EUROPEAN COMMISSION Brussels, 14.9.2016 COM(2016) 605 final 2016/0282(COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the financial rules applicable to the general budget of the Union and amending Regulation (EC) No 2012/2002, Regulations (EU) No 1296/2013, (EU) 1301/2013, (EU) No 1303/2013, EU No 1304/2013, (EU) No 1305/2013, (EU) No 1306/2013, (EU) No 1307/2013, (EU) No 1308/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014,(EU) No 283/2014, (EU) No 652/2014 of the European Parliament and of the Council and Decision No 541/2014/EU of the European Parliament and of the Council



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal The Financial Regulation sets out the principles and procedures governing the establishment and implementation of the EU budget and the control of the EU funds. Over the last 30 years, the number of general financial rules contained in the Financial Regulation has increased sharply. In addition, a number of sectoral financial rules have emerged: the rules for participation to the Framework Programme for Research and Innovation, the Common Provisions to the European Structural and Investment Funds and the Common Implementing Rules for the External Action. Users of EU funds have repeatedly complained about the proliferation of rules both at general and at sectoral level, their heterogeneity and their complexity due to the fact that they follow the architecture of the programme and multiple layers of controls. In addition, the complexity of the financial set of rules has slowed down implementation of the EU funds, making it costly and prone to errors. A first step towards more coherent and simpler financial rules was achieved in 2012: the Commission tabled proposals for the programmes covered by the MFF 2014-2020 which reduced the number of programmes and instruments, grouped them under a single framework with common rules, simplified procedures for application and declaration of costs by final beneficiaries, facilitated the deployment of innovative financial instruments, enabled EU Trust-Funds and improved the cost-efficiency of controls. Recent revisions have aligned the Financial Regulation on the results of the negotiation to the MFF 2014-2020 (2013 revision) as well as to the new Procurement Directive (2015 revision). However, there is room for further simplification. This is confirmed by the experience gained since 2014 and by the work of the High Level Group of Independent Experts on Monitoring Simplification for Beneficiaries of the European Structural and Investment Funds. The public consultation on the revision of the Financial Regulation also shows stakeholders’ clear expectations in the area. Efforts must therefore continue in order to remove bottlenecks, ensure synergies and complementarities between ESI Funds and the other EU funds and improve efficiency of delivery and control requirements. Simpler and more flexible financial rules will contribute to optimising spending and impact of the MFF 2014-2020 and constitute as such one of the key elements of the Commission's initiative for a Budget Focused on Results (BFOR) which aims at making sure that resources are allocated to priorities and that every action delivers maximum performance and added value. In addition, this will reduce the costs related to implementation of EU rules as well the number of errors. Simpler and more flexible EU financial rules are key in enhancing EU budget’s ability to adapt to changing circumstances and to respond to unexpected developments. The present legislative proposal forms an integral part of the mid-term review/revision of the multiannual financial framework (MFF) 2014-2020. It contributes to two of its main objectives: simplification and flexibility. The Commission therefore proposes in a single act an ambitious revision of the general financial rules accompanied by corresponding changes to the sectorial financial rules set out in 15 legislative acts concerning multiannual programmes. The inclusion of sectoral changes in the same legislative proposal aims at ensuring a coherent negotiation process as well as at facilitating a speedy adoption by the legislator. The focus is put on the following key areas: 1. Simplification for recipients of EU funds: many measures aim at simplifying life for recipients of EU funds. They relate to grants (removal of the non-cumulative award check for low-value grants and of the non-profit principle; simpler rules for "contribution in kind" valuation; recognition of volunteer work; grant awards without calls for proposal under specific conditions) and simplified forms of grants (Title VIII). 2. From multiple layers of controls to cross reliance on audit, assessment or authorisation, and harmonisation of reporting requirements: the aim of these measures is to encourage reliance as far as possible on one single audit, assessment or authorisation (conformity to State aids for instance), when the audit, assessment or authorisation meets the necessary conditions to be taken into account in the EU system. More generally, rules for implementing partners (international organisations, EIB/EIF, national promotional banks, national agencies, NGOs) will be simplified by relying increasingly on their procedures and policies once assessed positively. Financial framework partnership agreements concluded with long term partners will allow progressing in the harmonisation of audit, reporting and other administrative requirements among donors (Title V Articles 122, 123 and 126). 3. Allowing the application of only one set of rules to hybrid actions or in the case of combination of measures or instruments: the proposal aims at achieving further simplification for the partners of the EU by a number of measures to avoid the parallel application of different rules and procedures, notably through facilitating the combination of European Structural and Investment Funds (ESIF) funding with financial instruments and the European Fund for Strategic Investments (Title V). 4. More effective use of financial instruments: optimise use of reflows, ensuring a level playing field among key EU implementing partners, reducing burdensome requirements related to publication of individual data of final recipients or to the exclusion criteria (Title X). 5. More flexible budget management: the proposal sets out several ways for more budgetary flexibility, in order to allow the Union to respond to unforeseen challenges and new tasks more effectively and to achieve swifter crisis management - among which the creation of a "flexibility cushion" for unforeseen needs and new crises in the external actions geographic instruments budget, a more efficient activation of the solidarity and globalization adjustment funds, and the extension of Trust-Funds to internal policies (Articles 14 and 227), the creation of a EU crisis reserve with the reuse of decommitted appropriations, and for the next Multiannual Financial Framework, the possibility that financial operations other than financial instruments generate a contingent liability for the Union exceeding the financial assets provided to cover the financial liability of the Union (Article 203) and the creation of a common provisioning fund holding the resources provisioned for financial operations (Article 205). Recent initiatives (such as the European Fund for Strategic Investments (EFSI) or the European Fund for Sustainable Development (EFSD)), have indeed shown the need to fully use the leverage of the EU budget by creating non-provisioned contingent liabilities. Title X sets the framework to authorise, manage and control these financial risks. 6. Focus on results and streamlining of reporting: a stronger focus on results through lump sums, prizes, payment based on output and results rather than on reimbursement of costs, payment against conditions to be fulfilled (Article 121, Title XIII). This should contribute to further reducing the costs of implementing EU funds as well as the number of errors. On the reporting side, reports are regrouped around the draft budget and the integrated financial reporting package, in order to increase efficiency and transparency both towards the general public and the budgetary authority (Articles 39 and 239-245). 7. Simpler and leaner EU administration: facilitating agreements or delegations between Institutions or bodies in order to pool the implementation of administrative appropriations in European Offices or within Executive Agencies (Articles 57, 58, 64, 65 and 68); merging consultative panels competent for financial irregularities (Article 73 (6)) with the EDES panel (Article 139) and moving from annual to multiannual financing decisions (Article 108). 8. Providing possibility for citizen engagement: the proposal provides a possibility for citizens to be consulted on the implementation of the Union budget by the Commission, Member States and any other entity implementing the Union budget (Аrticle 54).

In simplifying and making EU financial rules more flexible, the present proposal paves the way for the preparation of the next generation of spending programmes (post-2020). •Consistency with existing provisions on the policy area In designing simpler and more flexible EU financial rules the Commission has made sure that it does not weaken sound financial management which remains a key objective. Quite to the contrary, the present proposal also strengthens rules on tax avoidance to be respected by EU implementing partners and clarifies that the duty to avoid conflicts of interest fully applies to all modes of implementation of EU funds (including at the level of Member States). It also consolidates the systems in place to protect EU budget against fraud and financial irregularities (extending the authorising officer's competence to take action with regard to the Early Detection and Exclusion System in indirect implementation).The simplification of EU financial rules will also contribute to reduce the costs and time needed to implement EU funds as well as the number of errors. It should also increase the impact of the policies and their results on the ground. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis The proposal is based on Article 322 of the Treaty on the Functioning of the European Union (TFEU) for the part relating to the revision the Financial Regulation and on the sectoral legal basis for the legislative acts modified by the second part. •Subsidiarity (for non-exclusive competence) The adoption of EU general financial rules and of the modifications proposed to the sectoral legislative acts falls under the exclusive competence of the EU. •Proportionality This proposal focused on simplification and does not contain rules which would not be necessary to achieve the objectives of the Treaty. In particular, the modifications to the sectorial legislative acts proposed in its omnibus part are limited to those necessary to allow the simplifications proposed in the Financial Regulation to deploy their full effect on the ground. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Stakeholder consultations A public consultation on the revision of the Financial Regulation was carried out in April/May 2016. A total of 111 contributions were received from a wide range of stakeholders. The replies show overall support for the simplification (65%) and flexibility (79%) measures proposed. With respect to simplifying EU grant rules, stakeholders continue to prefer the reimbursement of actual costs but do not oppose simplified reimbursement through unit costs, lump sums or flat rates or reimbursement on the basis of pre-defined results as long as those are not compulsory. These concerns are reflected in the proposal. In particular, simplified reimbursement of costs will remain only an additional option to be used by the authorising officer with regards to the nature of the supported actions and recipients. Implementing partners of the EU (national development agencies, international organizations, EIB/EIF, NGOs) request the Commission to rely more on their rules and policies once positively assessed. They complain about multiple prior assessments of their systems or procedures or repeated audits of the same activities by the EU and other donors, when cross-reliance on such assessments and audits could be possible. They also criticize different reporting requirements among donors. An Awareness Raising Event took place on 6 April 2016 in Brussels to allow stakeholders to voice their concerns/suggestions about the Financial Regulation. Their comments made are in line with the replies to the public consultation. The measures contained in this proposal address these concerns. •Impact assessment No impact assessment for this revision of the Financial Regulation has been carried out. The Financial Regulation as such has a limited economic, environmental or social impact (it provides the general rules for the implementation of the spending programmes, but the concrete economic or social impact incurs when making policy choices implementing the sectorial programmes). Changes proposed to the sectoral legislative acts are merely consequential to the simplifications proposed in the Financial Regulation •Regulatory fitness and simplification While the revision of the Financial Regulation and the corresponding changes to the sectoral legislative acts do not fall under the Regulatory Fitness Programme, they are in line with – and contribute significantly to – the Better Regulation agenda: indeed, this proposal reduces the overall number of general financial rules applicable to the EU budget by some 25% and regroups them in a single rule book which will replace both the Financial Regulation and its Rules of Application:

