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Regulation (EU) No 1303/2013 of the European Parliament and of the CouncilShow full title

Regulation (EU) No 1303/2013 of the European Parliament and of the Councilof 17 December 2013laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund and repealing Council Regulation (EC) No 1083/2006

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Point in time view as at 31/12/2020.

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Regulation (EU) No 1303/2013 of the European Parliament and of the Council is up to date with all changes known to be in force on or before 06 November 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations. Help about Changes to Legislation

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[F1PART ONEU.K.SUBJECT-MATTER AND DEFINITIONS

Article 1U.K.Subject-matter

[F2This Regulation lays down the common rules applicable to support for rural development. It also lays down the provisions necessary to ensure the effectiveness of the support and co-ordination with other retained direct EU legislation. The common rules that apply are set out in Part Two.]

F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part Four lays down general rules applicable to the Funds and the EMFF on management and control, financial management, accounts and financial corrections.

The rules set out in this Regulation shall apply without prejudice to the provisions laid down in Regulation (EU) No 1306/2013 of the European Parliament and of the Council(1) and to the specific provisions laid down in the following Regulations (the 'Fund-specific Regulations') in accordance with the fifth paragraph of this Article:

(1)

F4...

(2)

F4...

(3)

F4...

(4)

F4...

(5)

[F5Regulation (EU) No 1305/2013 of the European Parliament and of the Council on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (‘Regulation (EU) No 1305/2013’)]

(6)

a future Union legal act establishing the conditions for the financial support for maritime and fisheries policy for the programming period 2014 - 2020 (the 'EMFF Regulation").

[F6Part Two of this Regulation applies to support for rural development except when it explicitly allows for derogations. The Fund-specific Regulations may establish complementary rules to Part Two of this Regulation. The complementary rules in the Fund-specific Regulations must be read consistently with Part Two of this Regulation. In case of doubt about the application between provisions, Part Two of this Regulation prevails over the Fund-specific Regulations.]

Textual Amendments

Article 2U.K.Definitions

For the purposes of this Regulation, the following definitions apply;

(1)

F7...

(2)

'a strategic policy framework' means a document or a set of documents established at national or regional level, which sets out a limited number of coherent priorities established on the basis of evidence and a timeframe for the implementation of those priorities and which may include a monitoring mechanism;

(3)

'smart specialisation strategy' means the national or regional innovation strategies which set priorities in order to build competitive advantage by developing and matching research and innovation own strengths to business needs in order to address emerging opportunities and market developments in a coherent manner, while avoiding duplication and fragmentation of efforts; a smart specialisation strategy may take the form of, or be included in, a national or regional research and innovation (R&I) strategic policy framework;

(4)

[F8“Fund-specific rules” means the provisions laid down in, or established on the basis of, Regulation (EU) No 1305/2013];

(5)

[F9“programming” means the process of organisation, decision-making and allocation of financial resources in several stages, with the involvement of partners in accordance with Article 5, intended to implement, on a multi-annual basis, action by the relevant authority;]

(6)

[F10“programme” means a ‘rural development programme’ as referred to in Regulation (EU) No 1305/2013;]

(7)

'programme area' means a geographical area covered by a specific programme or, in the case of a programme covering more than one category of region, the geographical area corresponding to each separate category of region;

(8)

[F11“priority”, in Part Two of this Regulation, means a priority for rural development referred to in Regulation (EU) No 1305/2013;]

(9)

'operation' means a project, contract, action or group of projects selected by the managing authorities of the programmes concerned, or under their responsibility, that contributes to the objectives of a priority or priorities; in the context of financial instruments, an operation is constituted by the financial contributions from a programme to financial instruments and the subsequent financial support provided by those financial instruments;

(10)

[F12'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 [F13relevant authority] 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;]

(11)

'financial instruments' means financial instruments as defined in the Financial Regulation, save where otherwise provided in this Regulation;

(12)

'final recipient' means a legal or natural person receiving financial support from a financial instrument;

(13)

'State aid' means aid falling under Article 107(1) TFEU which shall be deemed for the purposes of this Regulation also to include de minimis aid within the meaning of Commission Regulation (EC) No 1998/2006(5), Commission Regulation (EC) No 1535/2007(6) and Commission Regulation (EC) No 875/2007(7);

(14)

'completed operation' means an operation that has been physically completed or fully implemented and in respect of which all related payments have been made by beneficiaries and the corresponding public contribution has been paid to the beneficiaries;

(15)

[F14“public expenditure” means any public contribution to the financing or operations the source of which is the budget of national, regional or local public authorities, the budget of the Union related to the European Agricultural Fund for Rural Development, the budget of public law bodies or the budget of associations of public authorities or of public law bodies;]

(16)

[F15“public law body” means any body governed by public law within the criteria in paragraphs (a) to (c) of point 9 of Article 1 of Directive 2004/18/EC of the European Parliament and of the Council]

(17)

'document' means a paper or an electronic medium bearing information of relevance in the context of this Regulation;

(18)

'intermediate body' means any public or private body which acts under the responsibility of a managing or certifying authority, or which carries out duties on behalf of such an authority, in relation to beneficiaries implementing operations;

(19)

'community-led local development strategy' means a coherent set of operations the purpose of which is to meet local objectives and needs, F16... and which is designed and implemented by a local action group;

(20)

F17...

(21)

'category of regions' means the categorisation of regions as 'less developed regions', 'transition regions' or 'more developed regions' in accordance with Article 90(2) [F18as it had effect immediately before IP completion day];

(22)

F19...

(23)

F20...

(24)

'Public private partnerships' (PPPs) means forms of cooperation between public bodies and the private sector, which aim to improve the delivery of investments in infrastructure projects or other types of operations, delivering public services through risk sharing, pooling of private sector expertise or additional sources of capital;

(25)

'PPP operation' means an operation which is implemented or intended to be implemented under a public-private-partnership structure;

(26)

[X1'escrow account' means a bank account covered by a written agreement between a managing authority or an intermediate body and the body implementing a financial instrument, or, in the case of a PPP operation, a written agreement between a public body beneficiary and the private partner approved by the managing authority or an intermediate body, set up specifically to hold funds to be paid out after the eligibility period in the case of a financial instrument, or during the eligibility period and/or after the eligibility period in the case of a PPP operation, exclusively for the purposes provided for in point (c) of Article 42(1), Article 42(2), Article 42(3) and Article 64, or a bank account set up on terms providing equivalent guarantees on the payments out of the funds;]

(27)

'fund of funds' means a fund set up with the objective of contributing support from a programme or programmes to several financial instruments. Where financial instruments are implemented through a fund of funds, the body implementing the fund of funds shall be considered to be the only beneficiary within the meaning of point 10 of this Article;

(28)

'SME' means a micro, small or medium sized enterprise as defined in Commission Recommendation 2003/361/EC(8)[F21as it had effect immediately before IP completion day];

(29)

'accounting year', means, for the purposes of F22... Part Four, the period from 1 July to 30 June, except for the first accounting year of the programming period, in respect of which it means the period from the start date for eligibility of expenditure until 30 June 2015. The final accounting year shall be from 1 July 2023 to 30 June 2024;

(30)

'financial year', means, for the purposes of F23... Part Four, the period from 1 January to 31 December;

(31)

F24...

