Article 257 Court of Auditors’ right of access
1. Union institutions, the bodies administering revenue or expenditure on the Union’s behalf and recipients shall afford the Court of Auditors all the facilities and give it all the information which it considers necessary for the performance of its task. They shall, at the request of the Court of Auditors, place at its disposal all documents concerning the award and performance of contracts financed by the budget and all accounts of cash or materials, all accounting records or supporting documents, and also administrative documents relating thereto, all documents relating to revenue and expenditure, all inventories, all organisation charts of departments, which the Court of Auditors considers necessary for auditing the annual accounts and budget implementation reports on the basis of records or on-the-spot auditing and, for the same purposes, all documents and data created or stored electronically. The Court of Auditors’ right of access shall include access to the IT system used for the management of revenue or expenditure subject to its audit, where such access is relevant for the audit. The internal audit bodies and other services of the national administrations concerned shall afford the Court of Auditors all the facilities which it considers necessary for the performance of its task. 2. The officials whose operations are checked by the Court of Auditors shall: (a) show their records of cash in hand, any other cash, securities and materials of all kinds, and also the supporting documents in respect of their stewardship of the funds with which they are entrusted, and also any books, registers and other documents relating thereto; (b) present the correspondence and any other documents required for the full implementation of the audit referred to in Article 255. The information supplied under point (b) of the first subparagraph may be requested only by the Court of Auditors. 3. The Court of Auditors shall be empowered to audit the documents in respect of the revenue and expenditure of the Union which are held by the departments of Union institutions and, in particular, by the departments responsible for decisions in respect of such revenue and expenditure, the bodies administering revenue or expenditure on the Union’s behalf and the natural or legal persons receiving payments from the budget. 4. The task of establishing that the revenue has been received and the expenditure incurred in a lawful and proper manner and that the financial management has been sound shall extend to the use, by bodies outside Union institutions, of Union funds received by way of contributions. 5. Union financing paid to recipients outside Union institutions shall be subject to the agreement in writing by those recipients or, failing agreement on their part, by contractors or subcontractors, to an audit by the Court of Auditors into the use made of the financing granted. 6. The Commission shall, at the request of the Court of Auditors, provide it with any information on borrowing and lending operations. 7. Use of integrated computer systems shall not have the effect of reducing access by the Court of Auditors to supporting documents. Whenever technically possible, electronic access to data and documents necessary for the audit shall be given to the Court of Auditors in its own premises and in compliance with relevant security rules.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 257 Court of Auditors’ right of access):
1. Union institutions, the bodies administering revenue or expenditure on the Union’s behalf and recipients shall afford the Court of Auditors all the facilities and give it all the information which it considers necessary for the performance of its task. They shall, at the request of the Court of Auditors, place at its disposal all documents concerning the award and performance of contracts financed by the budget and all accounts of cash or materials, all accounting records or supporting documents, and also administrative documents relating thereto, all documents relating to revenue and expenditure, all inventories, all organisation charts of departments, which the Court of Auditors considers necessary for auditing the annual accounts and budget implementation reports on the basis of records or on-the-spot auditing and, for the same purposes, all documents and data created or stored electronically. The Court of Auditors’ right of access shall include access to the IT system used for the management of revenue or expenditure subject to its audit, where such access is relevant for the audit. The internal audit bodies and other services of the national administrations concerned shall afford the Court of Auditors all the facilities which it considers necessary for the performance of its task. 2. The officials whose operations are checked by the Court of Auditors shall: (a) show their records of cash in hand, any other cash, securities and materials of all kinds, and also the supporting documents in respect of their stewardship of the funds with which they are entrusted, and also any books, registers and other documents relating thereto; (b) present the correspondence and any other documents required for the full implementation of the audit referred to in Article 255. The officials whose operations are checked by the Court of Auditors shall: (a) show their records of cash in hand, any other cash, securities and materials of all kinds, and also the supporting documents in respect of their stewardship of the funds with which they are entrusted, and also any books, registers and other documents relating thereto; (b) present the correspondence and any other documents required for the full implementation of the audit referred to in Article 255. The information supplied under point (b) of the first subparagraph may be requested only by the Court of Auditors. 3. The Court of Auditors shall be empowered to audit the documents in respect of the revenue and expenditure of the Union which are held by the departments of Union institutions and, in particular, by the departments responsible for decisions in respect of such revenue and expenditure, the bodies administering revenue or expenditure on the Union’s behalf and the natural or legal persons receiving payments from the budget. 4. The task of establishing that the revenue has been received and the expenditure incurred in a lawful and proper manner and that the financial management has been sound shall extend to the use, by bodies outside Union institutions, of Union funds received by way of contributions. 5. Union financing paid to recipients outside Union institutions shall be subject to the agreement in writing by those recipients or, failing agreement on their part, by contractors or subcontractors, to an audit by the Court of Auditors into the use made of the financing granted. 6. The Commission shall, at the request of the Court of Auditors, provide it with any information on borrowing and lending operations. 7. Use of integrated computer systems shall not have the effect of reducing access by the Court of Auditors to supporting documents. Whenever technically possible, electronic access to data and documents necessary for the audit shall be given to the Court of Auditors in its own premises and in compliance with relevant security rules.
Article 258 Annual report of the Court of Auditors
1. The Court of Auditors shall transmit to the Commission and the other Union institutions concerned, by 30 June, any observations which are, in its opinion, such that they should appear in its annual report. Those observations shall remain confidential and shall be subject to an adversarial procedure. Each Union institution shall address its reply to the Court of Auditors by 15 October. The replies of Union institutions other than the Commission shall be sent to the Commission at the same time. 2. The annual report of the Court of Auditors shall contain an assessment of the soundness of financial management. 3. The annual report of the Court of Auditors shall contain a section for each Union institution and for the common provisioning fund. The Court of Auditors may add any summary report or general observations which it sees fit to make. 4. The Court of Auditors shall transmit to the authorities responsible for giving discharge and to the other Union institutions, by 15 November, its annual report accompanied by the replies of Union institutions and shall ensure publication thereof in the Official Journal of the European Union .
Article 259 Special reports of the Court of Auditors
1. The Court of Auditors shall transmit to the Union institution or the body concerned any observations which are, in its opinion, such that they should appear in a special report. Those observations shall remain confidential and shall be subject to an adversarial procedure. The Union institution or the body concerned shall inform the Court of Auditors, in general, within six weeks of transmission of those observations, of any replies it wishes to make in relation to those observations. That period shall be suspended in duly justified cases, in particular where, during the adversarial procedure, it is necessary for the Union institution or body concerned to obtain feedback from Member States in order to finalise its reply. The replies of the Union institution or the body concerned shall directly and exclusively address the observations of the Court of Auditors. Upon request of the Court of Auditors or of the Union institution or body concerned, the replies may be examined by the European Parliament and by the Council after publication of the report. The Court of Auditors shall ensure that special reports are drawn up and adopted within an appropriate period of time, which shall, in general, not exceed 13 months. The special reports, together with the replies of the Union institutions or bodies concerned, shall be transmitted without delay to the European Parliament and to the Council, each of which shall decide, where appropriate in conjunction with the Commission, what action is to be taken in response. The Court of Auditors shall take all necessary steps to ensure that the replies to its observations from each Union institution or body concerned as well as the timeline for the drawing up of the special report are published together with the special report. 2. The opinions referred to in the second subparagraph of Article 287(4) TFEU which do not relate to proposals or drafts covered by the legislative consultation procedure may be published by the Court of Auditors in the Official Journal of the European Union . The Court of Auditors shall take its decision on publication after consulting the Union institution which requested the opinion or which is concerned by it. Opinions published shall be accompanied by any remarks by the Union institutions concerned.
Article 260 Timetable of the discharge procedure
1. The European Parliament, upon a recommendation from the Council acting by qualified majority, shall, before 15 May of year n+2, give a discharge to the Commission in respect of the implementation of the budget for year n. 2. Where the deadline provided for in paragraph 1 cannot be complied with, the European Parliament or the Council shall inform the Commission of the reasons therefor. 3. If the European Parliament postpones the decision giving a discharge, the Commission shall make every effort to take measures, as soon as possible, to remove or facilitate removal of the obstacles to that decision.
Article 261 The discharge procedure
1. The discharge decision shall cover the accounts of all the Union’s revenue and expenditure, the resulting balance and the assets and liabilities of the Union shown in the balance sheet. 2. With a view to giving the discharge, the European Parliament shall, after the Council has done so, examine the accounts, financial statements and the evaluation report referred to in Article 318 TFEU. It shall also examine the annual report made by the Court of Auditors together with the replies of the Union institutions under audit, and any relevant special reports by the Court of Auditors in respect of the financial year concerned and the Court of Auditors’ statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions. 3. The Commission shall submit to the European Parliament, at the latter’s request, any information required for the smooth application of the discharge procedure for the financial year concerned, in accordance with Article 319 TFEU.
Article 262 Follow-up measures
1. In accordance with Article 319 TFEU and Article 106a of the Euratom Treaty, Union institutions and Union bodies referred to in Articles 70 and 71 of this Regulation shall take all appropriate steps to act on the observations accompanying the European Parliament’s discharge decision and on the comments accompanying the recommendation for discharge adopted by the Council. 2. At the request of the European Parliament or of the Council, Union institutions and Union bodies referred to in Articles 70 and 71 shall report on the measures taken in the light of those observations and comments, and, in particular, on the instructions they have given to any of their departments which are responsible for budget implementation. Member States shall cooperate with the Commission by informing it of the measures they have taken to act on those observations so that the Commission may take them into account when drawing up its own report. The reports from Union institutions and Union bodies referred to in Articles 70 and 71 shall also be transmitted to the Court of Auditors.
Article 263 Specific provisions regarding the EEAS
The EEAS shall be subject to the procedures provided for in Article 319 TFEU and in Articles 260, 261 and 262 of this Regulation. The EEAS shall fully cooperate with Union institutions involved in the discharge procedure and provide, as appropriate, any additional necessary information, including through attendance at meetings of the relevant bodies.
Article 264 General provisions
1. Administrative appropriations shall be non-differentiated appropriations. 2. This Title applies to the administrative appropriations referred to in in Article 47(4) and to those of Union institutions other than the Commission. Budgetary commitments corresponding to administrative appropriations of a type common to several titles and which are managed globally may be recorded globally in the budgetary accounting following the summary classification by type as set out in Article 47(4). The corresponding expenditure shall be booked to the budget lines of each title according to the same distribution as for appropriations. 3. Administrative expenditure arising from contracts covering periods that extend beyond the financial year, either in accordance with local practice or relating to the supply of equipment, shall be charged to the budget for the financial year in which it is effected. 4. Advances may be paid, in accordance with the conditions laid down in the Staff Regulations and in the specific provisions concerning members of Union institutions, to staff and to members of Union institutions.
Article 265 Payments made in advance
Expenditure referred to in point (a) of Article 11(2) which shall be paid in advance pursuant to legal or contractual provisions may give rise to payments from 1 December onwards to be charged to the appropriations for the following financial year. In that case, the limit set out in Article 11(2) shall not apply.
Article 266 Specific provisions regarding building projects
1. Each Union institution shall provide the European Parliament and the Council, by 1 June each year, with a working document on its building policy, which shall incorporate the following information: (a) for each building, the expenditure and surface area covered by the appropriations of the corresponding budget lines. The expenditure shall include the costs of the fitting-out of buildings but not the other charges; (b) the expected evolution of the global programming of surface area and locations for the coming years with a description of the building projects in planning phase which are already identified; (c) the final terms and costs, as well as relevant information regarding project implementation of new building projects previously submitted to the European Parliament and to the Council under the procedure set out in paragraphs 2 and 3 and not included in the preceding year’s working documents. 2. For any building project likely to have significant financial implications for the budget, the Union institution concerned shall inform the European Parliament and the Council as early as possible, and in any case before any prospecting of the local market takes place, in the case of building contracts, or before invitations to tender are issued, in the case of building works, about the building surface area required and the provisional planning. 3. For any building project likely to have significant financial implications for the budget, the Union institution concerned shall present the building project, in particular its detailed estimated costs and its financing including any possible use of internal assigned revenue referred to in point (e) of Article 21(3), as well as a list of draft contracts intended to be used, to the European Parliament and to the Council and shall request their approval before contracts are concluded. At the request of the Union institution concerned, documents submitted relating to the building project shall be treated confidentially. Except in cases of force majeure as referred to in paragraph 4, the European Parliament and the Council shall deliberate upon the building project within four weeks of its receipt by both institutions. The building project shall be deemed approved at the expiry of this four-week period, unless the European Parliament or the Council take a decision contrary to the proposal within that period of time. If the European Parliament and/or the Council raise concerns within that four-week period, that period shall be extended once by two weeks. If the European Parliament or the Council take a decision contrary to the building project, the Union institution concerned shall withdraw its proposal and may submit a new one. 4. In cases of force majeure, for which due reasons shall be given, the information provided for in paragraph 2 may be submitted jointly with the building project. The European Parliament and the Council shall deliberate upon the building project within two weeks of its receipt by both institutions. The building project shall be deemed to be approved at the expiry of this two-week period, unless the European Parliament and/or the Council take a decision contrary to the proposal within this period of time. 5. The following shall be considered as building projects likely to have significant financial implications for the budget: (a) any acquisition of land; (b) the acquisition, sale, structural renovation, construction of buildings or any project combining those elements to be implemented in the same timeframe, exceeding EUR 3 000 000; (c) the acquisition, structural renovation, construction of buildings or any project combining those elements to be implemented in the same timeframe, exceeding EUR 2 000 000 in the event that the price represents more than 110 % of the local price of comparable properties as evaluated by an independent expert; (d) the sale of land or buildings in the event that the price represents less than 90 % of the local price of comparable properties as evaluated by an independent expert; (e) any new building contract, including usufructs, long-term leases and renewals of existing building contracts under less favourable conditions, not covered by point (b) with an annual charge of at least EUR 750 000; (f) the extension or renewal of existing building contracts, including usufruct and long-term leases, under the same or more favourable conditions, with an annual charge of at least EUR 3 000 000. This paragraph shall also apply to building projects which have an interinstitutional nature, as well as to Union delegations. The thresholds referred to in points (b) to (f) of the first subparagraph shall include the costs of fitting-out of the building. For rental and usufruct contracts, those thresholds shall take into account the costs of the fitting-out of the building but not the other charges. 6. Without prejudice to Article 17, a building acquisition project may be financed through a loan, subject to prior approval by the European Parliament and by the Council. Loans shall be contracted and repaid in accordance with the principle of sound financial management and with due regard to the financial interests of the Union. When the Union institution proposes to finance the acquisition through a loan, the financing plan to be submitted, together with the request for prior approval by the Union institution concerned, shall specify in particular, the maximum level of financing, the financing period, the type of financing, the financing conditions and savings compared to other types of contractual arrangements. The European Parliament and the Council shall deliberate upon the request for prior approval within four weeks, extendable once by two weeks, of its receipt by both institutions. The acquisition financed through a loan shall be deemed to be rejected if the European Parliament and the Council do not expressly approve it within the deadline.