·Key provisions of the Rules of Application are moved into the Financial Regulation, while less important elements will be integrated if needed and on a case by case basis in Commission’s internal rules or in guidelines made public by the Commission. ·The detailed procurement rules applicable to EU institutions and bodies are consolidated in an annex of the revised Financial Regulation, which could be modified by delegated act. ·Provisions of Part Two of the Financial Regulation relating to special provisions applicable to the European Agricultural Guarantee Fund, to Research, external action and to other specific EU funds are inserted in the relevant parts of the Financial Regulation unless they are no longer relevant. The proposal to revise the Financial Regulation also stresses commonalities and reduces specificities to the minimum so as to make the rules easier to apply for the users: emphasis is put on common rules applicable to all methods of implementation (direct, indirect and shared) as well as for all legal instruments by regrouping them in dedicated chapters. Provisions on European offices, executive agencies, decentralised agencies and public-private partnership bodies currently spread over the Financial Regulation are pulled into the same chapter. Rules on EU trust funds, budget support and experts (including research experts) are regrouped under a new title “Other budget implementation instruments”. The proposal also strongly focuses on achieving substantive simplification of the current EU financial rules. As mentioned in point 1 above, it contains numerous elements reducing the administrative burden for applicants and recipients of EU funds. The proposal does not exempt micro-enterprises from its scope. Such enterprises can be beneficiaries of EU funds and must therefore be subject to the rules. However, in certain areas, it reduces the costs for businesses which are often SMEs (replacing in the area of financial instruments the publication of individual data of beneficiaries by aggregate statistics) and more generally the numerous simplification measures should benefit to all enterprises •Fundamental rights The proposal is in line with the protection of fundamental rights. 4.BUDGETARY IMPLICATIONS The proposal does not have budgetary implications. •Detailed explanation of the specific provisions of the proposal 1. Simplification for recipients of EU funds 1.1. Simplify grant use, lump sums and cost calculations Many measures aim at simplifying life for recipients of EU funds. They relate to the content of grant applications, the value of contributions in kind, recognition of volunteers work, the conditions for award of grants without a call for proposals to Member States under specific conditions, the principle of no profit, the principles of non-cumulative award and the phasing out of grant decisions. Other measures demonstrate the move towards a simpler and leaner administration. 1.1.1. General financial rules The proposal promotes the use of simplified forms of grants, open to all EU funded programmes where the nature of the actions and underlying expenditure allow such approach (e.g. training and mobility actions, travel costs, etc.). This would alleviate the administrative burden, reinforce certainty on the reimbursed amount to beneficiaries and stimulate the up-take of simplified forms of grants and their combinations (Article 175). Use of expert judgment: the implementation of simplified forms of grants has been hampered by the lack of data needed to establish a reasonable approximation of the actual costs. This is often due to the innovative nature of the actions concerned or to the fact that actions are implemented only in certain countries and no data are available for other countries. In order to bridge this gap, it is proposed to make use of expert judgement in complement of or as an alternative to the statistical or historical data, depending on the nature of the action (Article 175). Simplifying the authorisation of lump sums, unit costs and flat rates: to replace the lengthy and burdensome process of authorisation (College decision for amounts higher 60.000 EUR per grant) by enabling the responsible authorising officer to adopt decisions authorising simplified forms. This level is more appropriate given the highly technical content (calculation methodologies, overviews of data, etc.) of the decision (Article 175). Simplifying and clarifying the content of grant applications including the accompanying supporting documents: no obligation to provide information demonstrating the applicants' financial and operational capacity if those are not verified (e.g. for public bodies); aligning the obligation to provide an audit report with the applicable EU and national law in the area of accounting (Article 189). Simplification of the principle of non–cumulative award: grants like scholarships to natural persons, direct support to refugees, unemployed and other persons in most need will be exempted from this rule since traditionally their value is quite low (Article 185).

Removing the no profit principle: the practical importance of the no-profit principle has diminished substantially: revenue-generating projects are in principle supported throughfinancial instruments. For projects that are in principle not revenue-generating, the no profit principle creates disincentives: beneficiaries are not encouraged to ensure that their projects become sustainable or profitable. This has in turn a negative impact on the economy. Simplifying the determination of the value of contributions in kind: these contributions do not constitute eligible costs. Therefore, their exact value is irrelevant. However, they may continue to be accepted as part of the co-financing. Any value reasonably established by the authorising officer at the time of acceptance of the estimated budget can demonstrate that there are other sources of financing of the action, apart from the EU grant, and that the co-financing principle is complied with (Article 184). Recognition of volunteer work: In order to facilitate the participation of small organisations in the implementation of the EU policies in an environment of limited availability of resources, it is necessary to recognise the value of the work provided by volunteers as eligible costs. As a result, such organisations may rely to a greater extent on volunteers' work for sake of providing co-financing to the action (Articles 175, 180 and 184 ). Simplifying and harmonising the conditions for award of grants without a call for proposals: it is proposed to extend the possibility to award direct grants to entities mandated by the Member States to the cases of a de facto or de jure monopoly or where direct beneficiaries have been chosen for their technical competencies, high degree of specialisation or administrative powers. In addition, the authorising officer would be authorised to combine the evaluation report and the award decision in one document. This will alleviate the administrative burden and will speed up the award of direct grants (Article 188). Simpler record-keeping: the record-keeping period shall be a uniform five years (three years if the funding is of an amount lower than or equal to € 60.000), also for indirect implementation (Article 128). Notional approach for grants: where grants are expressed only as an absolute value (not as a percentage of eligible costs), the eligibility of costs shall be verified at the latest at the time of the payment of the balance (Article 180). For this verification, a simplified ("notional") approach can be used (Article 150). Phasing out of grant decisions: it is proposed to phase out grant agreement and use predominantly grant agreements, subject to a review in the progress made towards e-grants at the end of the current MFF (Article 277). 1.1.2. Sectoral rules The improvements for using simplified cost options in the Financial Regulation are complemented by changes proposed for sectorial legislation extending the use of simplified cost options in ·Regulation (EU) No. 1303/2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund, ·European Social Fund Regulation (EU) No 1304/2013, ·Regulation (EU) No 223/2014 on the Fund for European Aid for the most deprived. 2. From multiple layers of controls to cross reliance on audit, assessment or authorisation, and harmonised reporting requirements The aim of these measures is to encourage reliance as far as possible on one single audit, assessment or authorisation (conformity to State aids for instance), when they meet the necessary conditions to be taken into account in the EU system. In order to avoid multiple layers of controls, the Commission shall promote the recognition of internationally accepted standards or international best practices in that area, as well as common reporting requirements among donors: ·Cross-reliance on ex-ante assessments and checks of recipients already conducted by other entities (donors) with regard to conditions equivalent to the EU ones (Article 122). ·Cross-reliance on audits conducted in accordance with internationally accepted standards is also encouraged always with a view of avoiding multi-audits of the same persons/entities for the same activities. This would allow the Commission to rely on independent audits conducted on the use of the EU funds by international partners (UN, World Bank etc.) or Member States (Article 123). ·Harmonisation of its reporting requirements with those of other donors: the Commission shall promote the adoption of common reporting requirements through the financial framework partnership agreements concluded with its main international partners (Article 126). ·Allowing the Commission to rely possible on the systems and procedures of the partners of the EU under indirect implementation if they have been positively assessed (Article 149) and impose remedies if certain rules/procedures are not sufficient to protect the EU financial interests; where the Commission requires the use of its own or specific procedures no assessment will be carried out. In all cases the level of supervision/control exercised should be adapted on the basis of the principle of proportionality. ·Enhancing Financial framework partnership agreements (Article 126): such agreements established with trusted partners for long term cooperation will in the future cover all the actions in direct and indirect implementation and reflect the extent to which the Commission may rely on the systems and procedures positively assessed as well as the application of a single set of rules for all legal instruments. Long term partnership agreements will offer a flexible framework for cross-reliance on assessments and audits where possible as well as for harmonising audit, reporting and other administrative requirements among donors. 3. Allowing the application of only one set of rules to hybrid actions or in the case of combination of measures or instruments The proposal aims at achieving further simplification for the partners of the EU under indirect implementation to the maximum extent possible.

