system of accrual accounting whereas the budget accounts are intended to draw up the budget outturn account and the reports on implementation of the budget.

ê 1995/2006 Recital 44 (adapted)

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(54) As regards the rules on accounting and the accounts, ð the presentation of accounts should be simplified by providing that Union's accounts comprise only the consolidated financial statements and the aggregated budgetary accounts. It should also be clarified that the consolidation process only concerns the institutions financed by the Union's budget, in order to take into account the specific independent status of the ECB. Finally, ï the Financial Regulation should make it Ö It should be Õ possible for the Commission's accounting officer to determine, in compliance with international standards, which other bodies in addition to those receiving Community Ö Union Õ subsidies fall within the scope of the consolidation of the accounts, it being understood that the consolidation of accounts neither entails any transfer of funds from self-financed bodies to the general budget of the European Union nor influences their financial and operational autonomy and the discharge procedures for their accounts.

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(55) In order to clearly separate the duties and responsibilities of the Commission's Accounting officer from those of the accounting officers of institutions or bodies whose accounts are consolidated, it should be provided that the report on budgetary and financial management of the financial year has to be prepared by each institution or body and then sent to the budgetary authority and the Court of Auditors by 31 March of the following financial year.

ê 1605/2002 recital 33 (adapted)

(90) The principles on which the general accounts are based and the financial statements are presented should be defined by reference to internationally accepted accounting principles and the Ö Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the Treaty Õ Directives of the European Parliament and of the Council on the annual accounts of certain types of companies Ö [22] Õ , where they are relevant in the context of the public service.

ê 1605/2002 recital 34 (adapted)

(91) The provisions on the supply of information concerning implementation of the budget should be adapted to Ö include Õ extend this information to the use of appropriations carried over, made available again and reused and to the various Ö Union Õ Community-law bodies, to improve the arrangements for providing monthly figures and the report on implementation, which Ö should Õ will be sent three times a year to the budgetary authority.

ê 1605/2002 recital 35

(92) The accounting methods employed by the institutions should be harmonised and, in this field, the Commission's accounting officer should have the right of initiative.

ê 1605/2002 recital 36 (adapted)

(93) It should be specified that the use of computerised financial management systems should in no way restrict the Court of Auditors' rights of access to supporting documents.

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(94) It is necessary to update the Union rules and principles on accounting in order to ensure their coherence with the International Public Sector Accounting Standard (IPSAS) rules.

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(95) The provisions concerning provisional and final accounts should be updated, in particular in order to provide for the reporting information that should accompany the accounts sent to the Commission's Accounting officer for the purpose of consolidation. Reference should also be made to the representation letter accompanying the transmission, by the institutions and bodies financed by the budget, to the Court of Auditors of their final accounts, as well as to the representation letter accompanying the transmission of the Union's final consolidated accounts. Finally, an earlier deadline should be set out for the Court of Auditors to make its observations on the provisional accounts of institutions other than the Commission and bodies financed by the budget in order to allow them to draw up their final accounts taking into account the Court's remarks.

ê 1605/2002 recital 37

(96) As regards external audit and discharge, although the Commission is fully responsible for implementation of the budget, the importance of management shared with the Member States involves their cooperation in the audit procedure by the Court of Auditors and the discharge by the budgetary authority.

ê 1605/2002 recital 38 (adapted)

(97) In order to Ö The timetable leading up to discharge should Õ provide optimum conditions for the presentation of the accounts and the discharge procedure, the timetable leading up to discharge should be amended.

ê 1605/2002 recital 39 (adapted)

(98) The Commission should submit to the European Parliament, at its request, any information required for the smooth application of the discharge procedure for the Ö relevant Õ financial year in question, in accordance with Article Ö 319 Õ 276 of the EC Treaty.

ê 1605/2002 recital 40 (adapted)

(99) Special provisions should be laid down for certain Ö Union Õ Community policies. Such provisions should comply with the basic principles of this Regulation.

ê 1605/2002 recital 41 (adapted)

(100) It seems necessary to make provision for the possibility of advance commitments against EAGGF and administrative appropriations from 15 November preceding the financial year in question.

ê 1995/2006 Recitals 45 and 46 (adapted)

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(101) In view of the coming into existence of the EAGF, which has replaced the European Agricultural Guidance and Guarantee Fund (EAGGF) with respect to financing of market measures from 1 January 2007, certain terminology in th is Financial Regulation should be adjusted. Clarification is also required in Ö to Õ the effect that provisional commitments may be made after the normal two-month deadline following receipt of the Member States' statements of expenditure in cases where a decision on a transfer of appropriations is expected. The special provisions of the Financial Regulation concerning transfers should be clarified.

(102) (59) The terminology should also be adjusted so that reference is made only to the Structural Funds, the Cohesion Fund, the European Fisheries Fund, the European Agricultural Fund for Rural Development and funds in the area of Freedom, Security and Justice managed under shared management. References to pre-accession structural measures (ISPA) and agricultural measures (Sapard) should be removed, since they involve ð indirect ï management by third countries ð and not shared management with Member States ï . As regards the making available again of decommitted appropriations, in line with the new basic acts for structural actions in the period 2007 to 2013 which cover the case of force majeure , provision should be maintained in Ö this Õ the Financial Regulation only for cases where a manifest error is attributable to the Commission.