Article 267 Early information procedure and prior approval procedure
1. The early information procedure set out in Article 266(2) and the prior approval procedure set out in Article 266(3) and (4) shall not apply to acquisition of land free of charge or for a symbolic amount. 2. The early information procedure set out in Article 266(2) and the prior approval procedure set out in Article 266(3) and (4) shall also apply to residential buildings if the acquisition, structural renovation, construction of buildings or any project combining those elements in the same timeframe is exceeding EUR 2 000 000 and the price is above 110 % of the local price or rent index of comparable properties. The European Parliament and the Council may request from the Union institution in charge any information related to residential buildings. 3. In exceptional or urgent political circumstances the early information referred to in Article 266(2) concerning building projects relating to Union delegations or offices in third countries may be submitted jointly with the building project pursuant to Article 266(3). In such cases, the early information and prior approval procedures shall be conducted at the earliest possible opportunity. For residential building projects in third countries, the early information and prior approval procedures shall be conducted jointly. 4. The prior approval procedure set out in Article 266(3) and (4) shall not apply to preparatory contracts or studies necessary to evaluate the detailed cost and financing of the building project.
Article 268 Information requests by the European Parliament and by the Council
The European Parliament and the Council shall be entitled to obtain any information or explanations regarding budgetary matters within their fields of competence.
Article 269 Exercise of the delegation
1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The power to adopt delegated acts referred to in Articles 70(1), the third paragraph of Article 71, Article 161 and the second and third subparagraphs of Article 213(2) shall be conferred on the Commission for a period ending on 31 December 2020. The Commission shall draw up a report in respect of the delegation of power not later than 31 December 2018. The delegation of power shall be tacitly extended for the periods of duration of the subsequent multiannual financial frameworks, unless the European Parliament or the Council opposes such extension not later than three months before the end of each period of duration of the corresponding multiannual financial framework. 3. The delegation of power referred to in Article 70(1), the third paragraph of Article 71, Article 161 and the second and third subparagraphs of Article 213(2) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 4. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. 5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 6. A delegated act adopted pursuant to Article 70(1), the third paragraph of Article 71, Article 161 and the second and third subparagraphs of Article 213(2) shall enter into force only if no objection has been expressed either by the European Parliament or by the Council within a period of two months of notification of that act to the European Parliament and to the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by two months at the initiative of the European Parliament or of the Council.
Article 271 Amendments to Regulation (EU) No 1301/2013
Regulation (EU) No 1301/2013 is amended as follows: (1) Article 3(1) is amended as follows: (a) point (e) is replaced by the following: ‘(e) investment in the development of endogenous potential through fixed investment in equipment and infrastructure, including cultural and sustainable tourism infrastructure, services to enterprises, support to research and innovation bodies and investment in technology and applied research in enterprises;’; (b) the following subparagraph is added: ‘Investment in cultural and sustainable tourism infrastructure as referred to in point (e) of the first subparagraph of this paragraph shall be considered small-scale and eligible for support, if the ERDF contribution to the operation does not exceed EUR 10 000 000. That ceiling shall be raised to EUR 20 000 000 in the case of infrastructure considered to be cultural heritage within the meaning of Article 1 of the 1972 Unesco Convention Concerning the Protection of the World Cultural and Natural Heritage.’; (3) in Annex I, the table, the text starting with ‘Social infrastructure’ until the end of the table is replaced by the following: ‘Social infrastructure Childcare and education persons Capacity of supported childcare or educational infrastructure Health persons Population covered by improved health services Housing housing units Rehabilitated housing housing units Rehabilitated housing, of which for migrants and refugees (not including reception centres) Migrants and refugees persons Capacity of infrastructure supporting migrants and refugees (other than housing) Urban Development specific indicators persons Population living in areas with integrated urban development strategies square metres Open space created or rehabilitated in urban areas square metres Public or commercial buildings built or renovated in urban areas’
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 271 Amendments to Regulation (EU) No 1301/2013):
Regulation (EU) No 1301/2013 is amended as follows: Article 3(1) is amended as follows: point (e) is replaced by the following: ‘(e) investment in the development of endogenous potential through fixed investment in equipment and infrastructure, including cultural and sustainable tourism infrastructure, services to enterprises, support to research and innovation bodies and investment in technology and applied research in enterprises;’; ‘(e) the following subparagraph is added: ‘Investment in cultural and sustainable tourism infrastructure as referred to in point (e) of the first subparagraph of this paragraph shall be considered small-scale and eligible for support, if the ERDF contribution to the operation does not exceed EUR 10 000 000 . That ceiling shall be raised to EUR 20 000 000 in the case of infrastructure considered to be cultural heritage within the meaning of Article 1 of the 1972 Unesco Convention Concerning the Protection of the World Cultural and Natural Heritage.’; in point (9) of Article 5, the following point is added: ‘(e) supporting the reception and the social and economic integration of migrants and refugees;’; (3) in Annex I, the table, the text starting with ‘Social infrastructure’ until the end of the table is replaced by the following: ‘Social infrastructure Childcare and education persons Capacity of supported childcare or educational infrastructure Health persons Population covered by improved health services Housing housing units Rehabilitated housing housing units Rehabilitated housing, of which for migrants and refugees (not including reception centres) Migrants and refugees persons Capacity of infrastructure supporting migrants and refugees (other than housing) Urban Development specific indicators persons Population living in areas with integrated urban development strategies square metres Open space created or rehabilitated in urban areas square metres Public or commercial buildings built or renovated in urban areas’ in Annex I, the table, the text starting with ‘Social infrastructure’ until the end of the table is replaced by the following: ‘Social infrastructure Childcare and education persons Capacity of supported childcare or educational infrastructure Health persons Population covered by improved health services Housing housing units Rehabilitated housing housing units Rehabilitated housing, of which for migrants and refugees (not including reception centres) Migrants and refugees persons Capacity of infrastructure supporting migrants and refugees (other than housing) Urban Development specific indicators persons Population living in areas with integrated urban development strategies square metres Open space created or rehabilitated in urban areas square metres Public or commercial buildings built or renovated in urban areas’ ‘Social infrastructure Childcare and education persons Capacity of supported childcare or educational infrastructure Childcare and education persons Capacity of supported childcare or educational infrastructure Health persons Population covered by improved health services Health Population covered by improved health services Housing housing units Rehabilitated housing Housing housing units Rehabilitated housing housing units Rehabilitated housing, of which for migrants and refugees (not including reception centres) Rehabilitated housing, of which for migrants and refugees (not including reception centres) Migrants and refugees persons Capacity of infrastructure supporting migrants and refugees (other than housing) Migrants and refugees Capacity of infrastructure supporting migrants and refugees (other than housing) Urban Development specific indicators persons Population living in areas with integrated urban development strategies Population living in areas with integrated urban development strategies square metres Open space created or rehabilitated in urban areas square metres Open space created or rehabilitated in urban areas square metres Public or commercial buildings built or renovated in urban areas’ Public or commercial buildings built or renovated in urban areas’
Article 272 Amendments to Regulation (EU) No 1303/2013
Regulation (EU) No 1303/2013 is amended as follows: (1) in recital 10, the second sentence is replaced by the following: ‘Those conditions should enable the Commission to obtain assurance that Member States are using the ESI Funds in a legal and regular manner and in accordance with the principle of sound financial management within the meaning of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council ( *1 ) (the “Financial Regulation”). ( *1 ) Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 ( OJ L 193, 30.7.2018, p. 1 ).’;" (2) Article 2 is amended as follows: (a) point (10) is replaced by the following: ‘(10) “beneficiary” means a public or private body or a natural person, responsible for initiating or both initiating and implementing operations, and: (a) in the context of State aid, the body which receives the aid, except where the aid per undertaking is less than EUR 200 000, in which case the Member State concerned may decide that the beneficiary is the body granting the aid, without prejudice to Commission Regulations (EU) No 1407/2013 ( *2 ) , (EU) No 1408/2013 ( *3 ) and (EU) No 717/2014 ( *4 ) ; and (b) in the context of financial instruments under Title IV of Part Two of this Regulation, the body that implements the financial instrument or the fund of funds as appropriate; ( *2 ) Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid ( OJ L 352, 24.12.2013, p. 1 )." ( *3 ) Commission Regulation (EU) No 1408/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid in the agriculture sector ( OJ L 352, 24.12.2013, p. 9 )." ( *4 ) Commission Regulation (EU) No 717/2014 of 27 June 2014 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid in the fishery and aquaculture sector ( OJ L 190, 28.6.2014, p. 45 ).’;" (b) point (31) is replaced by the following: ‘(31) “macroregional strategy” means an integrated framework agreed by the Council and, where appropriate, endorsed by the European Council, which may be supported by the ESI Funds among others, to address common challenges faced by a defined geographical area relating to Member States and third countries located in the same geographical area which thereby benefit from strengthened cooperation contributing to achievement of economic, social and territorial cohesion;’; (3) Article 4 is amended as follows: (a) in paragraph 7, the reference to ‘Article 59 of the Financial Regulation’ is replaced by ‘Article 63 of the Financial Regulation’; (b) paragraph 8 is replaced by the following: ‘8. The Commission and the Member States shall respect the principle of sound financial management in accordance with Article 33, Article 36(1) and Article 61 of the Financial Regulation.’; (4) in Article 9, the following paragraph is added: ‘The priorities established for each of the ESI Funds in the Fund-specific rules shall in particular cover the appropriate use of each ESI Fund in the areas of migration and asylum. In that context, coordination with the Asylum, Migration and Integration Fund established by Regulation (EU) No 516/2014 of the European Parliament and of the Council ( *5 ) shall be ensured, where appropriate. ( *5 ) Regulation (EU) No 516/2014 of the European Parliament and of the Council of 16 April 2014 establishing the Asylum, Migration and Integration Fund, amending Council Decision 2008/381/EC and repealing Decisions No 573/2007/EC and No 575/2007/EC of the European Parliament and of the Council and Council Decision 2007/435/EC ( OJ L 150, 20.5.2014, p. 168 ).’;" (6) Article 30 is amended as follows: (a) in paragraph 2, the second subparagraph is replaced by the following: ‘Where the amendment of a programme affects the information provided in the Partnership Agreement, the procedure set out in Article 16(4a) shall apply.’; (b) in paragraph 3, the third sentence is deleted; (8) Article 34(3) is amended as follows: (a) points (a) to (d) are replaced by the following: ‘(a) building the capacity of local actors, including potential beneficiaries, to develop and implement operations including by fostering their capacity to prepare and manage their projects; (b) drawing up a non-discriminatory and transparent selection procedure which avoids conflicts of interests, ensures that at least 50 % of the votes in selection decisions are cast by partners which are not public authorities, and allows selection by written procedure; (c) drawing up and approving non-discriminatory objective criteria for the selection of operations that ensure coherence with the community-led local development strategy by prioritising those operations according to their contribution to meeting that strategy’s objectives and targets; (d) preparing and publishing calls for proposals or an ongoing project submission procedure;’; (b) the following subparagraph is added: ‘Where local action groups carry out tasks not covered by points (a) to (g) of the first subparagraph that fall under the responsibility of the managing or certifying authority or of the paying agency, those local action groups shall be designated as intermediate bodies in accordance with the Fund-specific rules.’; (10) Article 37 is amended as follows: (a) in paragraph 2, point (c) is replaced by the following: ‘(c) an estimate of additional public and private resources to be potentially raised by the financial instrument down to the level of the final recipient (expected leverage effect), including as appropriate an assessment of the need for, and the extent of, differentiated treatment as referred to in Article 43a to attract counterpart resources from investors operating under the market economy principle and/or a description of the mechanisms which will be used to establish the need for, and extent of, such differentiated treatment, such as a competitive or appropriately independent assessment process;’; (b) in paragraph 3, the first subparagraph is replaced by the following: ‘3. The ex ante assessment referred to in paragraph 2 of this Article may take into account the ex ante evaluations referred to in point (h) of the first subparagraph and the second subparagraph of Article 209(2) of the Financial Regulation and may be performed in stages. It shall, in any event, be completed before the managing authority decides to make programme contributions to a financial instrument.’; (c) paragraph 8 is replaced by the following: ‘8. Final recipients supported by an ESI Fund financial instrument may also receive assistance from another ESI Funds priority or programme or from another instrument supported by the budget of the Union, including from the European Fund for Strategic Investments (EFSI) established by Regulation (EU) 2015/1017 of the European Parliament and of the Council ( *6 ) , in accordance with applicable Union State aid rules, as appropriate. In that case, separate records shall be maintained for each source of assistance and the ESI Funds financial instrument support shall be part of an operation with eligible expenditure distinct from the other sources of assistance. ( *6 ) Regulation (EU) 2015/1017 of the European Parliament and of the Council of 25 June 2015 on the European Fund for Strategic Investments, the European Investment Advisory Hub and the European Investment Project Portal and amending Regulations (EU) No 1291/2013 and (EU) No 1316/2013 — the European Fund for Strategic Investments ( OJ L 169, 1.7.2015, p. 1 ).’;" (11) Article 38 is amended as follows: (a) in paragraph 1, the following point is added: ‘(c) financial instruments combining such contribution with EIB financial products under the EFSI in accordance with Article 39a.’; (b) paragraph 4 is amended as follows: (i) points (b) and (c) of the first subparagraph are replaced by the following: ‘(b) entrust implementation tasks, through the direct award of a contract, to: (i) the EIB; (ii) an international financial institution in which a Member State is a shareholder; (iii) a publicly-owned bank or institution, established as a legal entity carrying out financial activities on a professional basis, which fulfils all of the following conditions: — there is no direct private capital participation, with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the relevant bank or institution, and with the exception of forms of private capital participation which confer no influence on decisions regarding the day-to-day management of the financial instrument supported by the ESI Funds; — operates under a public policy mandate given by the relevant authority of a Member State at national or regional level, which includes carrying out, as all or part of its activities, economic development activities contributing to the objectives of the ESI Funds; — carries out, as all or part of its activities, economic development activities contributing to the objectives of the ESI Funds in regions, policy areas or sectors for which access to funding from market sources is not generally available or sufficient; — operates without primarily focussing on maximising profits, but ensures a long-term financial sustainability for its activities; — ensures that the direct award of a contract referred to in point (b) does not provide any direct or indirect benefit for commercial activities by way of appropriate measures in accordance with applicable law; — is subject to the supervision of an independent authority in accordance with applicable law. (c) entrust implementation tasks to another body governed by public or private law; or (d) undertake implementation tasks directly, in the case of financial instruments consisting solely of loans or guarantees. In that case the managing authority shall be considered to be the beneficiary within the meaning of point (10) of Article 2.’; (ii) the second subparagraph is replaced by the following: ‘When implementing the financial instrument, the bodies referred to in points (a) to (d) of the first subparagraph of this paragraph shall ensure compliance with applicable law and with the requirements laid down in Article 155(2) and (3) of the Financial Regulation.’; (c) paragraphs 5 and 6 are replaced by the following: ‘5. The bodies referred to in points (a), (b) and (c) of the first subparagraph of paragraph 4 of this Article may, when implementing funds of funds further entrust part of the implementation to financial intermediaries provided that such bodies ensure under their responsibility that the financial intermediaries satisfy the criteria laid down in Articles 33(1) and 209(2) of the Financial Regulation. Financial intermediaries shall be selected on the basis of open, transparent, proportionate and non-discriminatory procedures, avoiding conflict of interests. 