3.1. General financial rules ·The application to an implementation partner of the Commission of only one set of rules instead of two would be allowed in certain cases – regardless of the nature of the action and of the role of the partner as a manager of funds or a "do-er". Where hybrid actions combine indirect and direct implementation and currently imply two sets of rules, accessory elements that are currently submitted to direct implementation rules (very often the case for technical assistance) would follow the rules of the main elements of the action (e.g. the running of a financial instrument with guarantees or else (Article 208(2)). ·In order to facilitate combinations between grants and financial instruments, a single set of rules (those of the financial instruments) shall apply to grants complementary to financial instruments if combined in a single action (Article 208(2)); ·The period for record-keeping for grants and financial instruments shall be aligned to five years (three years for amounts up to € 60.000 Article 128). 3.2. Sectoral rules ·Limiting state aid verifications to the state aid consistency check for the EU-level financial instruments foreseen under the Financial Regulation when ESI funds contribute to EU- level financial instruments (no double verification): Member States contributions to EU-level financial instruments which are made without any additional conditions as to the use of the contributions other than in relation to the geographic area for the use of the contribution shall not require another separate state aid verification as the financial instrument is already consistent with state aid rules based on the Financial regulation. This will be clarified through appropriate guidance. ·Extension of SME Initiative(SMEI), allowing for the use of the SME Initiative beyond 2016, making it possible for Member States to commit funding to the SMEI up to 2020. ·Extension and clarifications of CPR provisions on combinations between financial instruments and grants in order to facilitate their combined use. ·Introducing a new possibility to combine ESI Funds/EFSI and a new structure for combining ESI Funds with EIB and EIF: ESI Funds programmes should be able to contribute to financial instruments combined with EIB financing under EFSI. 4. More effective use of financial instruments 4.1. General financial rules Experience with financial instruments and in particular input from key implementation partners (EIB/EIF) point at the following possibilities to improve further their management and effectiveness: ·All reflows (revenues + repayments) generated by a financial instrument should be used for the same instrument to pursue efficiency gains; full transparency is guaranteed through reporting (Article 202(2)); ·EIB /EIF would retain their status as key EU partners in implementation but direct negotiations should be authorised between the Commission and a greater number of potential entities, to ensure a level-playing field amongst them (Article 149); ·Given the impossibility to impose the full respect of EU rules where the EU participates in a financial instrument as minority shareholder of a fund, it is proposed to allow a proportionate application of EU rules in such cases instead (Article 208(4)); ·The publication of individual data of final recipients would be replaced with statistical data, aggregated per relevant criteria proposed for final beneficiaries receiving EU support of less than € 500.000 (policy area, type of support, type of beneficiary, geographical distribution (Article 36(5)). ·Final beneficiaries and intermediaries shall not be required to provide a declaration of honour confirming that they are not in one of the exclusion situations where the implementing partner has an exclusion policy considered equivalent to that of the EU (Article 131). ·Two new sections are proposed to regulate other instruments bearing a financial risk, such as budgetary guarantees and financial assistance to Member Stets or third countries (Sections 2 and 3 of Chapter 2 of Title X). ·Rules to authorise, manage and control non-provisioned contingent liabilities have been introduced (Articles 203 to 206). 4.2. Sectoral rules

To further optimise management and use of financial instruments in shared implementation, changes to the Common Provisions Regulation 1303/2013 (CPR) are proposed: ·Clarifying the possibility for Member State Management Authorities to directly award a contract, including technical assistance, to the EIB/EIF, other International Financial Institutions as well as National Promotional Banks. ·Treasury management: where the temporary investment of ESI Fund money paid into a Financial Instrument before the investments in final recipients generates negative interests, their payment from resources paid back when at least one cycle of investments has been carried out shall be authorised. ·Certain EAFRD measure specific rules shall be removed that have hindered the programming of financial instruments in Rural Development and their implementation by the fund managers, to increase the leverage effect of the EAFRD funding through a higher use of financial instruments. 5. More flexible budget management 5.1. General financial rules The proposal sets out several ways for more budgetary flexibility, in order to allow the Union to respond to unforeseen challenges and new tasks more effectively: ·Allow for the establishment of EU trust funds also for emergency, post-emergency or thematic actions within the EU (and not only for third countries). Recent events in the European Union show the need for increased flexibility for funding within the EU. As the boundaries between external and internal policies are increasingly blurred, this would also provide a tool for replying to challenges crossing the borders (Article 227). ·Increase the "negative reserve" from EUR 200 million to EUR 400 million and thus also follow up to a Council request to limit the number of Draft Amending Budgets linked to payments (Article 48). ·Create a flexibility cushion for external action via the carry-over of non-allocated funds for the Instrument for Pre-accession Assistance (IPAII) , the European Neighbourhood Instrument (ENI) and the financing instrument for development cooperation (DCI) to year N+1 in the limit of 10% of the initial appropriations of each instrument (Article 12). ·Foresee more flexibility for crisis and emergency situations and humanitarian aid in grants: Administrative procedures are simplified to enable quick and efficient response (e.g. retroactive eligibility before the submission of the application to be decided by the authorising officer responsible, Article 186). ·Use of imprest accounts in the Union Delegations would be allowed for payment of limited amounts by budgetary procedures. Non-statutory staff in the field of crisis management aid and humanitarian aid operations could administrate such accounts and sign legal commitments executed from them up to EUR 2 500 (Article 109). ·Increase flexibility for autonomous transfers by the Commission by enlarging the current scope, i.e. by also allowing transfers of operational expenditure between different titles if they are covered by the same basic act, including support chapters, and from the administrative support lines to the corresponding operational lines (Article 28). ·Simpler mobilisation of the EU Solidarity Fund EUSF via an autonomous transfer from the reserve to the budget line once the decision of mobilisation has been adopted by the European Parliament and the Council (Article 28). ·Simpler mobilisation of the European Globalisation Fund EGF via automatic approval of transfers from the reserve to the budget line upon adoption by the Budgetary Authority on the mobilisation of the Fund (Article 30). ·Clarify that amounts corresponding to commitment appropriations for the Emergency Aid Reserve and the EU Solidarity Fund EUSF are carried over automatically (Article 12). ·Remove the obligation to first use the appropriations authorised for the current financial year until they are exhausted before using appropriations carried over. ·Allow use of internal assigned revenue for another purpose than the one for which it is assigned in case there are no identified needs allowing such revenue to be used for the same purpose (Article 30(3)). ·Allow the institutions and bodies to accept corporate in kind sponsoring for specific events or activities (i.e. not receptions or other exclusively social events). For that provision to be implemented, each institution would first authorise the principle of acceptance of sponsoring in kind and set out specific guidelines covering notably ethical aspects (Article 24). ·Foresee that, as part of the approval procedure of the sale of buildings or land, the Budget Authority may accept, on a case by case basis that the proceed of that sale is considered assigned revenue, in order to improve facility management by the Commission and facilitate the purchase of other buildings (Article 20(3)(g)).