(32)

F24...

(33)

'applicable ex ante conditionality' means a concrete and precisely pre-defined critical factor, which is a prerequisite for and has a direct and genuine link to, and direct impact on, the effective and efficient achievement of a specific objective for an investment priority or a [F25priority for rural development];

(34)

'specific objective' means the result to which an investment priority or [F26priority for rural development] contributes in a specific national or regional context through actions or measures undertaken within such a priority;

(35)

F27...

(36)

[F28”irregularity” means any breach of the law as it applies in the constituent nation resulting from an act or omission by an economic operator involved in the implementation of support for rural development, which has, or would have, the effect of charging an unjustified item of expenditure to a programme budget;]

(37)

[F29”economic operator” means any natural or legal person or other entity taking part in the implementation of support for rural development, with the exception of a relevant authority exercising its prerogatives as a public authority;]

(38)

'systemic irregularity' means any irregularity, which may be of a recurring nature, with a high probability of occurrence in similar types of operations, which results from a serious deficiency in the effective functioning of a management and control system, including a failure to establish appropriate procedures in accordance with this Regulation and the Fund-specific rules;

(39)

'serious deficiency in the effective functioning of a management and control system' means, for the purposes of implementation of the Funds and the EMFF under Part Four, a deficiency for which substantial improvements in the system are required, which exposes the Funds and the EMFF to a significant risk of irregularities, and the existence of which is incompatible with an unqualified audit opinion on the functioning of the management and control system;

(40)

[F30‘Financial Regulation’ means Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union as it had effect immediately before IP completion day;

(41)

“CMO support” means financial support granted under Regulation (EU) No 1308/2013 or any of the delegated or implementing acts adopted on the basis of that regulation or of Commission Regulation (EU) No 1234/2007;

(42)

“direct payment support” means financial support granted under any of the support schemes listed in Annex I to Regulation (EU) No 1307/2013;

(43)

“constituent nation” means England, Wales, Scotland or Northern Ireland, as the case may be;

(44)

“relevant authority” means—

(a)

in respect of support under rural development

(i)

in England, the Secretary of State,

(ii)

in Northern Ireland, the Department of Agriculture, Environment and Rural Affairs,

(iii)

in Scotland, the Scottish Ministers,

(iv)

in Wales, the Welsh Ministers,

(45)

“support for rural development” means financial support granted under Title 3 of Regulation (EU) No 1305/2013 or Title 3, Chapter 2 of this Regulation;]

(47)

[F31‘appropriate authority’ means:

(b)

in relation to regulations which relate to rural development:

(i)

subject to point (ii):

(aa)

insofar as the regulations apply in England, the Secretary of State;

(bb)

insofar as the regulations apply in Wales, the Welsh Ministers;

(cc)

insofar as the regulations apply in Scotland, the Scottish Ministers;

(dd)

insofar as the regulations apply in Northern Ireland, the Department of Agriculture, Environment and Rural Affairs, or

(ii)

the Secretary of State:

(aa)

for regulations applying in Scotland, if consent is given by the Scottish Ministers;

(bb)

for regulations applying in Northern Ireland, if consent is given by the Department of Agriculture, Environment and Rural Affairs.]

Editorial Information

Textual Amendments

F31Art. 2(47) inserted (31.12.2020) by The Agriculture (Legislative Functions) (EU Exit) Regulations 2019 (S.I. 2019/748), regs. 1, 74 (as amended S.I. 2020/1542, regs. 1(2), 14, which amendment included the omission of para 47(a)); 2020 c. 1, Sch. 5 para. 1(1)

F32Article 3U.K.Calculation of time limits for Commission decisions

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Textual Amendments

Textual Amendments

F1Regulation revoked in so far as relating to the European Maritime and Fisheries Fund (31.12.2020) by The Common Fisheries Policy (Amendment etc.) (EU Exit) Regulations 2020 (S.I. 2020/1542), reg. 1(3), Sch. Pt. 2

PART TWOU.K.[F33COMMON PROVISIONS APPLICABLE TO SUPPORT FOR RURAL DEVELOPMENT]

TITLE IU.K.[F34PRINCIPLES OF SUPPORT FOR RURAL DEVELOPMENT]

Article 4U.K.General principles

[F351.Support for rural development must be provided through multi-annual programmes that complement national, regional and local intervention, as well as the Fund-specific missions, including economic, social and territorial cohesion.]

[F362.The relevant authority must ensure, taking account of the specific context of each constituent nation, that support for rural development is consistent with the horizontal principles referred to in Articles 5, 7 and 8 and that it is complementary to CMO support and direct payment support and support under other retained direct EU legislation.]

F373.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.[F38The relevant authority, in accordance with its institutional, legal and financial framework, and the bodies designated by it] for that purpose shall be responsible for preparing and implementing programmes and carrying out their tasks, in partnership with the relevant partners referred to in Article 5, in compliance with this Regulation and the Fund-specific rules.

5.Arrangements for the implementation and use of [F39support for rural development], and in particular the financial and administrative resources required for the preparation and implementation of programmes, in relation to monitoring, reporting, evaluation, management and control, shall respect the principle of proportionality having regard to the level of support allocated and shall take into account the overall aim of reducing the administrative burden on bodies involved in the management and control of the programmes.

F406.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F407.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F408.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.[F41The relevant authority and Managing Authority] shall ensure the effectiveness of [F42support for rural development] during preparation and implementation, in relation to monitoring, reporting and evaluation.

10.[F43The relevant authority and Managing Authority] shall carry out their respective roles in relation to [F44support for rural development] with the aim of reducing the administrative burden on beneficiaries.

Textual Amendments

Article 5U.K.Partnership and multi-level governance

1.[F45The relevant authority] shall in accordance with its institutional and legal framework organise a partnership with the competent regional and local authorities. The partnership shall also include the following partners:

(a)competent F46... public authorities;

(b)economic and social partners; and

(c)relevant bodies representing civil society, including environmental partners, non-governmental organisations, and bodies responsible for promoting social inclusion, gender equality and non-discrimination.

2.In accordance with the multi-level governance approach, the partners referred to in paragraph 1 shall be involved by [F47the relevant authority] in the preparation of F48... progress reports and throughout the preparation and implementation of programmes, including through participation in the monitoring committees for programmes in accordance with Article 48.

F493.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The provisions of the code of conduct shall not in any way contradict the relevant provisions of this Regulation or the Fund-specific rules.

[F504.The Commission shall notify the delegated act, referred to in paragraph 3 of this Article, on the European code of conduct on partnership, simultaneously to the European Parliament and to the Council by 18 April 2014. That delegated act shall not specify a date of application that is earlier than the date of its adoption.]

F515.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F516.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

[F52Article 6U.K.Compliance with the law as it applies in the constituent nation

Operations receiving support for rural development must comply with the law as it applies in the constituent nation relating to its application (“the law as it applies in the constituent nation”).]

Textual Amendments

Article 7U.K.Promotion of equality between men and women and non-discrimination

The [F53relevant authority] shall ensure that equality between men and women and the integration of gender perspective are taken into account and promoted throughout the preparation and implementation of programmes, including in relation to monitoring, reporting and evaluation.