6. The bodies referred to in points (b) and (c) of the first subparagraph of paragraph 4 to which implementation tasks have been entrusted shall open fiduciary accounts in their name and on behalf of the managing authority, or set up the financial instrument as a separate block of finance within the institution. In the case of a separate block of finance, an accounting distinction shall be made between programme resources invested in the financial instrument and the other resources available in the institution. The assets held on fiduciary accounts and such separate blocks of finance shall be managed in accordance with the principle of sound financial management following appropriate prudential rules and shall have appropriate liquidity.’; (d) in the first subparagraph of paragraph 7, the introductory part is replaced by the following: ‘7. Where a financial instrument is implemented under points (a), (b) and (c) of the first subparagraph of paragraph 4, subject to the implementation structure of the financial instrument, the terms and conditions for contributions from programmes to financial instruments shall be set out in funding agreements in accordance with Annex IV at the following levels:’; (e) paragraph 8 is replaced by the following: ‘8. For financial instruments implemented under point (d) of the first subparagraph of paragraph 4, the terms and conditions for contributions from programmes to financial instruments shall be set out in a strategy document in accordance with Annex IV to be examined by the monitoring committee.’; (f) paragraph 10 is replaced by the following: ‘10. The Commission shall adopt implementing acts laying down uniform conditions regarding the detailed arrangements for the transfer and management of programme contributions managed by the bodies referred to in the first subparagraph of paragraph 4 of this Article and in Article 39a(5). Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 150(3).’; (12) Article 39 is amended as follows: (a) in the first subparagraph of paragraph 2, the introductory part is replaced by the following: ‘2. Member States may use the ERDF and EAFRD during the eligibility period set out in Article 65(2) of this Regulation to provide a financial contribution to financial instruments referred to in point (a) of Article 38(1) of this Regulation, implemented indirectly by the Commission with the EIB pursuant to point (c)(iii) of the first subparagraph of Article 62(1) of the Financial Regulation and Article 208(4) of the Financial Regulation, in respect of the following activities:’; (b) in the first subparagraph of paragraph 4: (i) point (a) is replaced by the following: ‘(a) by way of derogation from Article 37(2), it shall be based on an ex ante assessment at Union level carried out by the EIB and the Commission or, where more recent data are available, on an ex ante assessment at Union, national or regional level. On the basis of available data sources on bank debt finance and SMEs, the ex ante assessment shall cover, inter alia, an analysis of the SME financing needs at the relevant level, SME financing conditions and needs as well as an indication of the SME financing gap, a profile of the economic and financial situation of the SME sector at the relevant level, minimum critical mass of aggregate contributions, a range of estimated total loan volume generated by such contributions, and the added value;’; (ii) point (b) is replaced by the following: ‘(b) it shall be provided by each participating Member State as part of a separate priority axis within a programme in the case of ERDF contribution, or a single dedicated national programme per financial contribution by ERDF and EAFRD, supporting the thematic objective set out in point (3) of the first paragraph of Article 9;’; (c) paragraphs 7 and 8 are replaced by the following: ‘7. By way of derogation from Article 41(1) and (2) as regards the financial contributions referred to in paragraph 2 of this Article, the Member State’s payment application to the Commission shall be made on the basis of 100 % of the amounts to be paid by the Member State to the EIB in accordance with the schedule defined in the funding agreement referred to in point (c) of the first subparagraph of paragraph 4 of this Article. Such payment applications shall be based on the amounts requested by the EIB deemed necessary to cover commitments under guarantee agreements or securitisation transactions to be finalised within the three following months. Payments from Member States to the EIB shall be made without delay and in any case before commitments are entered into by the EIB. 8. At closure of the programme, the eligible expenditure as referred to in points (a) and (b) of the first subparagraph of Article 42(1) shall be the total amount of programme contributions paid to the financial instrument, corresponding: (a) for the activities referred to in point (a) of the first subparagraph of paragraph 2 of this Article, to the resources referred to in point (b) of the first subparagraph of Article 42(1); (b) for the activities referred to in point (b) of the first subparagraph of paragraph 2 of this Article, to the aggregate amount of new debt finance resulting from the securitisation transactions, paid to or to the benefit of eligible SMEs within the eligibility period set out in Article 65(2).’;
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The Commission has been conducting borrowing and lending operations to provide financial assistance in the form of loans to a beneficiary country for several decades . The borrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. G eneral rules for such operations are laid down in Article 220 of Regulation ( EU, Euratom ) 2018/1046 1 (“Financial Regulation”) , which provides that the Commission can be empowered in a basic act to borrow on behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings. The cash flows between the borrowed funds and the loans are matched one-to-one. This means that market operations are based on disbursement needs, which limits the possibility to plan various borrowing operations coherently with the best market opportunities and structure maturities to achieve the best costs. The funding needs for Ukraine require mobilisation and disbursement in a cost-effective flexible and financially sound manner, integrating all funding needs including for N ext G eneration EU (“ NGEU ”) . I t is of paramount importance that this funding be organised under a single funding method in order to allow different policy needs to be met concurrently . To that end, it is necessary to amend Regulation (EU, Euratom) 2018/1046 to establish the diversified funding strategy , currently implemented for borrowings under Decision (EU, Euratom) 2020/2053 2 as the baseline method for the implementation of borrowing operations. This strategy has allowed the successful mobilisation of funds for non-repayable support and loans under Regulation (EU) 2021/241 3 and a range of other EU policies in 2022. This will allow the Commission to finance the assistance to Ukraine under the proposed Regulation establishing an instrument to provide support to Ukraine 4 in a cost-efficient, flexible and financially sound manner to ensure parallel financing of all Union programmes relying on borrowing . T he extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraine and would be available to any future programmes . It will enable the Commission to use the infrastructure, which allows an integrated funding planning and communication to markets. In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness. The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilises resources through bond issuance. Recourse to a diversified funding strategy as a single funding method will allow the Commission to decouple the timing and the maturity of single funding transactions from the disbursements to beneficiaries. A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This then allows payments to be made to beneficiaries independently of market conditions pre vailing at the time of the disbursement , and avoid s having to raise fixed amounts in volatile o r adverse conditions. Over the life time of the programme of financial assistance , the net liabilities generated are fully matched by countervailing assets ( amounts outstanding, still to be repaid under loans as they mature 5 ) . On this basis, the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent and proportional allocation of costs . The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation. The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls. To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments. The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules. Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology. These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093. The Commission proposed a recast of the Financial Regulation 6 that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency and the changes incorporated in the pending recast during the legislative process . Consistency with existing policy provisions in the policy area The diversified funding strategy has been introduced for NGEU borrowing and has proven successful so far in that context. Consistency with other Union policies The diversified funding strategy will allow efficient use of borrowing capacity for Union policies which may make use of borrowing and lending operations.

EUROPEAN COMMISSIONBrussels, 9.11.2022COM(2022) 596 final2022/0370(COD)Proposal for aREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EU, Euratom) 2018/1046 as regards the establishment of a diversified funding strategy as a general borrowing methodEXPLANATORY MEMORANDUM1.CONTEXT OF THE PROPOSAL•Reasons for and objectives of the proposalTheCommission has been conducting borrowing and lending operationsto providefinancial assistance in the form of loansto a beneficiary countryfor several decades. Theborrowing and lending operations are guaranteed under the Union’s budget and come under the wider scope of budgetary implementation. General rules for such operations are laid down in Article 220 of Regulation (EU, Euratom) 2018/10461(“Financial Regulation”),whichprovides that the Commissioncan be empowered in a basic act to borrowon behalf of the Union or Euratom to on-lend the corresponding amounts to the beneficiary Member States or third countries under the conditions applicable to the borrowings.The cash flows between theborrowed funds and the loans are matched one-to-one. This means that market operationsarebased on disbursement needs, which limits the possibility to plan various borrowing operationscoherently withthe best market opportunities and structure maturities to achieve the best costs.Thefundingneedsfor Ukrainerequire mobilisation and disbursementin a cost-effectiveflexible and financially soundmanner,integrating allfundingneeds includingforNextGenerationEU(“NGEU”).It is of paramount importance that this funding beorganised underasingle funding methodin order to allow different policy needs to be metconcurrently.To that end, it is necessary to amend Regulation (EU, Euratom)2018/1046 to establish the diversified funding strategy,currently implemented for borrowings underDecision (EU, Euratom) 2020/20532as the baseline method fortheimplementation of borrowing operations.This strategy has allowed the successful mobilisation of funds fornon-repayable supportand loans under Regulation (EU) 2021/2413and a range of other EU policies in 2022.Thiswill allowtheCommissionto finance the assistance toUkraineunder the proposedRegulation establishing an instrumentto providesupport to Ukraine4in a cost-efficient, flexible and financially sound mannerto ensureparallelfinancingof all Unionprogrammesrelying on borrowing.The extension of the scope of application of the diversified funding strategy goes beyond the funding needs for Ukraineand would be available to any future programmes. It willenablethe Commission to use the infrastructure,which allowsan integrated funding planning and communication to markets.In the absence of such a single funding method, the Commission would be required to continue financing different programmes of financial assistance separately. This would create cost and complexity as the different programmes of financial assistance would compete for a limited number of funding opportunities. It would fragment the supply of Union’s debt and reduce liquidity and investor interest in the separate programmes. Financing all financial assistance through a single funding method would therefore enhance the liquidity of the Union’s bonds their attractiveness and cost-effectiveness.The diversified funding strategy is a financing method through which funding transactions are organised in a manner consistent with the limits of financial liability authorised in the basic acts in order to achieve the policy objectives. The implementation of a diversified funding strategy does not change the financial liabilities arising from the borrowing. It provides the Commission with more flexibility in how the Union mobilisesresources through bond issuance.Recourse to adiversified funding strategyas asingle fundingmethodwill allow theCommissionto decouple the timingand the maturityof single funding transactions from the disbursements to beneficiaries.A common liquidity pool financed by the issuance of short-term funding (EU-bills) enables the Commission to organise payments in accordance with a regular and agreed schedule, independently of the exact timing of the long-term bond issuance. This thenallowspayments tobe made tobeneficiaries independently of market conditionsprevailingat the time of the disbursement, and avoidshaving to raise fixed amounts in volatile oradverse conditions.Over the lifetimeof theprogramme offinancial assistance,thenetliabilities generated are fully matched by countervailing assets (amounts outstanding, still to be repaid underloans as they mature5).On this basis,the principles of budgetary neutrality and budgetary balance as set out in Article 310(1) TFEU are respected. The costs are fully borne by the beneficiaries based on a single cost allocation methodology that ensures transparent andproportionalallocation of costs.The repayment obligations should remain with the beneficiaries of the financial assistance, in compliance with Article 220(5)(e) of the Financial Regulation.The common liquidity pool should be maintained at levels that would allow the Commission to meet all expected outflows over the short-term, based on a robust liquidity forecasting capacity. The existence of a large, well-stocked liquidity buffer, capable of managing disbursements over long periods, allows the diversified funding strategy to function without the need for other solutions to address temporary cash shortfalls.To support the most successful implementation of the diversified funding strategy, the Commission should, as far as possible, ensure a continuous market presence and to this end implement all necessary transactions aiming at achieving the best possible funding costs and at facilitating of transactions in debt securities of the Union and Euratom. The latter is crucial in supporting the active involvement of the widest range of investors to markets for Union’s debt instruments.The conduct of the diversified funding strategy requires that a single set of rules is followed in respect of all borrowing and lending programmes which rely on it. The Financial Regulation in its role of a single rulebook for the implementation of the EU budget should provide the basis for those rules.Following the entry into force of this amendment of the Financial Regulation, the Commission will adopt and implement a wider governance framework, risk management procedures, and cost allocation methodology.These new rules of the Financial Regulation should only apply to new financial assistance to third countries for which the basic acts enter into force on or after the date of entry into force of these amendments of the Financial Regulation and the parallel amendment of Regulation (EU, Euratom) 2020/2093.The Commission proposed a recast of the Financial Regulation6that is being examined by the European Parliament and the Council. The present stand-alone proposal should be adopted as a matter of urgency andthe changes incorporated in the pending recast during the legislative process.