·Create a EU crisis reserve with the reuse of decommitted appropriations. ·For the next Multiannual Financial Framework, create the possibility that financial operations other than financial instruments generate a contingent liability for the Union exceeding the financial assets provided to cover the financial liability of the Union (Article 203) and a common provisioning fund holding the resources provisioned for financial operations (Article 205). 5.2 Sectoral rules ·The possibility for the Member States to help also in case of man-made catastrophes like the refugee crisis and to use available funds immediately (without having to wait for the submission of a programme amendment) is introduced in Regulation (EU) No 1305/2013 on support for rural development by the European Agricultural Fund for Rural Development. Also, a specific investment priority for migrants and refugees is added to simplify the programming of measures to help migrants and refugees under the European Regional Development Fund Regulation (EU) No 1301/2013. ·European Union Programme for Employment and Social Innovation (EaSI-Regulation No 1296/2013): in order to increase the adjustment capacity of EaSI to crisis and changing political priorities, flexibility is needed concerning the indicative spending levels foreseen for each of the three axis of the program and for each of the thematic priorities within these. In addition, the derogation allowing use of the European Globalisation Fund for the benefit of young people not in employment, education or training should be maintained given the current economic context. ·Connecting Europe Facility Regulation Nr 1316/2013: Given the success of the Multi-Annual Work Programmes, it is necessary to increase the flexibility so that 95% can be spent on multi-annual programmes and further projects supported with most value added for the Trans European Transport Network (Core Network Corridors, cross border projects and projects on the other sections of the Core Network). ·Management of expenditure for the food chain, animal health and animal welfare (Regulation (EU) No 652/2014): given the positive experience with the application of this rule and the substantial reduction of the related workload on the part of the beneficiaries and of Commission services, it is proposed to extend the possibility to use budgetary commitments divided into annual instalments. ·In Regulation (EU) No 1305/2013 on support for rural development, targeting mutual funds helping farmers in case of sharp drops in income in specific sectors shall be allowed, and subsidisation of the initial capital stock of such funds. 6. Focus on results and streamlining reporting The proposal includes a series of measures aimed at focusing better the budget on results, establishing a clear performance framework, enhancing transparency and streamlining reporting. 6.1 Focus on results A number of proposals open to all policy areas and focusing on results rather than on what has been actually spent. They demonstrate the Commission's commitment to provide the necessary conditions for a result-oriented approach: ·Allowing for payments based on conditions fulfilled, output or performance in all management modes (e.g. payments per resettled refugee in the AMIF funds or the support for young farmer setting up, Article 121). In such cases, the financing of projects is delinked from the reimbursement of the costs incurred by the recipients of EU funds: it depends directly on the results delivered on the ground. What matters is either the fulfilment of certain conditions as set out ex ante in the basic act or Commission Decisions and/or the achievement of results measured through performance indicators (ex-post). Such system enhances ownership/commitment by the recipients of funds to achieve results. They allow a significant reduction of the administrative burden and of the cost of controls. Controls can indeed be limited to verifying whether the conditions/agreed results have been met and the administrative burden. This in turn limits the risk of legality and regularity errors. It has been advocated by the European Court of Auditors under the name “entitlements”. ·Facilitating "Prizes"(Title IX): the title on “Prizes” is shortened and simplified; the obligation to announce prizes of a value of EUR 1 million or more in the statements accompanying the draft budget is replaced by prior information of the European Parliament and an explicit announcement of such prizes in the financing decision. ·Single lump sum (Article 176): a "single lump sum" could in the future cover all eligible costs of the action. Checks and controls will focus exclusively on the outputs/deliverables. The single lump sum is based on the assessment of the budget proposed by the grant applicant in view of the principles of efficiency, economy and effectiveness including by reference to relevant data and/or expert judgment. ·Priority to simplified forms of grants where payment is triggered by output and results (Article 175): an input based approach should only be considered if the output based approach is impossible or not appropriate. Currently simplified forms are predominantly used to cover the value of inputs (e.g. number of man-days, number of travels, number of days spent in mission, etc.). The possibility to pay simplified forms against the delivery of concrete outputs (e.g. a conference delivered, a festival organized, a prototype built, etc.) is similarly encouraged. ·Clarifying the scope of controls of simplified forms of grants and of their consequences if outputs are not delivered (Article 177): controls concentrate on the fulfilment of the conditions triggering the payment (e.g. whether a supported European movie was produced with the needed quality and distributed with the needed quantity, whether an Erasmus student actually studied abroad, etc.). No reporting on the costs actually incurred by the beneficiary is required. If the conditions triggering the payment were not fulfilled or if the agreed activities were implemented poorly, partially or late, the Commission shall reduce the amount of the grant proportionately to the failure and to recover amounts unduly spent. 6.2 A clear performance framework To complement the stronger focus on results, a clear performance framework is proposed: ·Linking performance, objective-setting, indicators, results and the principles of economy, efficiency and effectiveness in the use of appropriations (Article 31).

·Providing for performance based fees to remunerate organisations for managing EU funds (Article 150); ·Considering programme statements as the main source of programme performance information (Article 39); ·Merging of the "Synthesis" and "Article 318 TFEU" reports in one “Annual Management and Performance Report for the EU Budget” to deliver annually a single performance report on the EU budget (as from the 2015 financial year, Article 239). ·Aligning the terminology on evaluation to the provisions of the 2016 Inter Institutional Agreement on better law making and creating a link between ex-ante evaluations under the Financial Regulation and Impact Assessments (Article 32). 6.3 Streamlining reporting 6.3.1. General financial rules Successive revisions of the Financial Regulation have significantly increased the number of reports and information requested including on accounts: reporting is now provided through scattered documents, delivered along a differed calendar. In order to increasing efficiency and transparency not only towards the budgetary authority but also towards the general public, without however affecting the level of information currently provided, it is proposed: ·To gather reporting obligations around two key moments: reports accompanying ·the draft budget; all reporting on EU-level financial instruments would be merged into a single document accompanying the draft budget (Article 39). ·and those submitted as part of the discharge process: "the integrated financial reporting package” – a separate Chapter would deal with budgetary and other financial reporting (Articles 239-245). ·To make the new Annual Management and Performance Report for the EU Budget, resulting from the merge as from the 2015 financial year, of the Synthesis and of the Article 318 TFEU report is a key element of the integrated reporting package (Article 239). ·To specify that the external audit by the Court of Auditors takes account of the multiannual character of programmes (Article 247(1)). 6.3.2. Reporting: ·Reporting obligations are streamlined by eliminating certain redundancies (CPR). 7. A simpler and leaner EU administration 7.1. General financial rules A series of simplification measures aims at allowing the EU institutions to work more efficiently, notably by implementing jointly administrative appropriations to achieve economies of scale: ·Providing an explicit legal basis for Service Level Agreements (SLA) between departments of the EU institutions, EU bodies and European offices and extending to all institutions the possibility to conclude service-level agreements facilitating the implementation of administrative appropriations. In the future it will also be possible to delegate implementation of administrative appropriations to an office set up by the Commission. ·Clarifying the distinction between obligatory and non-obligatory tasks of offices (Articles 64 and 65): obligatory tasks must be covered by appropriations entered in the section of the budget relating to the office. Non-obligatory tasks which an office agrees voluntarily to conduct at the request of another institution or body are covered from the budget of the respective institution or body. ·Allowing multiannual financing decisions and reducing the amount of obligatory elements in a financing decision (Article 108). In addition, it is proposed that the financing decision constitutes at the same time the annual or the multi annual work programme. These changes would speed up the implementation of the budget in years 2 and following of a programme.

·Clarifying the rules on Executive Agencies (Article 68): they shall receive an annual contribution; their director acts as authorising officer by delegation when implementing operational appropriations; the delegation of an operational programme to an executive agency may include pilot projects and preparatory actions as well as the implementation of administrative expenditure in order to achieve synergies and economies of scale. ·Merging the Article 139 of the Financial Regulation Panel with the Financial Irregularity Panel (Article 90): for efficiency reasons, the Financial Regulation Panel recommending exclusion and financial penalties on economic operators would also become competent for financial irregularities by EU staff members, while the Disciplinary Board would continue to draw the consequences of these irregularities under the Staff Regulations. 7.2. Sectoral rules ·Several changes of the Common Provisions Regulation are proposed to facilitate programme management and nation-wide programmes as well as Joint Action Plans comprising projects focussing on output and results. ·In the area of direct payments for farmers, support is granted to active farmers and certain measures focus the support on young farmers. Proportionality for financial corrections linked to public procurement errors is introduced to avoid that such errors are always considered as affecting 100% of aid concerned. 8. Other changes Revenue operations: the following changes are proposed: ·The provision on negative adjustments of own resources for accounting purposes is modified for reasons of transparency (Article 94). ·A new provision sets a time limit within which a debit note shall be sent to the debtor (Article 96 (2)), reflecting recent case law of the Court of Justice. ·A new Article 107 sets the rules concerning the rate to be applied for compensatory interests in cases where an amount shall be reimbursed following a judgement of the Court of Justice of the European Union or an amicable settlement. ·The provision concerning fines, other penalties or sanctions is modified to make clear that the amounts provisionally cashed shall be repaid to the third party concerned taking into account the return; and that fines imposed by institutions other than the Commission (e.g. Council in line with Regulation 1173/2011) are also covered by the Financial Regulation (currently limited to fines imposed by the Commission, Article 106). ·Wording on assigned revenue is modified to reflect contributions to measures like the Turkey refugee facility (Article 20(2)). List of sectoral acts modified by the proposal: ·Council Regulation (EC) No 2012/2002 of 11 November 2002 establishing the European Union Solidarity Fund (OJ L 311, 14.11.2002, p.3); ·Regulation (EU) No 1296/2013 of the European Parliament and of the Council of 11 December 2013 on a European Union Programme for Employment and Social Innovation ("EaSI") and amending Decision No 283/2010/EU establishing a European Progress Microfinance Facility for employment and social inclusion (OJ L 347 20.12.2013, p. 238); ·Regulation (EU) No 1301/2013 of the European Parliament and of the Council of 17 December 2013 on the European Regional Development Fund and on specific provisions concerning the Investment for jobs and growth goal and repealing Regulation (EC) No 1080/2006 (OJ L 347, 20.12.2013, p. 289–302); ·Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (OJ L 347 20.12.2013, p. 320); ·Regulation (EU) No 1304/2013 of the European Parliament and of the Council of 17 December 2013 on the European Social Fund and repealing Council Regulation (EC) No 1081/2006 (OJ L 347 20.12.2013, p. 470); ·Regulation (EU) No 1305/2013 of the European Parliament and of the Council of 17 December 2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) No 1698/2005 (OJ L 347, 20.12.2013, p. 487–548); ·Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy and repealing Council Regulations (EEC) No 352/78, (EC) No 165/94, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No 485/2008 (OJ L 347, 20.12.2013, p.549);