The [F53relevant authority] shall take appropriate steps to prevent any discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation during the preparation and implementation of programmes. In particular, accessibility for persons with disabilities shall be taken into account throughout the preparation and implementation of programmes.

Textual Amendments

Article 8U.K.Sustainable development

The objectives of the [F54support for rural development] shall be pursued in line with the principle of sustainable development and with the F55... aim of preserving, protecting and improving the quality of the environment, as set out in Article 11 and Article 191(1) TFEU, taking into account the polluter pays principle.

[F562.The relevant authority must ensure that environmental protection requirements, resource efficiency, climate change mitigation and adaptation, biodiversity, disaster resilience, and risk prevention and management are promoted in the preparation and implementation of programmes. The relevant authority must provide information on the support for climate change objectives using a methodology based on the categories of intervention, focus areas or measures, as appropriate, for support for rural development. That methodology must consist of assigning a specific weighting to the support provided at a level which reflects the extent to which such support makes a contribution to climate change mitigation and adaptation goals. The specific weighting assigned must be differentiated on the basis of whether the support makes a significant or a moderate contribution towards climate change objectives. Where the support does not contribute towards those objectives of the contribution is insignificant, a weighting of zero shall be assigned. In the case of support for rural development weightings shall be attached to focus areas set out in Regulation (EU) No 1305/2013.]

[F57The appropriate authority may make regulations setting out uniform conditions for support for rural development for the application of the methodology referred to in the second paragraph.]

Textual Amendments

Textual Amendments

TITLE IIU.K.STRATEGIC APPROACH

CHAPTER IU.K.Thematic objectives for the ESI Funds and Common Strategic Framework

Article 9U.K.Thematic objectives

[F58In order to contribute to the Fund-specific missions, support for rural development must support the following thematic objectives:]

(1)

strengthening research, technological development and innovation;

(2)

enhancing access to, and use and quality of, ICT;

(3)

enhancing the competitiveness of SMEs, of the agricultural sector [F59(for support for rural development)] and of the fishery and aquaculture sector (for the EMFF);

(4)

supporting the shift towards a low-carbon economy in all sectors;

(5)

promoting climate change adaptation, risk prevention and management;

(6)

preserving and protecting the environment and promoting resource efficiency;

(7)

promoting sustainable transport and removing bottlenecks in key network infrastructures;

(8)

promoting sustainable and quality employment and supporting labour mobility;

(9)

promoting social inclusion, combating poverty and any discrimination;

(10)

investing in education, training and vocational training for skills and lifelong learning;

(11)

enhancing institutional capacity of public authorities and stakeholders and efficient public administration.

Thematic objectives shall be translated into priorities that are specific to [F60support for rural development] and are set out in the Fund-specific rules.

[F61The priorities established for [F60support for rural development] in the Fund-specific rules shall in particular cover the appropriate use of [F62support for rural development] 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(9) shall be ensured, where appropriate.]

Textual Amendments

Article 10U.K.Common Strategic Framework

[F631.In order to promote harmonious, balanced and sustainable development, a Common Strategic Framework (“CSF”) is hereby established as set out in Annex I. The CSF establishes strategic guiding principles to facilitate the programming process and the sectoral and territorial coordination of intervention through support for rural development, taking into account the key territorial challenges of the various types of territories.]

[F642.The strategic guiding principles as set out in the CSF shall be established in line with the purpose and within the scope of the support for rural development, and in line with this Regulation and the Fund-specific rules. The CSF shall not impose additional obligations upon constituent nations beyond those set out within the framework of the relevant sectorial policies.]

3.The CSF shall facilitate the preparation of F65... programmes in accordance with the principles of proportionality and subsidiarity and taking into account national and regional competences, in order for the specific and appropriate policy and coordination measures to be decided.

Textual Amendments

Article 11U.K.Content

The CSF shall establish:

(a)

F66...

(b)

arrangements to promote an integrated use of [F67support for rural development];

(c)

arrangements for coordination between [F67support for rural development] and [F68direct payment support and CMO support];

(d)

horizontal principles referred to in Articles 5, 7 and 8 and cross-cutting policy objectives for the implementation of [F67support for rural development];

(e)

arrangements to address the key territorial challenges for urban, rural, coastal and fisheries areas, the demographic challenges of regions or specific needs of geographical areas which suffer from severe and permanent natural or demographic handicaps F69... ;

(f)

priority areas for cooperation activities under [F67support for rural development], where appropriate, F70....

Textual Amendments

F71Article 12U.K.Review

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Textual Amendments

F72Article 13U.K.Guidance for beneficiaries

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

CHAPTER IIU.K.Partnership Agreement

F72Article 14U.K.Preparation of the Partnership Agreement

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Textual Amendments

F72Article 15U.K.Content of the Partnership Agreement

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Textual Amendments

F72Article 16U.K.Adoption and amendment of the Partnership Agreement

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Textual Amendments

F72Article 17U.K.Adoption of the revised Partnership Agreement in the event of delay in the entry into force of a Fund-specific Regulation

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Textual Amendments

CHAPTER IIIU.K.Thematic concentration, ex ante conditionalities and performance review

F72Article 18U.K.Thematic concentration

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Textual Amendments

Article 19U.K.Ex ante conditionalities

[F73The relevant authority must assess in accordance with its institutional and legal framework and in the context of the preparation of it programmes whether the ex ante conditionalities laid down in the respective Fund-specific rules and the general ex ante conditionalities set out in Part II of Annex XI are applicable to the specific objectives pursued within the priorities of their programmes and whether the applicable ex ante conditionalities are fulfilled.]

Textual Amendments

F74Article 20U.K.Performance reserve

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Textual Amendments

F74Article 21U.K.Performance review

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Textual Amendments

F74Article 22U.K.Application of the performance framework

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Textual Amendments

CHAPTER IVU.K.Measures linked to sound economic governance

F74Article 23U.K.Measures linking effectiveness of ESI Funds to sound economic governance

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Textual Amendments

F74Article 24U.K. Increase in payments for Member State with temporary budgetary difficulties

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Textual Amendments

F74Article 25U.K. Management of technical assistance for Member States

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Textual Amendments

[F75CHAPTER V U.K. Exceptional measures for the use of the ESI Funds in response to the COVID-19 outbreak

Article 25aU.K. Exceptional measures for the use of the ESI Funds in response to the COVID-19 outbreak

1.By way of derogation from Article 60(1) and the first and fourth subparagraphs of Article 120(3), at the request of a Member State, a co-financing rate of 100 % may be applied to expenditure declared in payment applications during the accounting year starting 1 July 2020 and ending 30 June 2021 for one or more priority axes in a programme supported by the ERDF, the ESF or the Cohesion Fund.

Requests for modification of the co-financing rate shall be submitted in accordance with the procedure for the amendment of programmes set out in Article 30 and shall be accompanied by a revised programme or programmes. The co-financing rate of 100 % shall apply only if the relevant amendment of the operational programme is approved by the Commission before the submission of the final application for an interim payment in accordance with Article 135(2).