Revised version (Article 272 Amendments to Regulation (EU) No 1303/2013):
Regulation (EU) No 1303/2013 is amended as follows: in recital 10, the second sentence is replaced by the following: ‘Those conditions should enable the Commission to obtain assurance that Member States are using the ESI Funds in a legal and regular manner and in accordance with the principle of sound financial management within the meaning of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council ( *1 ) (the “Financial Regulation”). Article 2 is amended as follows: point (10) is replaced by the following: ‘(10) “beneficiary” means a public or private body or a natural person, responsible for initiating or both initiating and implementing operations, and: (b) in the context of financial instruments under Title IV of Part Two of this Regulation, the body that implements the financial instrument or the fund of funds as appropriate; point (31) is replaced by the following: ‘(31) “macroregional strategy” means an integrated framework agreed by the Council and, where appropriate, endorsed by the European Council, which may be supported by the ESI Funds among others, to address common challenges faced by a defined geographical area relating to Member States and third countries located in the same geographical area which thereby benefit from strengthened cooperation contributing to achievement of economic, social and territorial cohesion;’; ‘(31) Article 4 is amended as follows: (a) in paragraph 7, the reference to ‘Article 59 of the Financial Regulation’ is replaced by ‘Article 63 of the Financial Regulation’; paragraph 8 is replaced by the following: ‘8. The Commission and the Member States shall respect the principle of sound financial management in accordance with Article 33, Article 36(1) and Article 61 of the Financial Regulation.’; in Article 9, the following paragraph is added: ‘The priorities established for each of the ESI Funds in the Fund-specific rules shall in particular cover the appropriate use of each ESI Fund in the areas of migration and asylum. In that context, coordination with the Asylum, Migration and Integration Fund established by Regulation (EU) No 516/2014 of the European Parliament and of the Council ( *5 ) shall be ensured, where appropriate. (5) in Article 16, the following paragraph is inserted: ‘4a. Where applicable, the Member State shall submit each year by 31 January an amended Partnership Agreement following the approval of amendments to one or more programmes by the Commission in the preceding calendar year. The Commission shall adopt each year by 31 March a decision confirming that the amendments to the Partnership Agreement reflect one or more programme amendments approved by the Commission in the preceding calendar year. That decision may include the amendment of other elements of the Partnership Agreement pursuant to a proposal referred to in paragraph 4, provided that the proposal is submitted to the Commission by 31 December of the preceding calendar year.’; in Article 16, the following paragraph is inserted: ‘4a. Where applicable, the Member State shall submit each year by 31 January an amended Partnership Agreement following the approval of amendments to one or more programmes by the Commission in the preceding calendar year. The Commission shall adopt each year by 31 March a decision confirming that the amendments to the Partnership Agreement reflect one or more programme amendments approved by the Commission in the preceding calendar year. That decision may include the amendment of other elements of the Partnership Agreement pursuant to a proposal referred to in paragraph 4, provided that the proposal is submitted to the Commission by 31 December of the preceding calendar year.’; Article 30 is amended as follows: (a) in paragraph 2, the second subparagraph is replaced by the following: ‘Where the amendment of a programme affects the information provided in the Partnership Agreement, the procedure set out in Article 16(4a) shall apply.’; (b) in paragraph 3, the third sentence is deleted; Article 30 is amended as follows: in paragraph 2, the second subparagraph is replaced by the following: ‘Where the amendment of a programme affects the information provided in the Partnership Agreement, the procedure set out in Article 16(4a) shall apply.’; (b) in paragraph 3, the third sentence is deleted; in Article 32, paragraph 4 is replaced by the following: Article 34(3) is amended as follows: points (a) to (d) are replaced by the following: ‘(a) building the capacity of local actors, including potential beneficiaries, to develop and implement operations including by fostering their capacity to prepare and manage their projects; ‘(a) (b) drawing up a non-discriminatory and transparent selection procedure which avoids conflicts of interests, ensures that at least 50 % of the votes in selection decisions are cast by partners which are not public authorities, and allows selection by written procedure; (c) drawing up and approving non-discriminatory objective criteria for the selection of operations that ensure coherence with the community-led local development strategy by prioritising those operations according to their contribution to meeting that strategy’s objectives and targets; (d) preparing and publishing calls for proposals or an ongoing project submission procedure;’; the following subparagraph is added: ‘Where local action groups carry out tasks not covered by points (a) to (g) of the first subparagraph that fall under the responsibility of the managing or certifying authority or of the paying agency, those local action groups shall be designated as intermediate bodies in accordance with the Fund-specific rules.’; in Article 36, paragraph 3 is replaced by the following: ‘3. The Member State or the managing authority may delegate certain tasks in accordance with the Fund-specific rules to one or more intermediate bodies, including local authorities, regional development bodies or non-governmental organisations, linked to the management and implementation of an ITI.’; Article 37 is amended as follows: in paragraph 2, point (c) is replaced by the following: ‘(c) an estimate of additional public and private resources to be potentially raised by the financial instrument down to the level of the final recipient (expected leverage effect), including as appropriate an assessment of the need for, and the extent of, differentiated treatment as referred to in Article 43a to attract counterpart resources from investors operating under the market economy principle and/or a description of the mechanisms which will be used to establish the need for, and extent of, such differentiated treatment, such as a competitive or appropriately independent assessment process;’; ‘(c) in paragraph 3, the first subparagraph is replaced by the following: ‘3. The ex ante assessment referred to in paragraph 2 of this Article may take into account the ex ante evaluations referred to in point (h) of the first subparagraph and the second subparagraph of Article 209(2) of the Financial Regulation and may be performed in stages. It shall, in any event, be completed before the managing authority decides to make programme contributions to a financial instrument.’; ‘8. Final recipients supported by an ESI Fund financial instrument may also receive assistance from another ESI Funds priority or programme or from another instrument supported by the budget of the Union, including from the European Fund for Strategic Investments (EFSI) established by Regulation (EU) 2015/1017 of the European Parliament and of the Council ( *6 ), in accordance with applicable Union State aid rules, as appropriate. In that case, separate records shall be maintained for each source of assistance and the ESI Funds financial instrument support shall be part of an operation with eligible expenditure distinct from the other sources of assistance. Article 38 is amended as follows: in paragraph 1, the following point is added: ‘(c) financial instruments combining such contribution with EIB financial products under the EFSI in accordance with Article 39a.’; paragraph 4 is amended as follows: points (b) and (c) of the first subparagraph are replaced by the following: ‘(b) entrust implementation tasks, through the direct award of a contract, to: (i) the EIB; (ii) an international financial institution in which a Member State is a shareholder; (iii) a publicly-owned bank or institution, established as a legal entity carrying out financial activities on a professional basis, which fulfils all of the following conditions: — there is no direct private capital participation, with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the relevant bank or institution, and with the exception of forms of private capital participation which confer no influence on decisions regarding the day-to-day management of the financial instrument supported by the ESI Funds; — operates under a public policy mandate given by the relevant authority of a Member State at national or regional level, which includes carrying out, as all or part of its activities, economic development activities contributing to the objectives of the ESI Funds; — carries out, as all or part of its activities, economic development activities contributing to the objectives of the ESI Funds in regions, policy areas or sectors for which access to funding from market sources is not generally available or sufficient; — operates without primarily focussing on maximising profits, but ensures a long-term financial sustainability for its activities; — ensures that the direct award of a contract referred to in point (b) does not provide any direct or indirect benefit for commercial activities by way of appropriate measures in accordance with applicable law; — is subject to the supervision of an independent authority in accordance with applicable law. a publicly-owned bank or institution, established as a legal entity carrying out financial activities on a professional basis, which fulfils all of the following conditions: — there is no direct private capital participation, with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the relevant bank or institution, and with the exception of forms of private capital participation which confer no influence on decisions regarding the day-to-day management of the financial instrument supported by the ESI Funds; — operates under a public policy mandate given by the relevant authority of a Member State at national or regional level, which includes carrying out, as all or part of its activities, economic development activities contributing to the objectives of the ESI Funds; — carries out, as all or part of its activities, economic development activities contributing to the objectives of the ESI Funds in regions, policy areas or sectors for which access to funding from market sources is not generally available or sufficient; — operates without primarily focussing on maximising profits, but ensures a long-term financial sustainability for its activities; — ensures that the direct award of a contract referred to in point (b) does not provide any direct or indirect benefit for commercial activities by way of appropriate measures in accordance with applicable law; — is subject to the supervision of an independent authority in accordance with applicable law. (c) entrust implementation tasks to another body governed by public or private law; or (d) undertake implementation tasks directly, in the case of financial instruments consisting solely of loans or guarantees. In that case the managing authority shall be considered to be the beneficiary within the meaning of point (10) of Article 2.’; the second subparagraph is replaced by the following: paragraphs 5 and 6 are replaced by the following: 6. The bodies referred to in points (b) and (c) of the first subparagraph of paragraph 4 to which implementation tasks have been entrusted shall open fiduciary accounts in their name and on behalf of the managing authority, or set up the financial instrument as a separate block of finance within the institution. In the case of a separate block of finance, an accounting distinction shall be made between programme resources invested in the financial instrument and the other resources available in the institution. The assets held on fiduciary accounts and such separate blocks of finance shall be managed in accordance with the principle of sound financial management following appropriate prudential rules and shall have appropriate liquidity.’; in the first subparagraph of paragraph 7, the introductory part is replaced by the following: paragraph 8 is replaced by the following: ‘8. For financial instruments implemented under point (d) of the first subparagraph of paragraph 4, the terms and conditions for contributions from programmes to financial instruments shall be set out in a strategy document in accordance with Annex IV to be examined by the monitoring committee.’; paragraph 10 is replaced by the following: ‘10. The Commission shall adopt implementing acts laying down uniform conditions regarding the detailed arrangements for the transfer and management of programme contributions managed by the bodies referred to in the first subparagraph of paragraph 4 of this Article and in Article 39a(5). Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 150(3).’; Article 39 is amended as follows: in the first subparagraph of paragraph 2, the introductory part is replaced by the following: in the first subparagraph of paragraph 4: point (a) is replaced by the following: ‘(a) by way of derogation from Article 37(2), it shall be based on an ex ante assessment at Union level carried out by the EIB and the Commission or, where more recent data are available, on an ex ante assessment at Union, national or regional level. On the basis of available data sources on bank debt finance and SMEs, the ex ante assessment shall cover, inter alia, an analysis of the SME financing needs at the relevant level, SME financing conditions and needs as well as an indication of the SME financing gap, a profile of the economic and financial situation of the SME sector at the relevant level, minimum critical mass of aggregate contributions, a range of estimated total loan volume generated by such contributions, and the added value;’; ‘(a) by way of derogation from Article 37(2), it shall be based on an ex ante assessment at Union level carried out by the EIB and the Commission or, where more recent data are available, on an ex ante assessment at Union, national or regional level. On the basis of available data sources on bank debt finance and SMEs, the ex ante assessment shall cover, inter alia, an analysis of the SME financing needs at the relevant level, SME financing conditions and needs as well as an indication of the SME financing gap, a profile of the economic and financial situation of the SME sector at the relevant level, minimum critical mass of aggregate contributions, a range of estimated total loan volume generated by such contributions, and the added value;’; point (b) is replaced by the following: ‘(b) it shall be provided by each participating Member State as part of a separate priority axis within a programme in the case of ERDF contribution, or a single dedicated national programme per financial contribution by ERDF and EAFRD, supporting the thematic objective set out in point (3) of the first paragraph of Article 9;’; paragraphs 7 and 8 are replaced by the following: for the activities referred to in point (b) of the first subparagraph of paragraph 2 of this Article, to the aggregate amount of new debt finance resulting from the securitisation transactions, paid to or to the benefit of eligible SMEs within the eligibility period set out in Article 65(2).’; the following article is inserted: 
‘Article 39a
Contribution of ESI Funds to financial instruments combining such contribution with EIB financial products under the European Fund for Strategic Investments
1. In order to attract additional private sector investment managing authorities may use the ESI Funds to provide a contribution to financial instruments referred to in point (c) of Article 38(1) provided that it contributes, inter alia, to the achievement of the objectives of the ESI Funds and to the Union strategy for smart, sustainable and inclusive growth.
In order to attract additional private sector investment managing authorities may use the ESI Funds to provide a contribution to financial instruments referred to in point (c) of Article 38(1) provided that it contributes, inter alia, to the achievement of the objectives of the ESI Funds and to the Union strategy for smart, sustainable and inclusive growth.
2. The contribution referred to in paragraph 1 shall not exceed 25 % of the total support provided to final recipients. In the less developed regions referred to in point (b) of the first subparagraph of Article 120(3), the financial contribution may exceed 25 % where duly justified by the assessments referred to in Article 37(2) or in paragraph 3 of this Article, but shall not exceed 40 %. The total support referred to in this paragraph shall comprise the total amount of new loans and guaranteed loans as well as equity and quasi-equity investments provided to final recipients. The guaranteed loans referred to in this paragraph shall only be taken into account to the extent that the ESI Funds resources are committed for guarantee contracts calculated on the basis of a prudent ex ante risk assessment covering a multiple amount of new loans.
The contribution referred to in paragraph 1 shall not exceed 25 % of the total support provided to final recipients. In the less developed regions referred to in point (b) of the first subparagraph of Article 120(3), the financial contribution may exceed 25 % where duly justified by the assessments referred to in Article 37(2) or in paragraph 3 of this Article, but shall not exceed 40 %. The total support referred to in this paragraph shall comprise the total amount of new loans and guaranteed loans as well as equity and quasi-equity investments provided to final recipients. The guaranteed loans referred to in this paragraph shall only be taken into account to the extent that the ESI Funds resources are committed for guarantee contracts calculated on the basis of a prudent ex ante risk assessment covering a multiple amount of new loans.
3. By way of derogation from Article 37(2), contributions pursuant to paragraph 1 of this Article may be based on the preparatory assessment, including the due diligence, carried out by the EIB for the purposes of its contribution to the financial product under the EFSI.
By way of derogation from Article 37(2), contributions pursuant to paragraph 1 of this Article may be based on the preparatory assessment, including the due diligence, carried out by the EIB for the purposes of its contribution to the financial product under the EFSI.
4. Reporting by managing authorities under Article 46 of this Regulation on operations comprising financial instruments under this Article shall be based on the information kept by the EIB for the purposes of its reporting pursuant to Article 16(1) and (2) of Regulation (EU) 2015/1017, supplemented by the additional information required under Article 46(2) of this Regulation. The requirements set out in this paragraph shall allow for uniform reporting conditions in accordance with Article 46(3) of this Regulation.
Reporting by managing authorities under Article 46 of this Regulation on operations comprising financial instruments under this Article shall be based on the information kept by the EIB for the purposes of its reporting pursuant to Article 16(1) and (2) of Regulation (EU) 2015/1017, supplemented by the additional information required under Article 46(2) of this Regulation. The requirements set out in this paragraph shall allow for uniform reporting conditions in accordance with Article 46(3) of this Regulation.
5. When contributing to financial instruments referred to in point (c) of Article 38(1) the managing authority may do any of the following: (a) invest in the capital of an existing or newly created legal entity dedicated to implement investments in final recipients consistent with the objectives of the respective ESI Funds which will undertake implementation tasks; (b) entrust implementation tasks in accordance with points (b) and (c) of the first subparagraph of Article 38(4).