·Regulation (EU) No 1307/2013 of the European Parliament and of the Council of 17 December 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No 637/2008 and Council Regulation (EC) No 73/2009 (OJ L 347 20.12.2013, p. 608); ·Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 establishing a common organisation of the markets in agricultural products and repealing Council Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007 (OJ L 347, 20.12.2013, p.671); ·Regulation (EU) No 1309/2013 of the European Parliament and of the Council of 17 December 2013 on the European Globalisation Adjustment Fund (2014-2020) and repealing Regulation (EC) No 1927/2006 (OJ L 347, 20.12.2013, p. 855–864); ·Regulation (EU) No 1316/2013 of the European Parliament and of the Council of 11 December 2013 establishing the Connecting Europe Facility, amending Regulation (EU) No 913/2010 and repealing Regulations (EC) No 680/2007 and (EC) No 67/2010 Text with EEA relevance (OJ L 348, 20.12.2013, p. 129–171); ·Regulation (EU) No 223/2014 of the European Parliament and of the Council of 11 March 2014 on the Fund for European Aid to the Most Deprived (OJ L 72, 12.3.2014, p. 1–41); ·Regulation (EU) No 283/2014 of the European Parliament and of the Council of 11 March 2014 on guidelines for trans-European networks in the area of telecommunications infrastructure and repealing Decision No 1336/97/EC Text with EEA relevance (OJ L 86, 21.3.2014, p. 14–26); ·Regulation (EU) No 652/2014 of the European Parliament and of the Council of 15 May 2014 laying down provisions for the management of expenditure relating to the food chain, animal health and animal welfare, and relating to plant health and plant reproductive material, amending Council Directives 98/56/EC, 2000/29/EC and 2008/90/EC, Regulations (EC) No 178/2002, (EC) No 882/2004 and (EC) No 396/2005 of the European Parliament and of the Council, Directive 2009/128/EC of the European Parliament and of the Council and Regulation (EC) No 1107/2009 of the European Parliament and of the Council and repealing Council Decisions 66/399/EEC, 76/894/EEC and 2009/470/EC (OJ L 189, 27.6.2014, p. 1–32); ·Decision No 541/2014/EU of the European Parliament and of the Council of 16 April 2014 establishing a Framework for Space Surveillance and Tracking Support (OJ L 158, 27.5.2014, p. 227–234). 2016/0282 (COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the financial rules applicable to the general budget of the Union and amending Regulation (EC) No 2012/2002, Regulations (EU) No 1296/2013, (EU) 1301/2013, (EU) No 1303/2013, EU No 1304/2013, (EU) No 1305/2013, (EU) No 1306/2013, (EU) No 1307/2013, (EU) No 1308/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014,(EU) No 283/2014, (EU) No 652/2014 of the European Parliament and of the Council and Decision No 541/2014/EU of the European Parliament and of the Council THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 42, 43(2), 46(d), 149, 153(2)(a), 164, 168(4)(b), 172, 175, 177, 178, 189(2), 209(1), 212(2), 322(2) and 349 thereof, in conjunction with the Treaty establishing the European Atomic Energy Community, and in particular Articles 106athereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee, Having regard to the opinion of the Committee of the Regions, Having regard to the opinion of the Court of Auditors Acting in accordance with the ordinary legislative procedure,

Whereas: (1)Since following three years of implementation further amendments are to be made to the financial rules applicable to the general budget of the Union in order remove bottlenecks in implementation by increasing flexibility, to simplify delivery for the stakeholders and the services and to focus more on results, Regulation (EU, Euratom) no 966/2012 of the European Parliament and of the Council should be repealed and replaced by this Regulation. (2)In order to reduce the complexity of financial rules applicable to the general budget of the Union ('the budget') and to include the relevant rules in one single regulation ("single rule book"), Commission Delegated Regulation (EU) No 1268/2012 should be repealed. In the interest of clarity, main rules from Regulation (EU) No 1268/2012 should be included in this Regulation, others should be included in guidance for services. (3)The fundamental budgetary principles should be maintained. Derogations from those fundamental principles for specific areas such as research, external actions and structural funds should be reviewed and simplified as far as possible, taking into account their continuing relevance, their added-value for the budget, and the burden they impose on stakeholders. (4)Up to 10% of the funds of the Instrument for Pre-accession Assistance (IPA II), the European Neighbourhood Instrument and the financing instrument for development cooperation (DCI) may be kept unallocated at the beginning of the financial year to allow additional funding to respond to major unforeseen needs, new crises situations or significant political shifts in third countries, in addition to the amounts already programmed. These unallocated funds, if not committed during the year, should be carried over by a Decision of the Commission. (5)Carry-over rules should be presented more clearly, making a distinction between the automatic and non-automatic carry-overs. (6)In order to optimise the implementation of the budget, it is important to allow for the carrying over and use of external assigned revenues for the succeeding programme or action. It should be possible to carry over internal assigned revenue for one year only, except where this Regulation provides otherwise. (7)The rules governing transfers of appropriations should allow for greater flexibility in order to ensure better budget implementation. To that end, it is important for the Commission to have the possibility of deciding on transfers, of up to 10%, of operational appropriations between Titles when they are covered by the same basic act. Transfers from administrative support lines to the corresponding operational lines should also be done autonomously by the Commission. (8)In order to improve agility of the implementation of special instruments, simplified mobilisation and transfer procedures are necessary for the European Globalisation Adjustment Fund and the European Union Solidarity Fund. (9)Concerning internal assigned revenue, derogation from the principle of specification should be introduced to allow optimal use of all types of appropriations available. In this respect, in case there are no identified needs allowing such revenue to be used for the purposes for which it is assigned, its use for a different purpose should be allowed. (10)Union institutions should be able to accept any donation made to the Union. (11)An enabling clause should be introduced to allow for in-kind sponsoring by a legal person of an EU event or activity for promotional or corporate social responsibility purposes. (12)The concept of performance as regards the EU budget should be clarified. Performance should be described as a direct application of the principle of sound financial management. There should be a link between performance, objective-setting, indicators, results and economy, efficiency and effectiveness in the use of appropriations. To avoid conflicts with existing performance frameworks of the different programmes, references in terms of performance terminology should be limited to objectives and monitoring progress in achieving them. (13)Union legislation should be of high quality, focus on areas where it produces greatest added value for European citizens and is as effective and efficient as possible in delivering the common policy objectives of the Union. Subjecting existing and new spending programmes and activities entailing significant spending to evaluation can help achieve these objectives. (14)The principle of transparency, enshrined in Article 15 TFEU which requires the institutions to work as openly as possible, implies, in the area of the implementation of the budget, that citizens are able to know where, and for what purpose, funds are spent by the Union. Such information fosters democratic debate, contributes to the participation of citizens in the Union's decision-making process and reinforces institutional control and scrutiny over Union expenditure. Such objectives should be achieved by the publication, preferably using modern communication tools, of relevant information concerning all recipients of Union funds which takes into account such all recipients' legitimate interests of confidentiality and security and, as far as natural persons are concerned, their right to privacy and the protection of their personal data. Institutions should therefore adopt a selective approach in the publication of information, in accordance with the principle of proportionality. Decisions to publish should be based on relevant criteria in order to provide meaningful information. (15)The information on the use of Union funds implemented under direct implementation should be published on an internet website of the institutions and should include at least the name, the locality, the amount and the purpose of the funds. That information should take into account relevant criteria such as the periodicity, the type and the importance of the measure. (16)The name and locality of the recipients of Union funds should be published for prizes, grants and contracts awarded following the opening-up of a public procedure to competition, as it is the case in particular for contests, call for proposals and call for tenders, in the respect of the principles of the TFEU and in particular the principles of transparency, proportionality, equal treatment and non-discrimination. Moreover such publication should contribute to the control of the public selection procedures by the rejected applicants of the competition. (17)The publication of personal data referring to natural persons should not exceed the duration during which the funds are being used by the recipient and should therefore be removed after two years. The same should apply to personal data referring to legal persons for whom the official title identifies one or more natural persons. (18)In most of the cases covered by this Regulation, the publication concerns legal persons. (19)When natural persons are concerned, such publication should only be envisaged respecting the principle of proportionality between the importance of the amount granted and the need to control the best use of the funds. Where natural persons are concerned, the publication of the region on NUTS 2 level is consistent with the objective of publication of recipients, ensures equal treatment between Member States of different sizes while respecting the recipients’ right to private life and in particular the protection of their personal data.