Before submitting the first payment application for the accounting year starting 1 July 2021, Member States shall notify the table referred to in point (d)(ii) of Article 96(2) confirming the co-financing rate which was applicable during the accounting year ending 30 June 2020 for the priorities concerned by the temporary increase to 100 %.

2.In response to the COVID-19 outbreak, the resources available for programming for the year 2020 for the Investment for growth and jobs goal may, at the request of a Member State, be transferred between the ERDF, the ESF and the Cohesion Fund, irrespective of the percentages referred to in points (a) to (d) of Article 92(1).

For the purpose of those transfers, the requirements laid down in Article 92(4) shall not apply.

Transfers shall not affect resources allocated to the YEI in accordance with Article 92(5) or to the aid for the most deprived under the Investment for growth and jobs goal in accordance with Article 92(7).

Resources transferred between the ERDF, the ESF and the Cohesion Fund under this paragraph shall be implemented in accordance with the rules of the Fund to which the resources are transferred.

3.By way of derogation from Article 93(1) and in addition to the possibility provided for in Article 93(2), resources available for programming for the year 2020 may, at the request of a Member State, be transferred between categories of regions in response to the COVID-19 outbreak.

4.Requests for transfers under paragraphs 2 and 3 of this Article shall be submitted in accordance with the procedure for amendment of programmes set out in Article 30, shall be duly justified and shall be accompanied by the revised programme or programmes identifying the amounts transferred by Fund and by category of region, where relevant.

5.By way of derogation from Article 18 of this Regulation and the Fund-specific Regulations, financial allocations set out in requests for programme amendments submitted or transfers notified pursuant to Article 30(5) of this Regulation, on or after 24 April 2020, shall not be subject to the requirements on thematic concentration set out in this Regulation or the Fund-specific Regulations.

6.By way of derogation from Article 16, as from 24 April 2020, Partnership Agreements shall not be amended and programme amendments shall not entail the amendment of Partnership Agreements.

By way of derogation from Articles 26(1), 27(1), 30(1) and 30(2), as from 24 April 2020 the consistency of programmes and of their implementation with the Partnership Agreement shall not be verified.

7.For operations that foster crisis response capacities in the context of the COVID-19 outbreak as referred to in the second subparagraph of Article 65(10), Article 65(6) shall not apply.

By way of derogation from point (b) of Article 125(3), such operations may be selected for support by the ERDF or the ESF prior to the approval of the amended programme.

8.For the purposes of point (b) of Article 87(1), where the COVID-19 outbreak is invoked as a reason of force majeure , information on the amounts for which it has not been possible to make a payment application shall be provided at an aggregate level by priority for operations whose total eligible cost is less than EUR 1 000 000.

9.The annual report on implementation of the programme referred to in Article 50(1) for the year 2019 shall be submitted by 30 September 2020 for all ESI Funds, by way of derogation from the deadlines set out in the Fund-specific Regulations. The transmission of the summary report to be prepared by the Commission in 2020, in accordance with Article 53(1), may be postponed accordingly.

10.By way of derogation from point (g) of Article 37(2), no review or update of the ex ante assessments shall be required where changes in financial instruments are necessary to provide an effective response to the COVID-19 outbreak.

11.Where financial instruments provide support in the form of working capital to SMEs pursuant to the second subparagraph of Article 37(4) of this Regulation, new or updated business plans, or equivalent documents, and evidence allowing verification that the support provided through the financial instruments has been used for its intended purpose as part of the supporting documents, shall not be required.

By way of derogation from Regulation (EU) No 1305/2013, such support may also be provided by the EAFRD under measures referred to in Regulation (EU) No 1305/2013 and relevant to the implementation of financial instruments. Such eligible expenditure shall not exceed EUR 200 000.

12.For the purposes of the second subparagraph of Article 127(1), the COVID-19 outbreak shall constitute a duly justified case that audit authorities may invoke, based on their professional judgement, to use a non-statistical sampling method for the accounting year starting 1 July 2019 and ending 30 June 2020.

13.For the purposes of application of point (f) of Article 30(1) of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council(10), the condition that appropriations are for the same objective shall not apply in respect of transfers under paragraphs 2 and 3 of this Article.]

Textual Amendments

TITLE IIIU.K. PROGRAMMING

CHAPTER I U.K. General provisions on the ESI Funds

[F76Article 26U.K.Preparation of programmes

Support for rural development must be implemented through programmes. Each programmes shall cover the period from 1 January 2014 to 31 December 2020.]

Textual Amendments

Article 27U.K.Content of programmes

1.F77...

Each programme shall include arrangements to ensure effective, efficient and coordinated implementation of [F78support for rural development] and actions to achieve a reduction of the administrative burden on beneficiaries.

2.Each programme shall define priorities setting out specific objectives, financial appropriations of support [F79for rural development] and corresponding national co-financing F80... which may be public or private in accordance with the Fund-specific rules.

F813.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.Each priority shall set out indicators and corresponding targets expressed in qualitative or quantitative terms, in accordance with the Fund-specific rules, in order to assess progress in programme implementation aimed at achievement of objectives as the basis for monitoring, evaluation and review of performance. Those indicators shall include:

(a)financial indicators relating to expenditure allocated;

(b)output indicators relating to the operations supported;

(c)result indicators relating to the priority concerned.

[F82The] Fund-specific rules shall set out common indicators and may set out provisions related to programme-specific indicators.

5.Each programme, except those which cover exclusively technical assistance, shall include a description, in accordance with the Fund-specific rules, of the actions to take into account the principles set out in Articles 5, 7 and 8.

6.Each programme, except those where technical assistance is undertaken under a specific programme, shall set out the indicative amount of support to be used for climate change objectives, based on the methodology referred to in Article 8.

7.[F83The authority with responsibility for preparing the programme] shall draft the programme in accordance with the Fund-specific rules.

Textual Amendments

F84Article 28U.K.Specific provisions on the content of programmes dedicated to joint instruments for uncapped guarantees and securitisation providing capital relief implemented by the EIB

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Textual Amendments

F85Article 29U.K.Procedure for the adoption of programmes

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Textual Amendments

[F86Article 30U.K.Amendment of programmes

Programmes may be amended by the relevant authority as set out in the Fund-specific regulations. The relevant authority must take into account this Regulation, the Fund-specific rules, the horizontal principles referred to in Article 5-7 and the expected impact of the changes to the programme on the programme's objectives.]

Textual Amendments

F87Article 31U.K.Participation of the EIB

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Textual Amendments

CHAPTER II U.K. Community-led local development

Article 32U.K.Community-led local development

[F881.Support for rural development must be provided by the relevant authority for community-led led local development.]

2.Community-led local development shall be:

(a)focused on specific subregional areas;

(b)led by local action groups composed of representatives of public and private local socio-economic interests, in which, at the decision-making level neither public authorities, as defined in accordance with national rules, nor any single interest group represents more than 49 % of the voting rights;

(c)carried out through integrated and multi-sectoral area-based local development strategies;

(d)designed taking into consideration local needs and potential, and shall include innovative features in the local context, networking and, where appropriate, cooperation.