When contributing to financial instruments referred to in point (c) of Article 38(1) the managing authority may do any of the following: (a) invest in the capital of an existing or newly created legal entity dedicated to implement investments in final recipients consistent with the objectives of the respective ESI Funds which will undertake implementation tasks; (b) entrust implementation tasks in accordance with points (b) and (c) of the first subparagraph of Article 38(4).
When contributing to financial instruments referred to in point (c) of Article 38(1) the managing authority may do any of the following:
(a) invest in the capital of an existing or newly created legal entity dedicated to implement investments in final recipients consistent with the objectives of the respective ESI Funds which will undertake implementation tasks;
(a)
invest in the capital of an existing or newly created legal entity dedicated to implement investments in final recipients consistent with the objectives of the respective ESI Funds which will undertake implementation tasks;
invest in the capital of an existing or newly created legal entity dedicated to implement investments in final recipients consistent with the objectives of the respective ESI Funds which will undertake implementation tasks;
(b) entrust implementation tasks in accordance with points (b) and (c) of the first subparagraph of Article 38(4).
(b)
entrust implementation tasks in accordance with points (b) and (c) of the first subparagraph of Article 38(4).
entrust implementation tasks in accordance with points (b) and (c) of the first subparagraph of Article 38(4).
The body entrusted with implementation tasks as referred to in point (b) of the first subparagraph of this paragraph shall either open a fiduciary account in its name and on behalf of the managing authority or set up a separate block of finance within the institution for programme contribution. In the case of a separate block of finance, an accounting distinction shall be made between programme resources invested in the financial instrument and the other resources available in the institution. The assets held on fiduciary accounts and such separate blocks of finance shall be managed in accordance with the principle of sound financial management following appropriate prudential rules and shall have appropriate liquidity.
For the purposes of this Article, a financial instrument may also take the form or be part of an investment platform in line with Article 2(4) of Regulation (EU) 2015/1017, provided that the investment platform takes the form of a special purpose vehicle or a managed account.
6. When implementing financial instruments under point (c) of Article 38(1) of this Regulation, the bodies referred to in paragraph 5 of this Article shall ensure compliance with applicable law and with the requirements laid down in Article 155(2) and (3) of the Financial Regulation.
When implementing financial instruments under point (c) of Article 38(1) of this Regulation, the bodies referred to in paragraph 5 of this Article shall ensure compliance with applicable law and with the requirements laid down in Article 155(2) and (3) of the Financial Regulation.
7. By 3 November 2018, the Commission shall adopt delegated acts in accordance with Article 149 supplementing this Regulation by laying down additional specific rules on the role, liabilities and responsibility of bodies implementing financial instruments, related selection criteria and products that may be delivered through financial instruments in accordance with point (c) of Article 38(1).
By 3 November 2018, the Commission shall adopt delegated acts in accordance with Article 149 supplementing this Regulation by laying down additional specific rules on the role, liabilities and responsibility of bodies implementing financial instruments, related selection criteria and products that may be delivered through financial instruments in accordance with point (c) of Article 38(1).
8. The bodies referred to in paragraph 5 of this Article, when implementing funds of funds may further entrust part of the implementation to financial intermediaries provided that such bodies ensure under their responsibility that the financial intermediaries satisfy the criteria laid down in Articles 33(1) and 209(2) of the Financial Regulation. Financial intermediaries shall be selected on the basis of open, transparent, proportionate and non-discriminatory procedures, avoiding conflict of interests.
The bodies referred to in paragraph 5 of this Article, when implementing funds of funds may further entrust part of the implementation to financial intermediaries provided that such bodies ensure under their responsibility that the financial intermediaries satisfy the criteria laid down in Articles 33(1) and 209(2) of the Financial Regulation. Financial intermediaries shall be selected on the basis of open, transparent, proportionate and non-discriminatory procedures, avoiding conflict of interests.
9. Where, for the purposes of implementing financial instruments referred to in point (c) of Article 38(1), managing authorities contribute the ESI Funds programme resources to an existing instrument, the fund manager of which has already been selected by the EIB, an international financial institution in which a Member State is a shareholder, or a publicly-owned bank or institution, established as a legal entity carrying out financial activities on a professional basis and fulfilling the conditions set out in point (b)(iii) of the first subparagraph of Article 38(4), they shall entrust implementation tasks to that fund manager through the award of a direct contract.
Where, for the purposes of implementing financial instruments referred to in point (c) of Article 38(1), managing authorities contribute the ESI Funds programme resources to an existing instrument, the fund manager of which has already been selected by the EIB, an international financial institution in which a Member State is a shareholder, or a publicly-owned bank or institution, established as a legal entity carrying out financial activities on a professional basis and fulfilling the conditions set out in point (b)(iii) of the first subparagraph of Article 38(4), they shall entrust implementation tasks to that fund manager through the award of a direct contract.
10. By way of derogation from Article 41(1) and (2), for contributions to financial instruments under paragraph 9 of this Article, applications for interim payment shall be phased in line with the payment schedule set out in the funding agreement. The payment schedule referred to in the first sentence of this paragraph shall correspond to the payment schedule agreed for other investors in the same financial instrument.
By way of derogation from Article 41(1) and (2), for contributions to financial instruments under paragraph 9 of this Article, applications for interim payment shall be phased in line with the payment schedule set out in the funding agreement. The payment schedule referred to in the first sentence of this paragraph shall correspond to the payment schedule agreed for other investors in the same financial instrument.
11. The terms and conditions for contributions pursuant to point (c) of Article 38(1) shall be set out in funding agreements in accordance with Annex IV at the following levels: (a) where applicable, between the duly mandated representatives of the managing authority and the body that implements the fund of funds; (b) between the duly mandated representatives of the managing authority, or where applicable, between the body that implements the fund of funds, and the body that implements the financial instrument.
The terms and conditions for contributions pursuant to point (c) of Article 38(1) shall be set out in funding agreements in accordance with Annex IV at the following levels: (a) where applicable, between the duly mandated representatives of the managing authority and the body that implements the fund of funds; (b) between the duly mandated representatives of the managing authority, or where applicable, between the body that implements the fund of funds, and the body that implements the financial instrument.
The terms and conditions for contributions pursuant to point (c) of Article 38(1) shall be set out in funding agreements in accordance with Annex IV at the following levels:
(a) where applicable, between the duly mandated representatives of the managing authority and the body that implements the fund of funds;
(a)
where applicable, between the duly mandated representatives of the managing authority and the body that implements the fund of funds;
where applicable, between the duly mandated representatives of the managing authority and the body that implements the fund of funds;
(b) between the duly mandated representatives of the managing authority, or where applicable, between the body that implements the fund of funds, and the body that implements the financial instrument.
(b)
between the duly mandated representatives of the managing authority, or where applicable, between the body that implements the fund of funds, and the body that implements the financial instrument.
between the duly mandated representatives of the managing authority, or where applicable, between the body that implements the fund of funds, and the body that implements the financial instrument.
12. For contributions pursuant to paragraph 1 of this Article to investment platforms which receive contributions from instruments set up at Union level, consistency with State aid rules shall be ensured in accordance with point (c) of the first subparagraph of Article 209(2) of the Financial Regulation.
For contributions pursuant to paragraph 1 of this Article to investment platforms which receive contributions from instruments set up at Union level, consistency with State aid rules shall be ensured in accordance with point (c) of the first subparagraph of Article 209(2) of the Financial Regulation.
13. In the case of financial instruments referred to in point (c) of Article 38(1) which take the form of a guarantee instrument, Member States may decide that the ESI Funds contribute, as appropriate, to different tranches of portfolios of loans covered also under the EU guarantee pursuant to Regulation (EU) 2015/1017.
In the case of financial instruments referred to in point (c) of Article 38(1) which take the form of a guarantee instrument, Member States may decide that the ESI Funds contribute, as appropriate, to different tranches of portfolios of loans covered also under the EU guarantee pursuant to Regulation (EU) 2015/1017.
14. For the ERDF, the ESF, the Cohesion Fund and the EMFF, a separate priority, and for the EAFRD, a separate type of operation, with a co-financing rate of up to 100 % may be established within a programme to support operations implemented through financial instruments referred to in point (c) of Article 38(1).
For the ERDF, the ESF, the Cohesion Fund and the EMFF, a separate priority, and for the EAFRD, a separate type of operation, with a co-financing rate of up to 100 % may be established within a programme to support operations implemented through financial instruments referred to in point (c) of Article 38(1).
15. Notwithstanding Article 70 and Article 93(1), contributions pursuant to paragraph 1 of this Article may be used for the purpose of giving rise to new debt and equity finance in the entire territory of the Member State without regard to the categories of region, unless otherwise provided in the funding agreement.
Notwithstanding Article 70 and Article 93(1), contributions pursuant to paragraph 1 of this Article may be used for the purpose of giving rise to new debt and equity finance in the entire territory of the Member State without regard to the categories of region, unless otherwise provided in the funding agreement.
16. By 31 December 2019, the Commission shall carry out a review of the application of this Article and shall where appropriate submit to the European Parliament and Council a legislative proposal.’;
By 31 December 2019, the Commission shall carry out a review of the application of this Article and shall where appropriate submit to the European Parliament and Council a legislative proposal.’; Article 40 is amended as follows: paragraphs 1 and 2 are replaced by the following: ‘1. The authorities designated in accordance with Article 124 of this Regulation and with Article 65 of the EAFRD Regulation shall not carry out on-the-spot verifications at the level of the EIB or other international financial institutions in which a Member State is a shareholder, for financial instruments implemented by them. The EIB and other international financial institutions in which a Member State is a shareholder shall provide to the designated authorities a control report with each application for payment. They shall also provide to the Commission and to the designated authorities an annual audit report drawn up by their external auditors. Those reporting obligations are without prejudice to the reporting obligations, including as regards the performance of the financial instruments, as set out in Article 46(1) and (2) of this Regulation. The Commission shall be empowered to adopt an implementing act concerning the models for the control reports and the annual audit reports referred to in the third subparagraph of this paragraph. That implementing act shall be adopted in accordance with the advisory procedure referred to in Article 150(2). 2. Without prejudice to Article 127 of this Regulation and Article 9 of Regulation (EU) No 1306/2013, the bodies responsible for the audit of the programmes shall not carry out audits at the level of the EIB or other international financial institutions in which a Member State is a shareholder, for financial instruments implemented by them. The bodies responsible for the audit of the programmes shall carry out audits of operations and of management and control systems at the level of other bodies implementing the financial instruments in their respective Member States and at the level of the final recipients provided that the conditions set out in paragraph 3 are fulfilled. The Commission may carry out audits at the level of the bodies referred to in paragraph 1, where it concludes that this is necessary to obtain reasonable assurance given the risks identified. 2a. As regards financial instruments referred to in point (a) of Article 38(1) and Article 39 which were established by a funding agreement signed before 2 August 2018, the rules set out in this Article applicable at the moment of the signature of the funding agreement shall apply, by way of derogation from paragraphs 1 and 2 of this Article.’; paragraph 4 is replaced by the following: the following paragraph is inserted: (a) where the irregularity that gives rise to the cancellation of the contribution is detected at the level of the final recipient, the contribution cancelled may be reused only for other final recipients within the same financial instrument; (b) where the irregularity that gives rise to the cancellation of the contribution is detected at the level of the financial intermediary within a fund of funds, the contribution cancelled may be reused only for other financial intermediaries. Where the irregularity that gives rise to the cancellation of the contribution is detected at the level of the body implementing funds of funds, or at the level of the body implementing financial instruments where a financial instrument is implemented through a structure without a fund of funds, the contribution cancelled may not be reused within the same operation. Where a financial correction is made for a systemic irregularity, the contribution cancelled may not be reused for any operation affected by the systemic irregularity.’; Article 41 is amended as follows: in the first subparagraph of paragraph 1, the introductory part is replaced by the following: paragraph 2 is replaced by the following: Article 42 is amended as follows: in paragraph 3, the first subparagraph is replaced by the following: in paragraph 5, the first subparagraph is replaced by the following: 
‘Article 43a
Differentiated treatment of investors
1. Support from the ESI Funds to financial instruments invested in final recipients and gains and other earnings or yields, such as interest, guarantee fees, dividends, capital gains or any other income generated by those investments, which are attributable to the support from the ESI Funds, may be used for differentiated treatment of investors operating under the market economy principle, as well as of the EIB when using the EU guarantee pursuant to Regulation (EU) 2015/1017. Such differentiated treatment shall be justified by the need to attract private counterpart resources and to leverage public funding.
Support from the ESI Funds to financial instruments invested in final recipients and gains and other earnings or yields, such as interest, guarantee fees, dividends, capital gains or any other income generated by those investments, which are attributable to the support from the ESI Funds, may be used for differentiated treatment of investors operating under the market economy principle, as well as of the EIB when using the EU guarantee pursuant to Regulation (EU) 2015/1017. Such differentiated treatment shall be justified by the need to attract private counterpart resources and to leverage public funding.
2. The assessments referred to in Articles 37(2) and 39a(3) shall include, as appropriate, an assessment of the need for, and the extent of, differentiated treatment as referred to in paragraph 1 of this Article and/or a description of the mechanisms which will be used to establish the need for, and extent of, such differentiated treatment.
The assessments referred to in Articles 37(2) and 39a(3) shall include, as appropriate, an assessment of the need for, and the extent of, differentiated treatment as referred to in paragraph 1 of this Article and/or a description of the mechanisms which will be used to establish the need for, and extent of, such differentiated treatment.
3. The differentiated treatment shall not exceed what is necessary to create the incentives for attracting private counterpart resources. It shall not over-compensate investors operating under the market economy principle, or the EIB when using the EU guarantee pursuant to Regulation (EU) 2015/1017. The alignment of interest shall be ensured through an appropriate sharing of risk and profit.
The differentiated treatment shall not exceed what is necessary to create the incentives for attracting private counterpart resources. It shall not over-compensate investors operating under the market economy principle, or the EIB when using the EU guarantee pursuant to Regulation (EU) 2015/1017. The alignment of interest shall be ensured through an appropriate sharing of risk and profit.