(20)Information on scholarships, and other direct support paid to natural persons in most need should remain exempt from publication. (21)In order to ensure the respect of the principle of equal treatment between recipients, the publication of information related to natural persons should also be ensured in line with the obligation for the Member States to establish a large transparency of the contracts above the amount laid down in 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. (22)The name and the locality of the recipient and the amount and the purpose of the funds should not be published if it risks endangering the integrity of the recipient as protected by the Charter of Fundamental Rights of the European Union or would harm the legitimate commercial interests of the recipient. (23)In the case of indirect and shared implementation, it should be for the persons, entities or designated bodies implementing Union funds to make available information on recipients and final recipients. Where applicable, the level of detail and criteria should be defined in the relevant sector specific rules and may be further defined in the financial framework partnership agreements. The Commission should make available a reference of the website where the information on recipients and final recipients can be found. (24)In the interest of increased readability and transparency of data on financial instruments implemented under direct and indirect implementation, it is appropriate to merge all reporting requirements in one single working document attached to the draft budget. (25)It is appropriate to provide for a possibility for the Commission to conclude service-level agreements with other insitutions in order to facilitate the implementation of administrative appropriations and also for an explicit possibility to conclude such agreements between departments of the institutions, Union bodies, European offices, bodies or persons entrusted with implementation of specific actions in the CFSP pursuant to Title V of the TEU and the Office of the Secretary General of the Board of Governors of the European schools for the provision of services, supply of products, execution of works or the implementation of building contracts. (26)It is appropriate to define the European offices and to distinguish between obligatory and non-obligatory tasks of such offices. A possibility for the Union institutions, Union bodies and other European offices to delegate authorising officer powers to the director of the European office should be introduced. European offices should also have the possibility to conclude service-level agreements for the provision of services, supply of products, for execution of works or for implementation of building contracts. It is appropriate to set out specific rules for the provision of accounting records, provisions authorising the Commission's accounting officer to delegate some of his tasks to staff in those offices and operating procedures for the bank accounts which the European offices may be authorised to open in the Commission's name. (27)In order to further improve the cost-efficiency of executive agencies and in the light of the practical experience gained with other Union bodies, the accounting officer of the Commission should be allowed to be entrusted with all or part of the tasks of the accounting officer of the executive agency. (28)For reasons of legal certainty, it is necessary to clarify that the directors of executive agencies act as authorising officers by delegation when managing operational appropriations of programmes delegated to their agency. To achieve the full effect of efficiency gains resulting from a global centralisation of certain support services the possibility for executive agencies to implement administrative expenditures should be explicitly mentioned. (29)It is necessary to establish rules on the powers and responsibilities of financial actors, in particular authorising officers and the accounting officers. (30)The European Parliament and Council should be informed of the appointment or termination of duties of an authorising officer by delegation, internal auditor and accounting officer within two weeks. (31)Authorising officers should be fully responsible for all revenue and expenditure operations executed under their authority, including in terms of internal control systems, and should be held accountable for their actions, including, where necessary, through disciplinary proceedings. (32)Consequently, the tasks, responsibilities and principles of the procedures to be observed should also be laid down. It is also necessary to provide that the authorising officers by delegation shall ensure that the authorising officers by subdelegation and their staff receive information concerning the control standards and respective methods and techniques and that measures are taken in order to ensure the functioning of the control system which should replace the obligation to establish specific code of professional standards applicable to financial verifications only. The responsibilities assumed are accounted for in an annual report to the institution and the report shall include the required financial and management information to support the authorising officer by delegation’s declaration of assurance on the performance of his or her duties, including the information on the overall performance of the operations carried out. The supporting documents relating to the operations carried out should be kept. Finally, all the various forms of negotiated procedure for the award of public contracts should, since those contracts represent derogations from the usual award procedures, be the subject of a special report to the institution and of a communication to the European Parliament and Council. (33)The double role of the Head of Union delegation, and of their deputies in their absence, as authorising officer by subdelegation for the European External Action Service (hereinafter ‘EEAS’) and, as regards operational appropriations, for the Commission should be taken into account. (34)The delegation of powers of budget implementation by the Commission concerning the operational appropriations of its own section to the deputy Heads of Delegations is restricted to situations where the performance of these tasks by the deputy Heads of Delegations is strictly necessary in order to ensure business continuity during the absence of the Heads of Delegations. The deputy Heads of Delegations cannot exercise these powers on a systematic basis or for reasons of internal work division. (35)The accounting officer continues to be responsible for the proper execution of payments, the collection of revenue and the recovery of amounts receivable. He/She manages the treasury, bank accounts and third party files, keeps the accounts and is responsible for drawing up the institution's financial statements. The accounting officer of the Commission is the only person who is entitled to define the accounting rules and harmonised charts of accounts, while accounting officers of all other Union institutions define accounting procedures applicable in their institutions. (36)The arrangements for the appointment and termination of the accounting officer’s duties should also be established. (37)It is appropriate that the accounting officer should set up procedures to ensure that the accounts opened for the requirements of treasury management and imprest accounts are not in debit. (38)The conditions for the use of imprest accounts, a system of management which constitutes an exception to normal budgetary procedures, should also be laid down, and the tasks and responsibilities of the imprest administrators, as well as those of the authorising officer and accounting officer in connection with the control of imprest accounts, should be set out. The European Parliament and Council should be informed of any appointment or termination of duties. For reasons of efficiency, imprest accounts should be set up in Union delegations, for appropriations from both the Commission and EEAS sections of the budget. It is also appropriate to allow under specific conditions for the use of imprest accounts in the Union delegation for payments of limited amounts by budgetary procedures. As regards the appointment of imprest administrators, it has proven necessary to choose them also from personnel employed by the Commission in the field of crisis management aid and humanitarian aid operations whenever there is no Commission statutory staff available. (39)In order to take into account the situation in the field of humanitarian aid operations whenever there is no respective Commission statutory staff available and the technical difficulties to have all legal commitments signed by the authorising officer responsible, it should be allowed for the personnel employed by the Commission in that field to sign legal commitments of a very low value up to EUR 2500 which are linked to the payments executed from the imprest accounts, and for the Heads of Union delegations or their deputies to sign legal commitments on the instruction of the authorising officer responsible.