3.[F89Where support for rural development is made available to community-led local development it must be done so in a consistent and coordinated way.] This shall be ensured inter alia through coordinated capacity-building, selection, approval and funding of community-led local development strategies and local action groups.

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[F915.Community-led local development funded by support for rural development must be carried out under one or more priorities of the relevant programme or programmes in accordance with the Fund-specific rules.]

Textual Amendments

Article 33U.K.Community-led local development strategies

1.A community-led local development strategy shall contain at least the following elements:

(a)the definition of the area and population covered by the strategy;

(b)an analysis of the development needs and potential of the area, including an analysis of strengths, weaknesses, opportunities and threats;

(c)a description of the strategy and its objectives, a description of the integrated and innovative features of the strategy and a hierarchy of objectives, including measurable targets for outputs or results. In relation to results, targets may be expressed in quantitative or qualitative terms. [F92The strategy shall be consistent with the relevant programmes.]

(d)a description of the community involvement process in the development of the strategy;

(e)an action plan demonstrating how objectives are translated into actions;

(f)a description of the management and monitoring arrangements of the strategy, demonstrating the capacity of the local action group to implement the strategy and a description of specific arrangements for evaluation;

(g)the financial plan for the strategy, including the planned allocation from [F93support for rural development].

2.[F94The relevant authority] shall define criteria for the selection of community-led local development strategies.

3.Community-led local development strategies shall be selected by a committee set up for that purpose by the managing authority or authorities responsible and approved by the managing authority or authorities responsible.

F954.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.The decision approving a community-led local development strategy shall set out the allocations [F96from the relevant programmes]. The decision shall also set out the responsibilities for the management and control tasks under the programme or programmes in relation to the community-led local development strategy.

6.The population of the area referred to in point (a) of paragraph 1 shall be not less than 10 000 and not more than 150 000 inhabitants. F97...

Textual Amendments

Article 34U.K.Local action groups

1.Local action groups shall design and implement the community-led local development strategies.

[F98The relevant authority] shall define the respective roles of the local action group and the authorities responsible for the implementation of the relevant programmes, concerning all implementation tasks relating to the community-led local development strategy.

2.The managing authority or authorities responsible shall ensure that the local action groups either select one partner within the group as a lead partner in administrative and financial matters, or come together in a legally constituted common structure.

3.The tasks of local action groups shall include the following:

[F12(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;]

(e)receiving and assessing applications for support;

(f)selecting operations and fixing the amount of support and, where relevant, presenting the proposals to the body responsible for final verification of eligibility before approval;

(g)monitoring the implementation of the community-led local development strategy and the operations supported and carrying out specific evaluation activities linked to that strategy.

[F61Where 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.]

4.Without prejudice to point (b) of paragraph 3, the local action group may be a beneficiary and implement operations in accordance with the community-led local development strategy.

5.In the case of cooperation activities of local action groups as referred to in point (c) of Article 35(1), the tasks set out in point (f) of paragraph 3 of this Article may be carried out by the managing authority responsible.

Textual Amendments

Article 35U.K.Support F99... for community-led local development

1.Support [F100for rural development] for community-led local development shall cover:

(a)the costs of preparatory support consisting of capacitybuilding, training and networking with a view to preparing and implementing a community-led local development strategy.

Such costs may include one or more of the following elements:

(i)

training actions for local stakeholders;

(ii)

studies of the area concerned;

(iii)

costs related to the design of the community-led local development strategy, including consultancy costs and costs for actions related to consultations of stakeholders for the purposes of preparing the strategy;

(iv)

administrative costs (operating and personnel costs) of an organisation that applies for preparatory support during the preparation phase;

(v)

support for small pilot projects.

Such preparatory support shall be eligible regardless of whether the community-led local development strategy designed by the local action group benefitting from the support is selected for funding by the selection committee set up under Article 33(3).

(b)implementation of operations under the community-led local development strategy;

(c)preparation and implementation of the local action group's cooperation activities;

(d)running costs linked to the management of the implementation of the community-led local development strategy consisting of operating costs, personnel costs, training cost, costs linked to public relations, financial costs as well as the costs linked to monitoring and evaluation of that strategy as referred to in point (g) of Article 34(3);

(e)animation of the community-led local development strategy in order to facilitate exchange between stakeholders to provide information and to promote the strategy and to support potential beneficiaries with a view to developing operations and preparing applications.

2.Support for running costs and animation as referred to in points (d) and (e) of paragraph 1 shall not exceed 25 % of the total public expenditure incurred within the community-led local development strategy.

Textual Amendments

CHAPTER ΙΙΙ U.K. Territorial development

F101Article 36U.K.Integrated territorial investment

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Textual Amendments

TITLE IVU.K. FINANCIAL INSTRUMENTS

Article 37U.K.Financial instruments

1.[F102Support for rural development] may be used to support financial instruments under one or more programmes, including when organised through funds of funds, in order to contribute to the achievement of specific objectives set out under a priority.

Financial instruments shall be implemented to support investments which are expected to be financially viable and do not give rise to sufficient funding from market sources. When applying this Title, the managing authorities, the bodies implementing funds of funds, and the bodies implementing financial instruments shall comply with applicable law, in particular on F103... public procurement.

2.Support of financial instruments shall be based on an ex ante assessment which has established evidence of market failures or suboptimal investment situations, and the estimated level and scope of public investment needs, including types of financial instruments to be supported. Such ex ante assessment shall include:

(a)an analysis of market failures, suboptimal investment situations, and investment needs for policy areas and thematic objectives or investment priorities to be addressed with a view to contributing to the achievement of specific objectives set out under a priority and to be supported through financial instruments. That analysis shall be based on available good practices methodology;

(b)an assessment of the added value of the financial instruments that are being considered for [F104support for rural development], consistency with other forms of public intervention addressing the same market, F105... the proportionality of the envisaged intervention and measures to minimise market distortion;

[F12(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;]

(d)an assessment of lessons learnt from similar instruments and ex ante assessments carried out by the [F106relevant authority] in the past, and how such lessons will be applied in the future;

(e)the proposed investment strategy, including an examination of options for implementation arrangements within the meaning of Article 38, financial products to be offered, final recipients targeted and envisaged combination with grant support as appropriate;

(f)a specification of the expected results and how the financial instrument concerned is expected to contribute to the achievement of the specific objectives set out under the relevant priority including indicators for that contribution;

(g)provisions allowing for the ex ante assessment to be reviewed and updated as required during the implementation of any financial instrument which has been implemented based upon such assessment, where during the implementation phase, the managing authority considers that the ex ante assessment may no longer accurately represent the market conditions existing at the time of implementation.

[F123.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.]

The summary findings and conclusions of ex ante assessments in relation to financial instruments shall be published within three months of their date of finalisation.

The ex ante assessment shall be submitted to the monitoring committee for information purposes in accordance with the Fund-specific rules.

4.Where financial instruments support financing to enterprises, including SMEs, such support shall target the establishment of new enterprises, early stage-capital, i.e. seed capital and start-up capital, expansion capital, capital for the strengthening of the general activities of an enterprise, or the realisation of new projects, penetration of new markets or new developments by existing enterprises, F107... in accordance with the Fund-specific rules. Such support may include investment in both tangible and intangible assets as well as working capital F108... with a view to stimulating the private sector as a supplier of funding to enterprises. It may also include the costs of transfer of proprietary rights in enterprises provided that such transfers take place between independent investors.