4. Differentiated treatment of investors operating under the market economy principle shall be without prejudice to the Union State aid rules.’;
Differentiated treatment of investors operating under the market economy principle shall be without prejudice to the Union State aid rules.’; in Article 44, paragraph 1 is replaced by the following: Without prejudice to Article 43a, resources paid back to financial instruments from investments or from the release of resources committed for guarantee contracts, including capital repayments and gains and other earnings or yields, such as interest, guarantee fees, dividends, capital gains or any other income generated by investments, which are attributable to the support from the ESI Funds, shall be re-used for the following purposes, up to the amounts necessary and in the order agreed in the relevant funding agreements: (a) further investments through the same or other financial instruments, in accordance with the specific objectives set out under a priority; (b) where applicable, to cover the losses in the nominal amount of the ESI Funds contribution to the financial instrument resulting from negative interest, if such losses occur despite active treasury management by the bodies implementing financial instruments; (c) where applicable, reimbursement of management costs incurred and payment of management fees of the financial instrument.’; in Article 46(2), the first subparagraph is amended as follows: point (c) is replaced by the following: ‘(c) points (g) and (h) are replaced by the following: ‘(g) interest and other gains generated by support from the ESI Funds to the financial instrument and programme resources paid back to financial instruments from investments as referred to in Articles 43 and 44 and amounts used for differentiated treatment as referred to in Article 43a; ‘(g) (h) progress in achieving the expected leverage effect of investments made by the financial instrument;’; in Article 49, paragraph 4 is replaced by the following: ‘4. The monitoring committee may make observations to the managing authority regarding implementation and evaluation of the programme including actions related to the reduction of the administrative burden on beneficiaries. It may also make observations on the visibility of support from the ESI Funds and on raising awareness about the results of such support. It shall monitor actions taken as a result of its observations.’; (21) in Article 51, paragraph 1 is replaced by the following: ‘1. An annual review meeting shall be organised every year from 2016 until and including 2023 between the Commission and each Member State to examine the performance of each programme, taking account of the annual implementation report and the Commission’s observations where applicable. The meeting shall also review the programme’s communication and information activities, in particular the results and effectiveness of measures taken to inform the public about the results and added value of support from the ESI Funds.’; in Article 51, paragraph 1 is replaced by the following: ‘1. An annual review meeting shall be organised every year from 2016 until and including 2023 between the Commission and each Member State to examine the performance of each programme, taking account of the annual implementation report and the Commission’s observations where applicable. The meeting shall also review the programme’s communication and information activities, in particular the results and effectiveness of measures taken to inform the public about the results and added value of support from the ESI Funds.’; (22) in Article 56, paragraph 5 is deleted; in Article 57, paragraph 3 is replaced by the following: ‘3. Paragraph 1 and 2 of this Article shall also apply to the contributions from the ERDF or the EAFRD to the dedicated programmes referred to in point (b) of the first subparagraph of Article 39(4).’; Article 58(1) is amended as follows: (a) in the second subparagraph, the reference to ‘Article 60 of the Financial Regulation’ is replaced by ‘Article 154 of the Financial Regulation’; in the third subparagraph, point (f) is replaced by the following: ‘(f) actions to disseminate information, support networking, carry out communication activities with particular attention to the results and added value of support from the ESI Funds, raise awareness and promote cooperation and exchange of experience, including with third countries;’; ‘(f) (c) the fourth subparagraph is replaced by the following: ‘The Commission shall dedicate at least 15 % of the resources referred to in this Article to bring about greater efficiency in communication to the public and stronger synergies between the communication activities undertaken at the initiative of the Commission, by extending the knowledge base on results, in particular through more effective data collection and dissemination, evaluations and reporting, and especially by highlighting the contribution of the ESI Funds to improving people’s lives, and by increasing the visibility of support from the ESI Funds as well as by raising awareness about the results and the added value of such support. Information, communication and visibility measures on results and added value of support from the ESI Funds, with particular focus on operations, shall be continued after the closure of the programmes, where appropriate. Such measures shall also contribute to the corporate communication of the political priorities of the Union as far as they are related to the general objectives of this Regulation.’; the fourth subparagraph is replaced by the following: ‘The Commission shall dedicate at least 15 % of the resources referred to in this Article to bring about greater efficiency in communication to the public and stronger synergies between the communication activities undertaken at the initiative of the Commission, by extending the knowledge base on results, in particular through more effective data collection and dissemination, evaluations and reporting, and especially by highlighting the contribution of the ESI Funds to improving people’s lives, and by increasing the visibility of support from the ESI Funds as well as by raising awareness about the results and the added value of such support. Information, communication and visibility measures on results and added value of support from the ESI Funds, with particular focus on operations, shall be continued after the closure of the programmes, where appropriate. Such measures shall also contribute to the corporate communication of the political priorities of the Union as far as they are related to the general objectives of this Regulation.’; the following subparagraph is added: ‘Depending on their purpose, the measures referred to in this Article can be financed either as operational or administrative expenditure.’; Article 59 is amended as follows: the following paragraph is inserted: ‘1a. Each ESI Fund may support technical assistance operations eligible under any of the other ESI Funds.’; the following paragraph is added: Without prejudice to paragraph 2, Member States may implement actions referred to in paragraph 1 through the direct award of a contract to: (a) the EIB; (b) an international financial institution in which a Member State is a shareholder; Article 61 is amended as follows: in paragraph 1, the first subparagraph is replaced by the following: ‘1. This Article shall apply to operations which generate net revenue after their completion. For the purposes of this Article, “net revenue” means cash in-flows directly paid by users for the goods or services provided by the operation, such as charges borne directly by users for the use of infrastructure, sale or rent of land or buildings, or payments for services less any operating costs and replacement costs of short-life equipment incurred during the corresponding period. Operating cost-savings generated by the operation, with the exception of cost-savings resulting from the implementation of energy efficiency measures, shall be treated as net revenue unless they are offset by an equal reduction in operating subsidies.’; in the first subparagraph of paragraph 3, the following point is inserted: ‘(aa) application of a flat rate net revenue percentage established by a Member State for a sector or subsector not covered by point (a). Before the application of the flat rate the responsible audit authority shall verify that the flat rate has been established according to a fair, equitable and verifiable method based on historical data or objective criteria;’; ‘(aa) paragraph 5 is replaced by the following: ‘5. As an alternative to the application of the methods laid down in paragraph 3 of this Article, the maximum co-financing rate referred to in Article 60(1) may, at the request of a Member State, be decreased for a priority or measure under which all supported operations could apply a uniform flat rate in accordance with point (a) of the first subparagraph of paragraph 3 of this Article. The decrease shall be not less than the amount calculated by multiplying the maximum Union co-financing rate applicable under the Fund-specific rules by the relevant flat rate referred to in that point.’; in the first subparagraph of paragraph 7, point (h) is replaced by the following: ‘(h) operations for which amounts or rates of support are defined in Annex II to the EAFRD Regulation or in the EMFF Regulation.’; ‘(h) paragraph 8 is replaced by the following: ‘8. In addition, paragraphs 1 to 6 shall not apply to operations for which support under the programme constitutes State aid.’; Article 65 is amended as follows: the third subparagraph of paragraph 8 is amended as follows: Point (h) is replaced by the following: ‘(h) operations for which amounts or rates of support are defined in Annex II to the EAFRD Regulation or in the EMFF Regulation with the exception of those operations for which reference is made to this paragraph in the EMFF Regulation; or’; Point (i) is replaced by the following: ‘(i) operations for which the total eligible cost does not exceed EUR 100 000 .’; ‘(i) paragraph 11 is replaced by the following: ‘11. An operation may receive support from one or more ESI Funds or from one or more programmes and from other Union instruments, provided that the expenditure declared in a payment application for one of the ESI Funds is not declared for support from another Fund or Union instrument, or for support from the same Fund under another programme. The amount of expenditure to be entered into a payment application of an ESI Fund may be calculated for each ESI Fund and for the programme or programmes concerned on a pro rata basis in accordance with the document setting out the conditions for support.’; Article 67 is amended as follows: paragraph 1 is amended as follows: point (c) is replaced by the following: ‘(c) lump sums;’; ‘(c) the following point is added: ‘(e) financing which is not linked to costs of the relevant operations but is based on the fulfilment of conditions related to the realisation of progress in implementation or the achievement of objectives of programmes as set out in the delegated act adopted in accordance with paragraph 5a.’; ‘(e) the following subparagraph is added: ‘For the form of financing referred to in point (e) of the first subparagraph, the audit shall exclusively aim at verifying that the conditions for reimbursement have been fulfilled.’; the following paragraph is inserted: ‘2a. For an operation or a project not covered by the first sentence of paragraph 4 and which receive support from the ERDF and the ESF, grants and repayable assistance for which the public support does not exceed EUR 100 000 shall take the form of standard scales of unit costs, lump sums or flat rates, except for operations receiving support within the framework of State aid that does not constitute de minimis aid. Where flat-rate financing is used, the categories of costs to which the flat rate is applied may be reimbursed in accordance with point (a) of the first subparagraph of paragraph 1. For operations supported by the EAFRD, ERDF or the ESF, where the flat rate referred to in Article 68b(1) is used, the allowances and the salaries paid to participants may be reimbursed in accordance with point (a) of the first subparagraph of paragraph 1 of this Article. This paragraph shall be subject to the transitional provisions set out in Article 152(7).’; paragraph 4 is replaced by the following: ‘4. Where an operation or a project forming a part of an operation is implemented exclusively through the public procurement of works, goods or services, only points (a) and (e) of the first subparagraph of paragraph 1 shall apply. Where the public procurement within an operation or project forming part of an operation is limited to certain categories of costs, all the options referred to in paragraph 1 may be applied for the whole operation or project forming a part of an operation.’; paragraph 5 is amended as follows: point (a) is replaced by the following: ‘(a) a fair, equitable and verifiable calculation method based on any of the following: (i) statistical data, other objective information or an expert judgement; (ii) the verified historical data of individual beneficiaries; (iii) the application of the usual cost accounting practices of individual beneficiaries;’; the following point is inserted: ‘(aa) a draft budget established on a case-by-case basis and agreed ex ante by the managing authority, or in the case of EAFRD the authority responsible for the selection of operations, where the public support does not exceed EUR 100 000 ;’; ‘(aa) Article 68 is replaced by the following: 
‘Article 68
Flat-rate financing for indirect costs concerning grants and repayable assistance
Where the implementation of an operation gives rise to indirect costs, they may be calculated at a flat rate in one of the following ways:
(a) a flat rate of up to 25 % of eligible direct costs, provided that the rate is calculated on the basis of a fair, equitable and verifiable calculation method or a method applied under schemes for grants funded entirely by the Member State for a similar type of operation and beneficiary;
(a)
a flat rate of up to 25 % of eligible direct costs, provided that the rate is calculated on the basis of a fair, equitable and verifiable calculation method or a method applied under schemes for grants funded entirely by the Member State for a similar type of operation and beneficiary;
a flat rate of up to 25 % of eligible direct costs, provided that the rate is calculated on the basis of a fair, equitable and verifiable calculation method or a method applied under schemes for grants funded entirely by the Member State for a similar type of operation and beneficiary;
(b) a flat rate of up to 15 % of eligible direct staff costs without there being a requirement for the Member State to perform a calculation to determine the applicable rate;
(b)
a flat rate of up to 15 % of eligible direct staff costs without there being a requirement for the Member State to perform a calculation to determine the applicable rate;
a flat rate of up to 15 % of eligible direct staff costs without there being a requirement for the Member State to perform a calculation to determine the applicable rate;
(c) a flat rate applied to eligible direct costs based on existing methods and corresponding rates, applicable in Union policies for a similar type of operation and beneficiary.
(c)
a flat rate applied to eligible direct costs based on existing methods and corresponding rates, applicable in Union policies for a similar type of operation and beneficiary.
a flat rate applied to eligible direct costs based on existing methods and corresponding rates, applicable in Union policies for a similar type of operation and beneficiary.
The Commission is empowered to adopt delegated acts in accordance with Article 149 to supplement the provisions on the flat rate and the related methods referred to in point (c) of the first subparagraph of this paragraph.’; the following articles are inserted: 
‘Article 68a
Staff costs concerning grants and repayable assistance
1. Direct staff costs of an operation may be calculated at a flat rate of up to 20 % of the direct costs other than the staff costs of that operation. Member States shall not be required to perform a calculation to determine the applicable rate provided that the direct costs of the operation do not include public works contracts which exceed in value the threshold set out in point (a) of Article 4 of Directive 2014/24/EU.
Direct staff costs of an operation may be calculated at a flat rate of up to 20 % of the direct costs other than the staff costs of that operation. Member States shall not be required to perform a calculation to determine the applicable rate provided that the direct costs of the operation do not include public works contracts which exceed in value the threshold set out in point (a) of Article 4 of Directive 2014/24/EU.
2. For the purposes of determining staff costs, an hourly rate may be calculated by dividing the latest documented annual gross employment costs by 1 720 hours for persons working full time, or by a corresponding pro-rata of 1 720 hours, for persons working part-time.
For the purposes of determining staff costs, an hourly rate may be calculated by dividing the latest documented annual gross employment costs by 1 720 hours for persons working full time, or by a corresponding pro-rata of 1 720 hours, for persons working part-time.
3. When applying the hourly rate calculated in accordance with paragraph 2, the total number of hours declared per person for a given year shall not exceed the number of hours used for the calculations of that hourly rate.
When applying the hourly rate calculated in accordance with paragraph 2, the total number of hours declared per person for a given year shall not exceed the number of hours used for the calculations of that hourly rate.
The first subparagraph shall not apply to programmes under the European territorial cooperation goal for staff costs related to individuals who work on a part-time assignment on the operation.
4. Where annual gross employment costs are not available, they may be derived from the available documented gross employment costs or from the contract for employment, duly adjusted for a 12-month period.
Where annual gross employment costs are not available, they may be derived from the available documented gross employment costs or from the contract for employment, duly adjusted for a 12-month period.
5. Staff costs related to individuals who work on part-time assignment on the operation may be calculated as a fixed percentage of the gross employment costs, in line with a fixed percentage of time worked on the operation per month, with no obligation to establish a separate working time registration system. The employer shall issue a document for employees setting out that fixed percentage.
Staff costs related to individuals who work on part-time assignment on the operation may be calculated as a fixed percentage of the gross employment costs, in line with a fixed percentage of time worked on the operation per month, with no obligation to establish a separate working time registration system. The employer shall issue a document for employees setting out that fixed percentage. 
‘Article 68b
Flat-rate financing for costs other than staff costs
1. A flat rate of up to 40 % of eligible direct staff costs may be used in order to cover the remaining eligible costs of an operation without a requirement for the Member State to execute any calculation to determine the applicable rate.
A flat rate of up to 40 % of eligible direct staff costs may be used in order to cover the remaining eligible costs of an operation without a requirement for the Member State to execute any calculation to determine the applicable rate.