(40)Once the tasks and responsibilities of each financial actor have been defined, they may be held liable only under the conditions laid down in the Staff Regulations of Officials of the European Union and the Conditions of Employment of Other Servants of the European Union. The specialised financial irregularities panels have been set up in the Union institutions, however due to limited number of cases submitted to them and for reasons of efficiency, it is appropriate to transfer their functions to the newly established inter-institutional panel which has been set up to assess requests and issue recommendations on the imposition on administrative sanctions (exclusion and financial penalty) referred to it by the Commission or other Union institutions and Union bodies. This transfer also aims at avoiding duplication and mitigating the risks of contradictory recommendations or opinions, in cases where both an economic operator and an EU staff member are involved. The procedure should be maintained by which an authorising officer may seek confirmation of an instruction which that officer considers to be irregular or contrary to the principle of sound financial management, and thus be released from any liability. The composition of this panel should be modified when it fulfils this role. (41)As regards revenue, it is necessary to address negative adjustments of own resources covered by Council Regulation on the system of the European Union's own resources. Except for the special case of own resources, it is necessary to keep the tasks and controls falling within the responsibility of the authorising officers at the different stages of the procedure: establishment of the estimate of amounts receivable, recovery order, dispatch of the debit note informing the debtor that the amount receivable has been established, calculation of any default interest due, and the decision, where necessary, to waive an entitlement subject to criteria guaranteeing compliance with sound financial management in order to ensure an efficient collection of revenue. (42)The authorising officer should be able to waive totally or partially the recovery of an established amount receivable when the debtor has entered into any of the insolvency proceeding as defined by Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings, in particular in cases of judicial arrangements, compositions and analogous proceedings. (43)Specific provisions on procedures of adjustment or cancellation of an estimate of amount receivable should be applied. (44)Due to the recent developments on the financial markets and the ECB rate applied to its principal refinancing operations, it is necessary to review the provisions concerning interest rate for fines or other penalties and to provide for rules in cases of negative interest rate. (45)To reflect the specific nature of receivables consisting in fines or other penalties imposed by the Institutions under the TFEU or Euratom Treaty, it is necessary to introduce specific provisions on the interest rates applicable on amounts due but not yet paid, in the case such amounts are increased by the Court of Justice of the European Union. (46)The rules on recovery should be both clarified and strengthened. In particular, it should be specified that the accounting officer shall recover amounts by offsetting them also against amounts owed to the debtor by an executive agency when it implements the Union budget. (47)For the sake of legal security, the rules regarding the delays when a debit note is to be sent should be defined. (48)In order to secure the management of assets whilst also yielding financial remuneration, it is necessary to have the amounts provisionally cashed, such as competitions fines which are being contested, invested in financial assets, and to determine the assignment of the return on them. Since the Commission is not the only institution which is entitled to impose fines or other penalties, it is necessary to set provisions concerning such fines or other penalties imposed by other institutions and to set rules for their recovery which should be equivalent to those for the fines or penalties imposed by the Commission. (49)In order to ensure that the Commission has all the necessary information for the adoption of the financing decisions, it is necessary to lay down the minimum requirements for the contents of financing decisions on grants, procurement, trust funds, prizes, financial instruments, blending facilities and budgetary guarantees. At the same time, in order to give a longer-term perspective to the potential recipients, it is necessary to allow that the financing decisions are adopted for more than one year but the implementation being subject to the availability of budget appropriations for the respective year. In order to enable such longer-term perspective it is necessary to reduce the number of the elements required for the financing decision. With the aim of simplification, the financing decision should at the same time constitute an annual or multi-annual programme. Since the contribution to the bodies referred to in Articles 69 and 70 is already established in the annual budget, it should not be required to adopt a specific financing decision in this respect. (50)As regards expenditure, the relationship between financing decisions, global commitments and individual commitments as well as concepts of budgetary and legal commitment of expenditure should be clarified in order to establish a clear framework for the different stages of budget implementation. (51)In order to take into account in particular the number of legal commitments concluded in the Union delegations and representations and the exchange rate fluctuations experienced by them, the provisional commitments should be possible also in cases where the final recipients and the amounts are known. (52)In order to make better use of the appropriations available for the implementation of external actions, the time limit during which individual legal commitments may be made on the basis of global budgetary commitment should be removed as well as the obligation to conclude a contribution agreement until 31 December of year n+1 in cases where a financing agreement with the third country presents the global budgetary commitment covering also the contribution agreement. (53)As regards the typology of payments which may be made by authorising officers, clarification of the various types of payments should, in accordance with the principle of sound financial management, be provided. The rules for clearing of pre-financing payments should further be clarified in particular for situations where no interim clearing is possible. To this effect, appropriate provisions should be included in legal commitments signed. (54)This Regulation should stipulate that the payments must be made within a specified time limit and that in the event of failure to respect this time limit creditors will be entitled to default interests to be charged to the budget, with the exception of Member States and as newly introduced, also the European Investment Bank and the European Investment Fund. (55)It is considered appropriate to integrate the provisions concerning validation and authorisation of expenditure in one article and to introduce a definition of de-commitments. Since the transactions are carried out in computerised systems, the concept of "signing a 'passed for payment' voucher" has been replaced by "electronically secured signature" except in a limited number of cases. It is also necessary to clarify that the validation of expenditure applies to all eligible costs, i.e. also such which are not associated with a request for payment, this being the case for the clearing of pre-financing. (56)In order to reduce complexity, streamline existing rules and improve the readability of this Regulation rules common to more than one budget implementation instruments should be established. For those reasons certain provisions should be regrouped, the wording and scope of other provisions should be aligned and unnecessary repetitions and cross referencing should be removed. (57)More emphasis should be put on performance and results. It is thus appropriate to define an additional form of financing not linked to costs of the relevant operations in addition to the forms of Union contribution already well established (reimbursement of the eligible costs actually incurred, unit cost, lump sums and flat-rate financing). This form of financing should be either based on the fulfilment of certain conditions ex ante or the achievement of results measured by reference to the previously set milestones or through performance indicators. (58)Where the Commission carries out assessments of the operational and financial capacity of recipients of EU funds or of their systems and procedures, it should be able to rely on the assessments already conducted by other entities or donors such as international organizations, in order to avoid duplicating assessments of the same recipients. The possibility to cross-rely on assessments conducted by other entities should be used where these assessments were made with regard to conditions equivalent to those set out in this Regulation for the applicable method of implementation. Therefore, in order to foster cross reliance on assessments among donors, the Commission should promote the recognition of internationally accepted standards or international best practices. (59)It is also important to avoid that recipients of EU funds are audited several times by different entities on the use of these funds. It is therefore necessary to foresee the possibility to rely on audits already carried out by independent auditors provided that they are based on internationally accepted standards, that they provide reasonable assurance, and that they have been conducted on the financial statements and reports setting out the use of the Union contribution. Such audits should then form the basis of the overall assurance on the use of EU funds.

(60)It is important to allow Member States to request that resources allocated to them under shared implementation are transferred at Union level and implemented by the Commission in direct or indirect implementation, where possible for the benefit of the Member State concerned. This would optimise the use of these resources and of the instruments established under this Regulation or under sector specific Regulations including the EFSI Regulation, to which the Member States would request these resources to be transferred. In order to guarantee an efficient implementation of these instruments, it is necessary to foresee that where resources are transferred to instruments established under this Regulation or under sector specific Regulations including the EFSI Regulation, the rules of those regulations shall apply. (61)In order to provide for a long term cooperation mechanism with recipients of Union funding, the possibility of signing financial framework partnership agreements should be provided for. Financial framework partnerships should be implemented through grants or through cooperation agreements with entities implementing Union funds. For this purpose the minimum content of such agreements should be specified. Financial framework partnerships should not unduly restrict access to Union funding. (62)The conditions and procedures for suspending, terminating and reducing the Union contribution should be harmonised across the different budget implementation instruments (for example grants, procurement, indirect implementation, prizes, etc.). The grounds for such suspension, termination or reduction should be defined. (63)This Regulation should establish standard periods for which documents relating to Union contributions should be kept by recipients so as to avoid divergent or disproportionate contractual requirements while still providing the Commission, the European Anti-fraud office and the Court of Auditors with sufficient time to obtain access to such data and documents and perform the ex post checks and audits. In addition, participants and recipients should be obliged to cooperate in the protection of the Union's financial interest. (64)In order to provide adequate information to participants and recipients and to ensure that they have the possibility to exercise their right of defence this Regulation should allow participants and recipients to submit their observations before adoption of any measure adversely affecting their rights and to be informed on the means of redress they dispose of for challenging such a measure. (65)In order to protect the Union's financial interests, a single early detection and exclusion system should be set up by the Commission. (66)The early detection and exclusion sytem should apply to participants, recipients, entities on whose capacity the candidate or tenderer intends to rely or to subcontractors of a contractor, any person or entity receiving Union funds where the budget is implemented under indirect implementation, any person or entity receiving Union funds under financial instruments directly implemented and participants or recipients of entities implementing the budget under shared implementation. (67)It should be clarified that where a decision to register a person or entity in the early detection and exclusion system database is taken on the basis of the exclusion situations of a nаtural or legal person who is a member of the administrative, management or supervisory body of that person or entity, or who has powers of representation, decision or control with regard to that person or entity or a natural or legal person that assumes unlimited liability for the debts of that person or entity or a natural person who is essential for the award or for the implementation of the legal commitment, the information registered in the database shall include the information concerning these persons. (68)The decision to exclude a person or entity from participation in award procedures or the imposition of a financial penalty and the decision to publish the related information should be taken by the authorising officer responsible, in light of their autonomy in administrative matters. In the absence of a final judgment or final administrative decision and in cases related to a serious breach of contract, the authorising officers responsible should take their decision having regard to the recommendation of the panel on the basis of a preliminary classification in law.. The panel should also assess the duration of an exclusion in cases where the duration has not been set by the final judgment or the final administrative decision. (69)The role of the panel should be to ensure the coherent operation of the exclusion system. The panel should be composed of a standing chair, representatives of the Commission and a representative of the authorising officer responsible. (70)The preliminary classification in law does not prejudge the final assessment of the conduct of the person or entity concerned by the competent authorities of Member States under national law. The recommendation of the panel, as well as the decision of the authorising officer responsible, should therefore be reviewed following the notification of such a final assessment. (71)A person or entity should be excluded by the authorising officer responsible when a final judgment or a final administrative decision has been taken in the case of grave professional misconduct, non-compliance, whether intentional or not, with the obligations related to the payment of social security contributions or the payment of taxes, fraud affecting the budget , corruption, participation in a criminal organisation, money laundering, terrorist financing, terrorist related offences, child labour or other forms of trafficking in human beings or irregularity. It should also be excluded in the case of a serious breach of a legal commitment or bankruptcy. (72)When deciding on the exclusion or the imposition of a financial penalty and on the publication thereof or on the rejection of person or entity, the authorising officer responsible should ensure compliance with the principle of proportionality by taking into particular account the seriousness of the situation, its budgetary impact, the time which has elapsed since the relevant conduct, its duration and its recurrence, the intention or degree of negligence and the degree of collaboration of the person or entity with the relevant competent authority and its contribution to the investigation. (73)The authorising officer responsible should also be able to exclude a person or entity where a natural or legal person assuming unlimited liability for the debts of that economic operator is bankrupt or in a similar situation of insolvency or where that natural or legal person fails to comply with its obligations to pay social security contributions or taxes, where such situations impact the financial situation of the economic operator. (74)A person or entity should not be subject to a decision of exclusion when it has taken remedial measures, thus demonstrating its reliability. That possibility should not apply in case of the most severe criminal activities. (75)In light of the principle of proportionality, cases where a financial penalty may be imposed as an alternative to the exclusion and cases where the gravity of the conduct of the recipient concerned in respect of attempting to unduly obtain Union funds justifies the imposition of a financial penalty in addition to the exclusion so as to ensure a deterrent effect should be distinguished. The minimum and maximum financial penalty which can be imposed by the contracting authority should also be defined. (76)A financial penalty should only be imposed on a recipient and not on a participant given that the amount of the financial penalty to be imposed is calculated on the basis of the value of the legal commitment at stake. (77)The possibility to apply administrative and/or financial penalties on a regulatory basis is independent from the possibility to apply contractual penalties, such as liquidated damages and should be noted. (78)The duration of exclusion should be limited in time, as is the case in Directive 2014/24/EU and in accordance with the principle of proportionality. (79)It is necessary to determine the commencement date and the duration of the limitation period for imposing administrative sanctions.