[F109Financial instruments may also provide support in the form of working capital to SMEs, if necessary as a temporary measure, to provide an effective response to a public health crisis.]

5.Investments that are to be supported through financial instruments shall not be physically completed or fully implemented at the date of the investment decision.

6.Where financial instruments provide support to final recipients in respect of infrastructure investments with the objective of supporting urban development or urban regeneration or similar infrastructure investments with the objectives of diversifying non-agricultural activities in rural areas, such support may include the amount necessary for the reorganisation of a debt portfolio regarding infrastructure forming part of the new investment, up to a maximum of 20 % of the total amount of programme support from the financial instrument to the investment.

7.Financial instruments may be combined with grants, interest rate subsidies and guarantee fee subsidies. Where [F110support for rural development] is provided by means of financial instruments and combined in a single operation, with other forms of support directly related to financial instruments targeting the same final recipients, including technical support, interest rate subsidies and guarantee fee subsidies, the provisions applicable to financial instruments shall apply to all forms of support within that operation. In such cases, F111... separate records shall be maintained for each form of support.

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9.The combination of support provided through grants and financial instruments as referred to in paragraphs 7 and 8 mayF113... cover the same expenditure item provided that the sum of all forms of support combined does not exceed the total amount of the expenditure item concerned. Grants shall not be used to reimburse support received from financial instruments. Financial instruments shall not be used to pre-finance grants.

10.Contributions in kind shall not constitute eligible expenditure in respect of financial instruments, except for contributions of land or real estate in respect of investments with the objective of supporting rural development, urban development or urban regeneration, where the land or real estate forms part of the investment. Such contributions of land or real estate shall be eligible provided that the conditions laid down in Article 69(1) are met.

11.VAT shall not constitute eligible expenditure of an operation, except in the case of VAT which is non-recoverable under national VAT legislation. The treatment of VAT at the level of investments made by final recipients shall not be taken into account for the purposes of determining the eligibility of expenditure under the financial instrument. However, where financial instruments are combined with grants under paragraphs 7 and 8 of this Article, the provisions of Article 69(3) shall apply to the grant.

F11412.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F11513.The appropriate authority may make regulations in relation to support for rural development laying down additional specific rules on the purchase of land and on combining technical support with financial instruments.]

Textual Amendments

Article 38U.K.Implementation of financial instruments

[F1161.In implementing Article 37, Managing Authorities may provide a financial contribution to financial instruments set up at national, regional, transnational or cross-border level, managed by or under the responsibility of the Managing Authority.]

F1172.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.For financial instruments under F118... paragraph 1, the managing authority may provide a financial contribution to the following financial instruments:

(a)financial instruments complying with the standard terms and conditions [F119as set out in Regulation (EU) No 964/2014], in accordance with the second subparagraph of this paragraph;

(b)already existing or newly created financial instruments which are specifically designed to achieve the specific objectives set out under the relevant priority.

The [F120appropriate authority may make regulations in relation to support for rural development] concerning the standard terms and conditions with which the financial instruments under point (a) of the first subparagraph shall comply. F121...

4.When supporting financial instruments referred to in point (b) of paragraph 1 the managing authority may:

[F122(a)invest in the capital of existing or newly created legal entities dedicated to implementing financial instrument consistent with the objectives of the support for rural development, which will undertake implementation tasks; the support to such entities shall be limited to the amounts necessary to implement new investments in accordance with Article 37 and in a manner that is consistent with the objectives of this Regulation;]

[F12(b)entrust implementation tasks, through the direct award of a contract, to:

(i)

F123...

(ii)

an international financial institution in which a [F124relevant authority] 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 [F125the law as it applies in the constituent nation] 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 [F126support for rural development];

  • operates under a public policy mandate given by the relevant authority F127..., which includes carrying out, as all or part of its activities, economic development activities contributing to the objectives of [F126support for rural development];

  • carries out, as all or part of its activities, economic development activities contributing to the objectives of [F126support for rural development] 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.]

[F12When 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.]

F128...

[F125.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.]

[F127.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:]

(a)where applicable, between the duly mandated representatives of the managing authority and the body that implements the fund of funds; and

(b)between the duly mandated representatives of the managing authority, or where applicable, the body that implements the fund of funds, and the body that implements the financial instrument.

[F128.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.]

9.National public and private contributions, including where relevant contributions in kind as referred to in Article 37(10), may be provided at the level of the fund of funds, at the level of the financial instrument or at the level of final recipients, in accordance with the Fund-specific rules.

[F1210.[F129The appropriate authority may make regulations in relation to support for rural development] 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). F130...]

Textual Amendments

F131Article 39U.K.Contribution of ERDF and EAFRD to joint uncapped guarantee and securitisation financial instruments in favour of SMEs, implemented by the EIB

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Textual Amendments

F132Article 39aU.K. Contribution of ESI Funds to financial instruments combining such contribution with EIB financial products under the European Fund for Strategic Investments

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Textual Amendments

Article 40U.K.Management and control of financial instruments

[F121.[F133The authorities designated in accordance with Article 65 of the Regulation (EU) No 1305/2013 must not carry out on-the-spot verifications at the level of international financial institutions in which a relevant authority is a shareholder, for financial instruments implemented by them.

However, the designated authorities shall carry out checks in accordance with Article 59(1) of Regulation (EU) No 1306/2013 at the level of other bodies implementing the financial instruments in the jurisdiction of their respective constituent nation.

International financial institutions in which a relevant authority is a shareholder must provide to the designated authorities a control report with each application for payment. They shall also provide 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 F134... international financial institutions in which a [F135relevant authority] 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 [F136constituent nation] and at the level of the final recipients provided that the conditions set out in paragraph 3 are fulfilled.

F137...

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3.The bodies responsible for the audit of programmes may conduct audits at the level of final recipients only when one or more of the following situations occur:

(a)supporting documents, providing evidence of the support from the financial instrument to final recipients and of its use for the intended purposes in line with applicable law, are not available at the level of the managing authority or at the level of the bodies that implement financial instruments;

(b)there is evidence that the documents available at the level of the managing authority or at the level of the bodies that implement financial instruments do not represent a true and accurate record of the support provided.

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5.The bodies implementing financial instruments shall be responsible for ensuring that supporting documents are available and shall not impose on final recipients record-keeping requirements that go beyond what is necessary to enable them to fulfil that responsibility.

[F615a.[F140By way of derogation from the second paragraph of Article 56 of Regulation (EU) No 1306/2013, in operations comprising financial instruments, a contribution cancelled in accordance with the first paragraph of Article 56 of Regulation (EU) No 1306/2013, as a result of an individual irregularity, may be reused within the same operation under the following conditions:]

(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.]