For operations supported by the ESF, the ERDF or the EAFRD, salaries and allowances paid to participants shall be considered additional eligible costs not included in the flat rate.
2. The flat rate referred to in paragraph 1 shall not be applied to staff costs calculated on the basis of a flat rate.’;
The flat rate referred to in paragraph 1 shall not be applied to staff costs calculated on the basis of a flat rate.’; Article 70 is replaced by the following: 
‘Article 70
Eligibility of operations depending on location
1. Subject to the derogations referred to in paragraph 2 and the Fund-specific rules, operations supported by the ESI Funds shall be located in the programme area.
Subject to the derogations referred to in paragraph 2 and the Fund-specific rules, operations supported by the ESI Funds shall be located in the programme area.
Operations concerning the provision of services to citizens or businesses which cover the whole territory of a Member State shall be considered as being located in all programme areas within a Member State. In such cases, expenditure shall be allocated to the concerned programme areas on a pro-rata basis, based on objective criteria.
The second subparagraph of this paragraph does not apply to the national programme referred to in Article 6(2) of Regulation (EU) No 1305/2013 or to the specific programme for the establishment and the operation of the national rural network referred to in Article 54(1) of that Regulation.
2. The managing authority may accept that an operation is implemented outside the programme area but within the Union, provided that all the following conditions are satisfied: (a) the operation is for the benefit of the programme area; (b) the total amount from the ERDF, Cohesion Fund, EAFRD or EMFF allocated under the programme to operations located outside the programme area does not exceed 15 % of the support from the ERDF, Cohesion Fund, EAFRD or EMFF at the level of the priority at the time of adoption of the programme; (c) the monitoring committee has given its agreement to the operation or types of operations concerned; (d) the obligations of the authorities for the programme in relation to management, control and audit concerning the operation are fulfilled by the authorities responsible for the programme under which that operation is supported or they enter into agreements with authorities in the area in which the operation is implemented.
The managing authority may accept that an operation is implemented outside the programme area but within the Union, provided that all the following conditions are satisfied: (a) the operation is for the benefit of the programme area; (b) the total amount from the ERDF, Cohesion Fund, EAFRD or EMFF allocated under the programme to operations located outside the programme area does not exceed 15 % of the support from the ERDF, Cohesion Fund, EAFRD or EMFF at the level of the priority at the time of adoption of the programme; (c) the monitoring committee has given its agreement to the operation or types of operations concerned; (d) the obligations of the authorities for the programme in relation to management, control and audit concerning the operation are fulfilled by the authorities responsible for the programme under which that operation is supported or they enter into agreements with authorities in the area in which the operation is implemented.
The managing authority may accept that an operation is implemented outside the programme area but within the Union, provided that all the following conditions are satisfied:
(a) the operation is for the benefit of the programme area;
(a)
the operation is for the benefit of the programme area;
the operation is for the benefit of the programme area;
(b) the total amount from the ERDF, Cohesion Fund, EAFRD or EMFF allocated under the programme to operations located outside the programme area does not exceed 15 % of the support from the ERDF, Cohesion Fund, EAFRD or EMFF at the level of the priority at the time of adoption of the programme;
(b)
the total amount from the ERDF, Cohesion Fund, EAFRD or EMFF allocated under the programme to operations located outside the programme area does not exceed 15 % of the support from the ERDF, Cohesion Fund, EAFRD or EMFF at the level of the priority at the time of adoption of the programme;
the total amount from the ERDF, Cohesion Fund, EAFRD or EMFF allocated under the programme to operations located outside the programme area does not exceed 15 % of the support from the ERDF, Cohesion Fund, EAFRD or EMFF at the level of the priority at the time of adoption of the programme;
(c) the monitoring committee has given its agreement to the operation or types of operations concerned;
(c)
the monitoring committee has given its agreement to the operation or types of operations concerned;
the monitoring committee has given its agreement to the operation or types of operations concerned;
(d) the obligations of the authorities for the programme in relation to management, control and audit concerning the operation are fulfilled by the authorities responsible for the programme under which that operation is supported or they enter into agreements with authorities in the area in which the operation is implemented.
(d)
the obligations of the authorities for the programme in relation to management, control and audit concerning the operation are fulfilled by the authorities responsible for the programme under which that operation is supported or they enter into agreements with authorities in the area in which the operation is implemented.
the obligations of the authorities for the programme in relation to management, control and audit concerning the operation are fulfilled by the authorities responsible for the programme under which that operation is supported or they enter into agreements with authorities in the area in which the operation is implemented.
Where operations financed from the Funds and the EMFF are implemented outside the programme area in accordance with this paragraph and have benefits both outside and within the programme area, such expenditure shall be allocated to those areas on a pro rata basis based on objective criteria.
Where operations concern the thematic objective referred to in point (1) of the first paragraph of Article 9 and are implemented outside the Member State but within the Union, only points (b) and (d) of the first subparagraph of this paragraph shall apply.
3. For operations concerning technical assistance or information, communication and visibility measures and promotional activities, and for operations concerning the thematic objective referred to in point (1) of the first paragraph of Article 9, expenditure may be incurred outside the Union provided that the expenditure is necessary for the satisfactory implementation of the operation.
For operations concerning technical assistance or information, communication and visibility measures and promotional activities, and for operations concerning the thematic objective referred to in point (1) of the first paragraph of Article 9, expenditure may be incurred outside the Union provided that the expenditure is necessary for the satisfactory implementation of the operation.
4. Paragraphs 1, 2 and 3 shall not apply to programmes under the European territorial cooperation goal. Paragraphs 2 and 3 shall not apply to operations supported by the ESF.’;
Paragraphs 1, 2 and 3 shall not apply to programmes under the European territorial cooperation goal. Paragraphs 2 and 3 shall not apply to operations supported by the ESF.’; in Article 71, paragraph 4 is replaced by the following: Article 75 is amended as follows: ‘2a. The Commission shall provide the competent national authority with: (a) the draft audit report from the on-the-spot audit or check within three months of the end of that audit or check; (b) the final audit report within three months of the receipt of a complete reply from the competent national authority to the draft audit report from the on-the-spot audit or check concerned. The Commission shall provide the competent national authority with: (a) the draft audit report from the on-the-spot audit or check within three months of the end of that audit or check; (b) the final audit report within three months of the receipt of a complete reply from the competent national authority to the draft audit report from the on-the-spot audit or check concerned. The reports referred to in points (a) and (b) of the first subparagraph shall be made available within the time limits set out in those points in at least one of the official languages of the institutions of the Union. The time limit set out in point (a) of the first subparagraph shall not include the period which starts on the date following the date on which the Commission sends its request for additional information to the Member State and lasts until the Member State responds to that request. This paragraph shall not be applicable to the EAFRD.’; in the second paragraph of Article 76, the reference to ‘Article 84(2) of the Financial Regulation’ is replaced by ‘Article 110(1) of the Financial Regulation’; in Article 84, the reference to ‘Article 59(6) of the Financial Regulation’ is replaced by ‘Article 63(8) of the Financial Regulation’; in Article 98, paragraph 2 is replaced by the following: ‘2. The ERDF and the ESF may finance, in a complementary manner and subject to a limit of 10 % of Union funding for each priority axis of an operational programme, a part of an operation for which the costs are eligible for support from the other Fund on the basis of rules applied to that Fund, provided that such costs are necessary for the satisfactory implementation of the operation and are directly linked to it.’; Article 102 is amended as follows: paragraph 6 is replaced by the following: ‘6. Expenditure relating to a major project may be included in a payment application after the submission for approval referred to in paragraph 2. Where the Commission does not approve the major project selected by the managing authority, the declaration of expenditure following the withdrawal of the application by the Member State or the adoption of the Commission decision shall be rectified accordingly.’; the following paragraph is added: ‘7. Where the major project is appraised by independent experts pursuant to paragraph 1 of this Article, expenditure relating to that major project may be included in a payment application after the managing authority has informed the Commission of the submission to the independent experts of the information required under Article 101. An independent quality review shall be delivered within six months of the submission of that information to the independent experts. The corresponding expenditure shall be withdrawn and the declaration of expenditure shall be rectified accordingly in the following cases: (a) where the independent quality review has not been notified to the Commission within three months of the expiry of the deadline referred to in the second subparagraph; (b) where the submission of the information is withdrawn by the Member State; or (c) where the relevant appraisal is negative.’; (40) in Article 104, paragraphs 2 and 3 are replaced by the following: ‘2. The public expenditure allocated to a joint action plan shall be a minimum of EUR 5 000 000 or 5 % of the public support of the operational programme or one of the contributing programmes, whichever is lower. 3. Paragraph 2 shall not apply to operations supported under the YEI, to the first joint action plan submitted by a Member State under the Investment for growth and jobs goal or the first joint action plan submitted by a programme under the European territorial cooperation goal.’; in Article 104, paragraphs 2 and 3 are replaced by the following: ‘2. The public expenditure allocated to a joint action plan shall be a minimum of EUR 5 000 000 or 5 % of the public support of the operational programme or one of the contributing programmes, whichever is lower. 3. Paragraph 2 shall not apply to operations supported under the YEI, to the first joint action plan submitted by a Member State under the Investment for growth and jobs goal or the first joint action plan submitted by a programme under the European territorial cooperation goal.’; (41) in Article 105(2), the second sentence is deleted; in Article 106, the first paragraph is amended as follows: point (1) is replaced by the following: ‘(1) a description of the objectives of the joint action plan and how it contributes to the objectives of the programme or to the relevant country-specific recommendations and the broad guidelines of the economic policies of the Member States and of the Union under Article 121(2) TFEU and the relevant Council recommendations which the Member States are to take into account in their employment policies under Article 148(4) TFEU;’; (b) point (2) is deleted; point (3) is replaced by the following: ‘(3) a description of the projects or types of projects envisaged, together with the milestones, where relevant, and the targets for outputs and results linked to the common indicators by priority axis, where relevant;’; ‘(3) ‘(6) confirmation that it will contribute to the approach to promoting equality between men and women, as set out in the relevant programme or Partnership Agreement; ‘(6) (7) confirmation that it will contribute to the approach on sustainable development, as set out in the relevant programme or Partnership Agreement; its implementing provisions, including the following: (a) information on the selection of the joint action plan by the managing authority in accordance with Article 125(3); (b) the arrangements for steering the joint action plan, in accordance with Article 108; (c) the arrangements for monitoring and evaluating the joint action plan including arrangements ensuring the quality, collection and storage of data on the achievement of milestones, outputs and results;’; point (9) is amended as follows: point (a) is replaced by the following: ‘(a) the costs of achieving milestones, and targets for outputs and results, based, in the case of standard scales of unit costs and lump sums, on the methods set out in Article 67(5) of this Regulation and in Article 14 of the ESF Regulation;’; ‘(a) (ii) point (b) is deleted; in Article 107, paragraph 3 is replaced by the following: ‘3. The decision referred to in paragraph 2 shall indicate the beneficiary and the objectives of the joint action plan, the milestones, where relevant, and targets for outputs and results, the costs of achieving those milestones and targets for outputs and result, and the financing plan by operational programme and priority axis, including the total eligible amount and the amount of public expenditure, the implementation period of the joint action plan and, where relevant, the geographical coverage and target groups of the joint action plan.’; in Article 108(1), the first subparagraph is replaced by the following: (45) in Article 109(1), the second sentence is deleted; Article 110 is amended as follows: in paragraph 1, point (c) is replaced by the following: ‘(c) implementation of the communication strategy, including information and communication measures, and of measures to enhance the visibility of the Funds;’; ‘(c) in paragraph 2, point (a) is replaced by the following: the methodology and criteria used for selection of operations, except where those criteria are approved by local action groups in accordance with point (c) of Article 34(3);’; Article 114 is amended as follows: paragraph 1 is replaced by the following: ‘1. An evaluation plan shall be drawn up by the managing authority or a Member State for one or more operational programmes. The evaluation plan shall be submitted to the monitoring committee no later than one year after the adoption of the operational programme. In the cases of dedicated programmes referred to in point (b) of the first subparagraph of Article 39(4) adopted before 2 August 2018, the evaluation plan shall be submitted to the monitoring committee no later than one year after that date.’; (b) paragraph 4 is deleted; the heading of Chapter II of Title III of Part Three is replaced by the following: ‘Information, communication and visibility’; Article 115 is amended as follows: the heading is replaced by the following: in paragraph 1, point (d) is replaced by the following: ‘(d) publicising to Union citizens the role and achievements of cohesion policy and of the Funds through measures to enhance the visibility of the results and impact of Partnership Agreements, operational programmes and operations.’; ‘(d) paragraph 3 is replaced by the following: ‘3. Detailed rules concerning information, communication and visibility for the public and information measures for potential beneficiaries and for beneficiaries are laid down in Annex XII.’; in Article 116, paragraph 3 is replaced by the following: ‘3. By way of derogation from the third subparagraph of paragraph 2 of this Article, the managing authority shall inform the monitoring committee or committees responsible at least once a year on the progress in the implementation of the communication strategy as referred to in point (c) of Article 110(1) and on its analysis of the results of that implementation as well as on the information and communication activities and measures to enhance visibility of the Funds that are planned for the following year. The monitoring committee shall give an opinion on the activities and measures planned for the following year, including on ways to increase the effectiveness of communication activities aimed at the public.’; in Article 117, paragraph 4 is replaced by the following: ‘4. Union networks comprising the members designated by Member States shall be set up by the Commission to ensure exchange of information on the results of the implementation of the communication strategies, the exchange of experience in implementing the information and communication measures, the exchange of good practices, and to enable joint planning or coordination of communication activities between the Member States and with the Commission where appropriate. The networks shall at least once a year debate and assess the effectiveness of the information and communication measures, and propose recommendations to enhance the outreach and impact of communication activities and to raise awareness about the results and added value of those activities.’; Article 119 is amended as follows: in paragraph 1, the first subparagraph is replaced by the following: ‘1. The amount of the Funds allocated to technical assistance in a Member State shall be limited to 4 % of the total amount of the Funds allocated to operational programmes under the Investment for growth and jobs goal.’; (b) in paragraph 2, the first sentence is deleted; paragraph 4 is replaced by the following: ‘4. In the case of the Structural Funds, where the allocations referred to in paragraph 1 are used to support technical assistance operations altogether relating to more than one category of region, the expenditure relating to the operations may be implemented under a priority axis combining different categories of region and attributed on a pro rata basis taking into account either the respective allocations to the different categories of regions of the operational programme or the allocation under each category of region as a share of the total allocation to the Member State.’; the following paragraph is inserted: ‘5a. The assessment of the respect of the percentages shall be carried out at the time of adoption of the operational programme.’; in Article 122(2), the fourth subparagraph is replaced by the following: ‘When amounts unduly paid to a beneficiary for an operation cannot be recovered and this is as a result of fault or negligence on the part of a Member State, that Member State shall be responsible for reimbursing the amounts concerned to the budget of the Union. Member States may decide not to recover an amount unduly paid if the amount to be recovered from the beneficiary, not including interest, does not exceed EUR 250 in contribution from the Funds to an operation in an accounting year.’; in Article 123(5), the first subparagraph is replaced by the following: ‘5. In the case of the Funds and in the case of the EMFF, provided that the principle of separation of functions is respected, the managing authority, the certifying authority, where applicable, and the audit authority may be part of the same public authority or body.’; Article 125 is amended as follows: in paragraph 3, point (c) is replaced by the following: ‘(c) ensure that the beneficiary is provided with a document setting out the conditions for support for each operation including the specific requirements concerning the products or services to be delivered under the operation, the financing plan, the time limit for execution, as well as the requirements regarding information, communication and visibility;’; ‘(c) the first subparagraph of paragraph 4 is amended as follows: point (a) is replaced by the following: ‘(a) verify that the co-financed products and services have been delivered, that the operation complies with applicable law, the operational programme and the conditions for support of the operation and: where costs are to be reimbursed pursuant to point (a) of the first subparagraph of Article 67(1), that the amount of expenditure declared by the beneficiaries in relation to those costs has been paid; Article 127 is amended as follows: in the third subparagraph of paragraph 1, the reference to ‘the second subparagraph of Article 59(5) of the Financial Regulation’ is replaced by ‘Article 63(7) of the Financial Regulation’; Article 131 is replaced by the following: 
‘Article 131
Payment applications
1. Payment applications shall include, for each priority: (a) the total amount of eligible expenditure incurred by beneficiaries and paid in implementing operations, as entered in the accounting system of the certifying authority; (b) the total amount of public expenditure incurred in implementing operations, as entered in the accounting system of the certifying authority.