(80)It is important to be able to reinforce the deterrent effect achieved by the exclusion and the financial penalty. In that regard, the deterrent effect should be reinforced by the possibility to publish the information related to the exclusion and/or to the financial penalty, with full respect for the data protection requirements set out in Regulation (EC) No 45/2001 of the European Parliament and of the Council (6) and in Directive 95/46/EC of the European Parliament and of the Council (7). This should contribute to ensuring that the same conduct is not repeated. For reasons of legal certainty and in accordance with the principle of proportionality it should be specified in which situations a publication should not take place. In its assessment, the authorising officer responsible should have regard to any recommendation of the panel. As far as natural persons are concerned, personal data should only be published in exceptional cases justified by the seriousness of the conduct or its impact on the Union's financial interests. (81)The information related to an exclusion or a financial penalty should only be published in the case of grave professional misconduct, fraud, a significant deficiency in complying with the main obligations of a contract financed by the budget or an irregularity. (82)The criteria for exclusion should be clearly separated from the criteria leading to a possible rejection from a given procedure. (83)The information on the early detection of risks and on the imposition of administrative sanctions on a person of entity should be centralised. For that purpose, related information should be stored in a database set up and operated by the Commission as the owner of the centralised system. That system should operate in full compliance with the right to privacy and the protection of personal data. (84)While the setting up and the operation of the early detection and exclusion system should be the responsibility of the Commission, other institutions and bodies, as well as all entities implementing the budget under direct, shared and indirect implementation should participate in that system by transmitting relevant information to the Commission. The authorising officer responsible and the panel should guarantee the right of defence of economic operators. The same right should be given to a person of entity, in the context of an early detection, where an act envisaged by an authorising officer could adversely affect the rights of the person of entity concerned. In cases of fraud, corruption or any other illegal activity affecting the Union's financial interests which are not yet subject to a final judgment, the authorising officer responsible and the panel should be given the possibility to defer the opportunity given to the person of entity to submit its observations. Such deferral should only be justified where there are compelling legitimate grounds to preserve the confidentiality of the investigation. (85)The Court of Justice of the European Union should be given unlimited jurisdiction with regard to penalties imposed pursuant to this Regulation, in accordance with Article 261 of the Treaty on the Functioning of the European Union (TFEU). (86)In order to facilitate the protection of the Union's financial interests across all implementation modes, it should be possible for the entities involved in the implementation of the budget in shared and indirect implementation to take into account, as appropriate, exclusions decided upon by the authorising officers at Union level. (87)This Regulation should foster the objective of e-Government, and in particular the use of electronic data in the exchange of information between the institutions and third parties. (88)Progress towards the electronic exchange of information and electronic submission of documents, which constitute a major simplification measure, should be accompanied by clear conditions for the acceptance of the systems to be used, so as to establish a legally sound environment while preserving flexibility in the management of Union funds for the participants, recipients and the authorising offices as provided for in this Regulation. (89)Rules on the composition and tasks of the committee in charge of assessing application documents in procurement, grant award procedures and in contests for prizes should be laid down. The committee may be composed of external experts if provided so in the basic act. (90)In line with the principle of good administration the authorising officer should request clarifications or missing documents while respecting the principle of equality of treatment and without substantially changing the application documents. The authorising officer may decide not to do so only in duly justified cases. In addition, the authorising officer should be able to correct an obvious clerical error or request the participant to correct it. (91)Sound financial management should require that the Commission protects itself by requesting guarantees at the time of paying pre-financing. The requirement for contractors and beneficiaries to lodge guarantees should not be automatic, but should be based on a risk analysis. Where during the course of implementation the authorising officer discovers that a guarantor is no longer authorised to issue guarantees in accordance with the applicable national law, the authorising officer should be able to require replacement of the guarantee. (92)The different sets of rules for direct and indirect implementation, in particular the definition of budget implementation tasks, have created confusion and entailed risk in errors of qualification both for the Commission and for the partners and should thus be simplified and harmonised. (93)The provisions on the ex-ante pillar assessment should be revised to enable the Commission to rely as much as possible on the systems and procedures of the partners which have deemed equivalent to the ones used by the Commission. In addition, it is important to clarify that where the assessment reveals areas where the procedures in place are not sufficient to protect the financial interests of the Union, the Commission may sign contribution agreements while imposing additional supervisory measures. It is also important to clarify where the Commission does not require a pillar assessment in order to sign contribution agreements. (94)It is appropriate to indicate that the remuneration of the Organisations implementing the EU budget should, where relevant and possible, have a performance based nature. (95)The Commission enters into partnerships with third countries by means of financing agreements. It is important to clarify the content of the financing agreement particularly for those parts that are implemented by the third country in indirect implementation. (96)It is important to recognise the specific nature of blending facilities where the Commission blends its contribution with that of Financial Institutions and to clarify the application of Title X on Financial Instruments. (97)Procurement rules and principles applicable to public contracts awarded by the Union institutions on their own account should be based on the rules contained in the Directive 2014/23/EU of the European Parliament and of the Council and Directive 2014/24/EU. (98)In the case of mixed contracts, the methodology of the contracting authorities for determining the applicable rules should be clarified. (99)The ex ante and ex post publicity measures necessary to launch a procurement procedure should be clarified in the case of contracts above and below the thresholds set out in Directive 2014/24/EU and for those falling outside the scope of that Directive..

(100)This Regulation should include an exhaustive list of all the procurement procedures available to the Union institutions regardless of the thresholds. (101)In the interests of administrative simplification and in order to encourage the participation of small and medium-sized enterprises, negotiated procedures for middle-value contracts should be provided for. (102)As is the case in Directive 2014/24/EU, this Regulation should allow for market consultation prior to the launch of a procurement procedure. In order to ensure that the innovation partnership is used only when the desired product does not exist on the market, an obligation to carry out such preliminary market consultation before using an innovation partnership should be laid down in this Regulation. (103)The contribution of contracting authorities the protection of the environment and the promotion of sustainable development, while ensuring that they can obtain the best value for money for their contracts, in particular through requiring specific labels or through the use of appropriate award methods, should be clarified. (104)In order to ensure that, when executing contracts, economic operators comply with the applicable environmental, social and labour law obligations established by Union law, national law, collective agreements or the applicable international social and environmental conventions listed in Annex X to Directive 2014/24/EU, such obligations should be part of the minimum requirements defined by the contracting authority and should be integrated in the contracts signed by the contracting authority. (105)It is appropriate that different cases usually referred to as situations of conflict of interest be identified and treated distinctly. The notion of a ‘conflict of interest’ should be solely used for cases where an entity or person with responsibilities for budget implementation, audit or control or an official or an agent of a Union institution is in such a situation. In cases where an economic operator attempts to unduly influence a procedure or obtain confidential information, this should be treated as grave professional misconduct. In addition, economic operators may be in a situation where they should not be selected to implement a contract because of a professional conflicting interest. For instance, a company should not evaluate a project in which it has participated or an auditor should not be in a position to audit accounts it has previously certified. (106)In accordance with Directive 2014/24/EU, it should be possible to verify whether an economic operator is excluded, to apply selection and award criteria, as well as to verify compliance with the procurement documents in any order. As a result, it should be possible to reject tenders on the basis of award criteria without a prior check on exclusion or selection criteria of the corresponding tenderer. (107)Contracts should be awarded on the basis of the most economically advantageous tender in line with Article 67 of Directive 2014/24/EU. It should be clarified that selection criteria are strictly linked to the evaluation of candidates or tenderers and award criteria are strictly linked to the evaluation of the tenders. (108)Union public procurement should ensure that Union funds are used in an effective, transparent, and appropriate way. In that regard, electronic procurement should contribute to the better use of Union funds and enhance access to contracts for all economic operators. (109)The existence of an opening phase and an evaluation for any procedure should be clarified. An award decision should always be the outcome of an evaluation. (110)When notified of the outcome of a procedure, candidates and tenderers should be informed of the grounds on which the decision was taken and should receive a detailed statement of reasons based on the content of the evalu