Textual Amendments

Article 41U.K. [X1Payment applications including expenditure for financial instruments]

[F121.As regards financial instruments referred to in points (a) and (c) of Article 38(1), and as regards financial instruments referred to in point (b) of Article 38(1) implemented in accordance with points (a), (b) and (c) of the first subparagraph of Article 38(4), phased applications for interim payment shall be made for programme contributions paid to the financial instrument during the eligibility period laid down in Article 65(2) (the ‘eligibility period’) in accordance with the following conditions:]

(a)the amount of the programme contribution paid to the financial instrument included in each application for interim payment submitted during the eligibility period shall not exceed 25 % of the total amount of programme contributions committed to the financial instrument under the relevant funding agreement, corresponding to expenditure within the meaning of points (a), (b) and (d) of Article 42(1) expected to be paid during the eligibility period. Applications for interim payment submitted after the eligibility period shall include the total amount of eligible expenditure within the meaning of Article 42;

(b)each application for interim payment referred to in point (a) of this paragraph may include up to 25 % of the total amount of the national co-financing as referred to in Article 38(9) expected to be paid to the financial instrument, or at the level of final recipients for expenditure in the meaning of points (a), (b) and (d) of Article 42(1), within the eligibility period;

(c)subsequent applications for interim payment submitted during the eligibility period shall only be made:

(i)

[X1for the second application for interim payment, when at least 60 % of the amount included in the first application for interim payment has been spent as eligible expenditure within the meaning of points (a), (b) and (d) of Article 42(1);]

(ii)

[X1for the third and subsequent applications for interim payment, when at least 85 % of the amounts included in the previous applications for interim payment have been spent as eligible expenditure within the meaning of points (a), (b) and (d) of Article 42(1);]

[X1(d)each application for interim payment, which includes expenditure related to financial instruments, shall separately disclose the total amount of programme contributions paid to the financial instruments and the amounts paid as eligible expenditure within the meaning of points (a), (b) and (d) of Article 42(1).]

At closure of a programme, the application for payment of the final balance shall include the total amount of eligible expenditure as referred to in Article 42.

[F122.As regards financial instruments referred to in point (b) of Article 38(1) implemented in accordance with point (d) of the first subparagraph of Article 38(4), the applications for interim payment and for payment of the final balance shall include the total amount of the payments effected by the managing authority for investments in final recipients as referred to in points (a) and (b) of the first subparagraph of Article 42(1).]

[X13.The [F141appropriate authority may make regulations in relation to support for rural development], laying down the rules for withdrawal of payments to financial instruments and consequent adjustments in respect of applications for payment.]

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Editorial Information

Textual Amendments

Article 42U.K.Eligible expenditure at closure

1.At closure of a programme, the eligible expenditure of the financial instrument shall be the total amount of programme contributions effectively paid or, in the case of guarantees, committed by the financial instrument within the eligibility period, corresponding to:

(a)payments to final recipients, and in the cases referred to in Article 37(7) payments to the benefit of final recipients;

(b)resources committed for guarantee contracts, whether outstanding or already come to maturity, in order to honour possible guarantee calls for losses, calculated on the basis of a prudent ex ante risk assessment, covering a multiple amount of underlying new loans or other risk-bearing instruments for new investments in final recipients;

(c)capitalised interest rate subsidies or guarantee fee subsidies, due to be paid for a period not exceeding 10 years after the eligibility period, used in combination with financial instruments, paid into an escrow account specifically set up for that purpose, for effective disbursement after the eligibility period, but in respect of loans or other risk-bearing instruments disbursed for investments in final recipients within the eligibility period;

(d)reimbursement of management costs incurred or payment of management fees of the financial instrument.

The [F143appropriate authority may make regulations in relation to support for rural development] laying down the specific rules concerning the establishment of a system of capitalisation of annual instalments for interest rate subsidies and guarantee fee subsidies referred to in point (c) of the first subparagraph.

2.In the case of equity-based instruments and micro-credit, capitalised management costs or fees due to be paid for a period not exceeding six years after the eligibility period, in respect of investments in final recipients which occurred within the eligibility period, which cannot be covered by Articles 44 or 45, may be considered as eligible expenditure when paid into an escrow account specifically set up for that purpose.

[F123.In the case of equity-based instruments targeting enterprises referred to in Article 37(4) for which the funding agreement referred to in point (b) of Article 38(7) was signed before 31 December 2018, which by the end of the eligibility period invested at least 55 % of the programme resources committed in the relevant funding agreement, a limited amount of payments for investments in final recipients to be made for a period not exceeding four years after the end of the eligibility period may be considered as eligible expenditure, when paid into an escrow account specifically set up for that purpose, provided that F144... all of the conditions set out below are fulfilled.]

The amount paid into the escrow account:

(a)shall be used solely for follow-on investments in final recipients having received initial equity investments from the financial instrument within the eligibility period, which are still wholly or partially outstanding;

(b)shall be used solely for follow-on investments to be made in accordance with market standards and market standard contractual arrangements and limited to the minimum necessary to stimulate private sector co-investment, while ensuring continuity of financing for the target enterprises so that both public and private investors can benefit from investments;

(c)shall not exceed 20 % of the eligible expenditure of the equity-based instrument referred to in point (a) of the first subparagraph of paragraph 1 from which ceiling capital resources and gains returned to that equity-based instrument during the eligibility period shall be deducted.

Any amounts paid into the escrow account which are not used for investments in final recipients paid in the period referred to in the first subparagraph shall be used in accordance with Article 45.

[X14.The eligible expenditure disclosed in accordance with paragraphs 1, 2 and 3 shall not exceed the sum of the:]

[X1(a)total amount of [F145support for rural development] paid for the purposes of paragraphs 1, 2 and 3; and]

(b)corresponding national co-financing.

[F125.Where management costs and fees as referred to in point (d) of the first subparagraph of paragraph 1 of this Article and in paragraph 2 of this Article are charged by the body implementing the fund of funds or bodies implementing financial instruments pursuant to point (c) of Article 38(1) and points (a), (b) and (c) of the first subparagraph of Article 38(4), they shall not exceed the thresholds defined in [F146legislation made under] paragraph 6 of this Article. Whereas management costs shall comprise direct or indirect cost items reimbursed against evidence of expenditure, management fees shall refer to an agreed price for services rendered established via a competitive market process, where applicable. Management costs and fees shall be based on a performance-based calculation methodology.]

Management costs and fees may comprise arrangement fees. Where arrangement fees, or any part thereof, are charged to final recipients, they shall not be declared as eligible expenditure.

Management costs and fees, including those incurred for preparatory work in relation to the financial instrument before the signature of the relevant funding agreement, shall be eligible as from the date of signature of the relevant funding agreement.

6.The [F147appropriate authority may make regulations in relation to support for rural development], laying down the specific rules setting out the criteria for determining management costs and fees on the basis of performance and the applicable thresholds as well as rules for the reimbursement of capitalised management costs and fees for equity-based instruments and micro-credit.

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Article 43U.K.Interest and other gains generated by support [F148for rural development] to financial instruments

1.Support [F148for rural development] paid to financial instruments shall be placed in accounts domiciled within financial institutions in [F149the constituent nation] and shall be invested on a temporary basis in accordance with the principles of sound financial management.