ê 1605/2002 recital 42 (adapted)

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(103) As regards ð the specific provisions of this Regulation concerning the structural funds, cohesion funds, European fisheries fund, the European Agricultural Fund for Rural Development and funds in the area of Freedom, Security and Justice managed under shared management ï the Structural Funds, the provision for repayment of payments on account and making appropriations available again contained in the Commission declaration annexed to Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds[23], as last amended by Regulation (EC) No 1447/2001[24], should be retained. ð Moreover, by way of derogation from the rule of carry over, it should be allowed to carry over commitment appropriations available at the end of the financial year, arising from repayments of payment on account, until the closure of the programme, and to use those commitment appropriations when other commitment appropriations are not longer available. ï

ê 1995/2006 Recitals 47 and 48 (adapted)

(61) A Ö The Õ provision Ö concerning Õ should be added to the Financial Regulation to cover the assigned revenue generated by the winding-up of the European Coal and Steel Community and the making available of the corresponding appropriations Ö should be maintained Õ .

(62) It is necessary to allow appropriations, which have been decommitted as a result of total or partial non-implementation of the projects for which they were earmarked, to be made available again. However, that should be possible only under strict conditions, and only in the area of research, since research projects present a higher financial risk than those in other policy areas.

ê 1605/2002 recital 43 (adapted)

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(104) As regards research, the presentation of the budget should be Ö coherent Õ harmonised with the provisions concerning activity-based budgeting., whilst preserving the Ö The Õ flexibility of management which the Joint Research Centre (JRC) currently enjoys Ö should be preserved Õ .

(105) ð Furthermore, clarification is needed for the participation of the JRC in procurement and grant procedures when it carries out activities financed in whole or in part by the general budget outside the budget lines usually dedicated to the JRC in the research funds. When participating in grant and public procurement procedures as a third party, the JRC should be exempted from the application of the provisions concerning exclusion criteria, administrative and financial penalties, economic and financial capacity and the lodging of guarantees. Moreover, it is necessary to take into account the technical-scientific services provided by the JRC to other Institutions or Commission services through internal administrative arrangements, which fall outside public procurement rules. Finally, in order to carry out these tasks effectively, that revenue stemming from the activities linked to those tasks should exceptionally be considered external assigned revenue. ï

ê 1605/2002 recital 44 (adapted)

(106) As regards external action, decentralisation of management of external aid should be authorised provided that the Commission is given guarantees of sound financial management and the beneficiary State is accountable to the Commission for the funds paid to it.

ê 1605/2002 recital 45 (adapted)

(107) Financing agreements or contracts signed with the beneficiary State or a national, Community or international public-sector body and natural or legal persons governed by private law must include the general procurement principles laid down in Title V of part one and Title IV of part two of this Regulation as regards external actions.

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(108) As regards the specific provisions relating to the implementation of external actions, it is necessary to take into account the changes and simplification proposed concerning the various management modes.

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

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(110) As regards entities entrusted under indirect management to implement external actions, the period for the conclusion of contracts and grants by these entities should be limited to three years following the signature of the delegation agreement with the Commission, unless specific exceptional and external circumstances prevail. However, that deadline should not apply to multi-annual programmes implemented under the structural funds procedures. Detailed rules for de-commitment of appropriations in the latter case should be laid down in sector-specific rules.

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(111) With regard to specific rules on procurement applicable to external actions, it is necessary to allow third country nationals to participate in tender procedures, in the case of implementation without a basic act and where duly justified exceptional circumstances prevail.

ê 1605/2002 recital 46

(112) A special title should be included containing the general provisions for the management of European offices.

ê 1995/2006 Recital 50 (adapted)

(113) In order to facilitate management, it should be made possible for the institutions to delegate the powers of authorising officers to Directors of inter-institutional European Offices for the management of appropriations entered in their respective sections of the budget. While their content should remain unchanged, the relevant Articles of the Financial Regulation should be slightly re-structured in order Ö For that purpose, it is appropriate Õ to clarify the sub-delegation of authorising powers by the Directors of Offices.

ê 1605/2002 recital 47 (adapted)

(114) A Ö It is appropriate to maintain a Õ separate title should also contain Ö containing Õ the special rules applicable to administrative appropriations. Provision should also be made to enable each of the two branches of the budgetary authority to issue an opinion in good time on building projects likely to have significant financial implications for the budget.

ê 1605/2002 recital 48 (adapted)

The change in the timetable for the consolidation of the institutions' accounts should be deferred until the financial year 2005 in order to allow the necessary time to put in place the essential internal procedures involved.

ê 1995/2006 Recital 51

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(115) The procedure under which the budgetary authority may issue an opinion on a building project should be clarified. Moreover, ð in order to allow institutions to develop a long term real estate policy and profit from lower interest rates thanks to the Union favourable credit rating on the financial market, they should be authorised to raise loans outside the budget to acquire real estate assets. This would provide the possibility to address the complexity of the current system, while saving costs and introducing more transparency. ï

ê 1995/2006 Recital 52 (adapted)

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(116) Successive framework research programmes have facilitat