Payment applications shall include, for each priority: (a) the total amount of eligible expenditure incurred by beneficiaries and paid in implementing operations, as entered in the accounting system of the certifying authority; (b) the total amount of public expenditure incurred in implementing operations, as entered in the accounting system of the certifying authority.
Payment applications shall include, for each priority:
(a) the total amount of eligible expenditure incurred by beneficiaries and paid in implementing operations, as entered in the accounting system of the certifying authority;
(a)
the total amount of eligible expenditure incurred by beneficiaries and paid in implementing operations, as entered in the accounting system of the certifying authority;
the total amount of eligible expenditure incurred by beneficiaries and paid in implementing operations, as entered in the accounting system of the certifying authority;
(b) the total amount of public expenditure incurred in implementing operations, as entered in the accounting system of the certifying authority.
(b)
the total amount of public expenditure incurred in implementing operations, as entered in the accounting system of the certifying authority.
the total amount of public expenditure incurred in implementing operations, as entered in the accounting system of the certifying authority.
With regard to the amounts to be included in payment applications for the form of support referred to in point (e) of the first subparagraph of Article 67(1), the payment applications shall include the elements set out in the delegated acts adopted in accordance with Article 67(5a) and shall use the model for payment applications set out in the implementing acts adopted in accordance with paragraph 6 of this Article.
2. Eligible expenditure included in a payment application shall be supported by receipted invoices or accounting documents of equivalent probative value, except for the forms of support referred to in points (b) to (e) of the first subparagraph of Article 67(1) of this Regulation, Articles 68, 68a and 68b of this Regulation, Article 69(1) of this Regulation and Article 109 of this Regulation and in Article 14 of the ESF Regulation. For those forms of support, the amounts included in a payment application shall be the costs calculated on the applicable basis.
Eligible expenditure included in a payment application shall be supported by receipted invoices or accounting documents of equivalent probative value, except for the forms of support referred to in points (b) to (e) of the first subparagraph of Article 67(1) of this Regulation, Articles 68, 68a and 68b of this Regulation, Article 69(1) of this Regulation and Article 109 of this Regulation and in Article 14 of the ESF Regulation. For those forms of support, the amounts included in a payment application shall be the costs calculated on the applicable basis.
3. In the case of State aid, the public contribution corresponding to the expenditure included in a payment application shall have been paid to the beneficiaries by the body granting the aid or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, paid by the beneficiary to the body receiving the aid.
In the case of State aid, the public contribution corresponding to the expenditure included in a payment application shall have been paid to the beneficiaries by the body granting the aid or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, paid by the beneficiary to the body receiving the aid.
4. By way of derogation from paragraph 1 of this Article, in the case of State aid, the payment application may include advances paid to the beneficiary by the body granting the aid or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, paid by the beneficiary to the body receiving the aid, under the following cumulative conditions: (a) those advances are subject to a guarantee provided by a bank or other financial institution established in the Member State or are covered by a facility provided as a guarantee by a public entity or by the Member State; (b) those advances do not exceed 40 % of the total amount of the aid to be granted to a beneficiary for a given operation or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, of the total amount of the aid to be granted to the body receiving the aid as part of a given operation; (c) those advances are covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, expenditure paid by the body receiving the aid in implementing the operation, and supported by receipted invoices or accounting documents of equivalent probative value within three years of the year of the payment of the advance or on 31 December 2023, whichever is earlier.
By way of derogation from paragraph 1 of this Article, in the case of State aid, the payment application may include advances paid to the beneficiary by the body granting the aid or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, paid by the beneficiary to the body receiving the aid, under the following cumulative conditions: (a) those advances are subject to a guarantee provided by a bank or other financial institution established in the Member State or are covered by a facility provided as a guarantee by a public entity or by the Member State; (b) those advances do not exceed 40 % of the total amount of the aid to be granted to a beneficiary for a given operation or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, of the total amount of the aid to be granted to the body receiving the aid as part of a given operation; (c) those advances are covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, expenditure paid by the body receiving the aid in implementing the operation, and supported by receipted invoices or accounting documents of equivalent probative value within three years of the year of the payment of the advance or on 31 December 2023, whichever is earlier.
By way of derogation from paragraph 1 of this Article, in the case of State aid, the payment application may include advances paid to the beneficiary by the body granting the aid or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, paid by the beneficiary to the body receiving the aid, under the following cumulative conditions:
(a) those advances are subject to a guarantee provided by a bank or other financial institution established in the Member State or are covered by a facility provided as a guarantee by a public entity or by the Member State;
(a)
those advances are subject to a guarantee provided by a bank or other financial institution established in the Member State or are covered by a facility provided as a guarantee by a public entity or by the Member State;
those advances are subject to a guarantee provided by a bank or other financial institution established in the Member State or are covered by a facility provided as a guarantee by a public entity or by the Member State;
(b) those advances do not exceed 40 % of the total amount of the aid to be granted to a beneficiary for a given operation or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, of the total amount of the aid to be granted to the body receiving the aid as part of a given operation;
(b)
those advances do not exceed 40 % of the total amount of the aid to be granted to a beneficiary for a given operation or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, of the total amount of the aid to be granted to the body receiving the aid as part of a given operation;
those advances do not exceed 40 % of the total amount of the aid to be granted to a beneficiary for a given operation or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, of the total amount of the aid to be granted to the body receiving the aid as part of a given operation;
(c) those advances are covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, expenditure paid by the body receiving the aid in implementing the operation, and supported by receipted invoices or accounting documents of equivalent probative value within three years of the year of the payment of the advance or on 31 December 2023, whichever is earlier.
(c)
those advances are covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, expenditure paid by the body receiving the aid in implementing the operation, and supported by receipted invoices or accounting documents of equivalent probative value within three years of the year of the payment of the advance or on 31 December 2023, whichever is earlier.
those advances are covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, expenditure paid by the body receiving the aid in implementing the operation, and supported by receipted invoices or accounting documents of equivalent probative value within three years of the year of the payment of the advance or on 31 December 2023, whichever is earlier.
Where the conditions set out in point (c) of the first subparagraph are not met, the next payment application shall be corrected accordingly.
5. Each payment application which includes advances of the type referred to in paragraph 4 of this Article shall separately disclose: (a) the total amount paid from the operational programme as advances; (b) the amount which, within three years of the payment of the advance in accordance with point (c) of the first subparagraph of paragraph 4, has been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid; and (c) the amount which has not been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid, and for which the three year period has not yet elapsed.
Each payment application which includes advances of the type referred to in paragraph 4 of this Article shall separately disclose: (a) the total amount paid from the operational programme as advances; (b) the amount which, within three years of the payment of the advance in accordance with point (c) of the first subparagraph of paragraph 4, has been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid; and (c) the amount which has not been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid, and for which the three year period has not yet elapsed.
Each payment application which includes advances of the type referred to in paragraph 4 of this Article shall separately disclose:
(a) the total amount paid from the operational programme as advances;
(a)
the total amount paid from the operational programme as advances;
the total amount paid from the operational programme as advances;
(b) the amount which, within three years of the payment of the advance in accordance with point (c) of the first subparagraph of paragraph 4, has been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid; and
(b)
the amount which, within three years of the payment of the advance in accordance with point (c) of the first subparagraph of paragraph 4, has been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid; and
the amount which, within three years of the payment of the advance in accordance with point (c) of the first subparagraph of paragraph 4, has been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid; and
(c) the amount which has not been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid, and for which the three year period has not yet elapsed.
(c)
the amount which has not been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid, and for which the three year period has not yet elapsed.
the amount which has not been covered by expenditure paid by the beneficiary or, where Member States have decided that the beneficiary is the body granting the aid pursuant to point (10)(a) of Article 2, by the body receiving the aid, and for which the three year period has not yet elapsed.
6. The Commission shall, in order to ensure uniform conditions for the implementation of this Article, adopt implementing acts laying down the model for payment applications. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 150(3).’;
The Commission shall, in order to ensure uniform conditions for the implementation of this Article, adopt implementing acts laying down the model for payment applications. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 150(3).’; in Article 140(3), the following sentence is added: ‘Where documents are kept on commonly accepted data carriers in accordance with the procedure laid down in paragraph 5, no originals shall be required.’; (63) in Article 147(1), the reference to ‘Article 78 of the Financial Regulation’ is replaced by ‘Article 98 of the Financial Regulation’; (64) in Article 148, paragraph 1 is replaced by the following: ‘1. Operations for which the total eligible expenditure does not exceed EUR 400 000 for the ERDF and the Cohesion Fund, EUR 300 000 for the ESF or EUR 200 000 for the EMFF shall not be subject to more than one audit by either the audit authority or the Commission prior to the submission of the accounts for the accounting year in which the operation is completed. Other operations shall not be subject to more than one audit per accounting year by either the audit authority or the Commission prior to the submission of the accounts for the accounting year in which the operation is completed. Operations shall not be subject to an audit by the Commission or the audit authority in any year if there has already been an audit in that year by the European Court of Auditors, provided that the results of the audit work performed by the European Court of Auditors for such operations can be used by the audit authority or the Commission for the purpose of fulfilling their respective tasks. By derogation from the first subparagraph, operations for which the total eligible expenditure is between EUR 200 000 and EUR 400 000 for the ERDF and the Cohesion Fund, between EUR 150 000 and EUR 300 000 for the ESF and between EUR 100 000 and EUR 200 000 for the EMFF may be subject to more than one audit, if the audit authority concludes, based on its professional judgment, that it is not possible to issue or draw up an audit opinion on the basis of statistical or non-statistical sampling methods referred to in Article 127(1) without carrying out more than one audit of the respective operation.’; in Article 148, paragraph 1 is replaced by the following: ‘1. Operations for which the total eligible expenditure does not exceed EUR 400 000 for the ERDF and the Cohesion Fund, EUR 300 000 for the ESF or EUR 200 000 for the EMFF shall not be subject to more than one audit by either the audit authority or the Commission prior to the submission of the accounts for the accounting year in which the operation is completed. Other operations shall not be subject to more than one audit per accounting year by either the audit authority or the Commission prior to the submission of the accounts for the accounting year in which the operation is completed. Operations shall not be subject to an audit by the Commission or the audit authority in any year if there has already been an audit in that year by the European Court of Auditors, provided that the results of the audit work performed by the European Court of Auditors for such operations can be used by the audit authority or the Commission for the purpose of fulfilling their respective tasks. By derogation from the first subparagraph, operations for which the total eligible expenditure is between EUR 200 000 and EUR 400 000 for the ERDF and the Cohesion Fund, between EUR 150 000 and EUR 300 000 for the ESF and between EUR 100 000 and EUR 200 000 for the EMFF may be subject to more than one audit, if the audit authority concludes, based on its professional judgment, that it is not possible to issue or draw up an audit opinion on the basis of statistical or non-statistical sampling methods referred to in Article 127(1) without carrying out more than one audit of the respective operation.’; Article 149 is amended as follows: paragraphs 2 and 3 are replaced by the following: 3. (b) ‘3a. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making.’; paragraphs 5 is replaced by the following: (66) In Article 152, the following paragraph is added: ‘7. The managing authority, or the monitoring committee for the programmes under the European territorial cooperation goal, may decide not to apply Article 67(2a) for a maximum period of 12 months starting from 2 August 2018. Where the managing authority, or the monitoring committee for the programmes under the European territorial cooperation goal, considers that Article 67(2a) creates a disproportionate administrative burden, it may decide to extend the transitional period referred to in the first subparagraph of this paragraph for a period it considers appropriate. It shall notify the Commission of such decision before the expiration of the initial transitional period. The first and second subparagraphs do not apply to grants and repayable assistance supported by the ESF for which the public support does not exceed EUR 50 000 .’; In Article 152, the following paragraph is added: ‘7. The managing authority, or the monitoring committee for the programmes under the European territorial cooperation goal, may decide not to apply Article 67(2a) for a maximum period of 12 months starting from 2 August 2018. Where the managing authority, or the monitoring committee for the programmes under the European territorial cooperation goal, considers that Article 67(2a) creates a disproportionate administrative burden, it may decide to extend the transitional period referred to in the first subparagraph of this paragraph for a period it considers appropriate. It shall notify the Commission of such decision before the expiration of the initial transitional period. The first and second subparagraphs do not apply to grants and repayable assistance supported by the ESF for which the public support does not exceed EUR 50 000 .’;