[X12.Interest and other gains attributable to support [F148for rural development] paid to financial instruments shall be used for the same purposes, including the reimbursement of management costs incurred or payment of management fees of the financial instrument in accordance with point (d) of the first subparagraph of Article 42(1) and in accordance with Article 42(2) and (3), as the initial support [F148for rural development], either within the same financial instrument or, following the winding up of the financial instrument, in other financial instruments or forms of support in accordance with the specific objectives set out under a priority, until the end of the eligibility period.]

3.The managing authority shall ensure that adequate records of the use of interest and other gains are maintained.

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[F61Article 43aU.K. Differentiated treatment of investors

1.Support [F150for rural development] 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 [F150for rural development], may be used for differentiated treatment of investors operating under the market economy principle, F151... . 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) F152... 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, F153.... The alignment of interest shall be ensured through an appropriate sharing of risk and profit.

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[F12Article 44U.K.Re-use of resources attributable to the support from the ESI Funds until the end of the eligibility period

1.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 [F155support for rural development], 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 [F156contribution from support for rural development] 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.]

[X12.The managing authority shall ensure that adequate records of the re-use of the resources referred to in paragraph 1 are maintained.]

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[X1Article 45U.K. Re-use of resources after the end of the eligibility period

[F157The relevant authority] shall adopt the necessary measures to ensure that resources paid back to financial instruments, including capital repayments and gains and other earnings or yields generated during a period of at least eight years after the end of the eligibility period, which are attributable to [F158support for rural development] to financial instruments pursuant to Article 37, are re-used in accordance with the aims of the programme or programmes, either within the same financial instrument or, following the exit of those resources from the financial instrument, in other financial instruments provided that, in both cases, an assessment of market conditions demonstrates a continuing need for such investment, or in other forms of support.]

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Article 46U.K.Report on implementation of financial instruments

1.The managing authority shall send to the [F159Programme Monitoring Committee] a specific report covering the operations comprising financial instruments as an annex to the annual implementation report.

2.The specific report referred to in paragraph 1 shall include, for each financial instrument, the following information:

(a)identification of the programme and of the priority or measure from which support [F160for rural development] is provided;

(b)description of the financial instrument and implementation arrangements;

[F12(c)identification of the bodies implementing financial instruments, and the bodies implementing funds of funds where applicable, as referred to under points (a), (b) and (c) of Article 38(1);]

(d)total amount of programme contributions by priority or measure paid to the financial instrument;

(e)total amount of support paid to the final recipients or to the benefit of final recipients, or committed in guarantee contracts by the financial instrument for investments in final recipients, as well as management costs incurred or management fees paid, by programme and priority or measure;

(f)the performance of the financial instrument including progress in its set-up and in selection of bodies implementing the financial instrument, including the body implementing a fund of funds;

[F12(g)interest and other gains generated by support [F160for rural development] 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;

(h)progress in achieving the expected leverage effect of investments made by the financial instrument;]

(i)the value of equity investments, with respect to previous years;

(j)contribution of the financial instrument to the achievement of the indicators of the priority or measure concerned.

The information in points (h) and (j) of the first subparagraph may be included only in the annex to the annual implementation reports submitted in 2017 and 2019 as well as in the final implementation report. The reporting obligations set out in points (a) to (j) of the first subparagraph shall not be applied at the level of final recipients.

[F1613.The appropriate authority may make regulations in relation to rural development setting out the models to be used when reporting on financial instruments to the monitoring committee.]

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TITLE VU.K. MONITORING AND EVALUATION

CHAPTER I U.K. Monitoring

Section I U.K. Monitoring of programmes

Article 47U.K.Monitoring committee

[F1631.The Managing Authority must agree with a Programme Monitoring Committee, set up in accordance with the institutional, legal and financial framework of the constituent nation, on the monitoring and implementation of the programme.]

2.Each monitoring committee shall draw up and adopt its rules of procedure in accordance with the institutional, legal and financial framework of the [F164constituent nation] concerned.

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Article 48U.K.Composition of the monitoring committee

1.The composition of the monitoring committee shall be decided by the [F166Managing Authority], provided that the monitoring committee is composed of representatives of the relevant F167... authorities and intermediate bodies and of representatives of the partners referred to in Article 5. Representatives of the partners shall be delegated to be part of the monitoring committee by the respective partners through transparent processes. Each member of the monitoring committee may have a voting right.

F168...

2.The list of the members of the monitoring committee shall be published.

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5.The monitoring committee shall be chaired by a representative of the [F170constituent nation] or of the managing authority.

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Article 49U.K.Functions of the monitoring committee

1.The monitoring committee shall meet at least once a year and shall review implementation of the programme and progress made towards achieving its objectives. In doing so, it shall have regard to the financial data, common and programme-specific indicators, including changes in the value of result indicators and progress towards quantified target values F171... and, where relevant, the results of qualitative analyses.

[X12.The monitoring committee shall examine all issues that affect the performance of the programme, including the conclusions of the performance review.]

3.The monitoring committee shall be consulted and shall, if it considers it to be appropriate, give an opinion on any amendment of the programme proposed by the managing authority.

[F124.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 [F172for rural development] and on raising awareness about the results of such support. It shall monitor actions taken as a result of its observations.]

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Article 50U.K.Implementation reports

[F1731.Until and including 2023, each Managing Authority must submit to the Programme Monitoring Committee an annual report on implementation of the programme in the previous financial year by the deadline established in the Fund-specific rules.]

2.Annual implementation reports shall set out key information on implementation of the programme and its priorities by reference to the financial data, common and programme-specific indicators and quantified target values, including changes in the value of result indicators where appropriate F174.... The data transmitted shall relate to values for indicators for fully implemented operations and also, where possible, having regard to the stage of implementation, for selected operations. They shall also set out a synthesis of the findings of all evaluations of the programme that have become available during the previous financial year, any issues which affect the performance of the programme, and the measures taken. The annual implementation report to be submitted in 2016 may also set out, where relevant, actions taken to fulfil ex ante conditionalities.

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4.The annual implementation report to be submitted in 2017 shall set out and assess the information referred to in paragraph 2 and progress made towards achieving the objectives of the programme, including the contribution of [F176support for rural development] to changes in the value of result indicators, when evidence is available from relevant evaluations. That annual implementation report shall set out the actions taken to fulfil the ex-ante conditionalities not fulfilled at the time of adoption of the programmes. It shall also assess the implementation of actions to take into account the principles set out in Articles 7 and 8, the role of the partners referred to in Article 5 in the implementation of the programme and report on support used for climate change objectives.

[X15.The annual implementation report to be submitted in 2019 and the final implementation report for [F176support for rural development] shall, in addition to the information and assessment referred to in paragraphs 2 and 4, include information on, and assess progress towards, achieving the objectives of the programme F177... .]

6.In order to be deemed admissible, the annual implementation reports referred to in paragraphs 1 to 5 shall contain all the information required in those paragraphs and in the Fund-specific rules.

F178...

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9.The annual and final implementation reports, as well as a summary for citizens of their content, shall be made available to the public.

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F180Article 51U.K.Annual review meeting

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Section II U.K. Strategic progress

F181Article 52U.K.Progress report

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F182Article 53U.K.Reporting by the Commission and debate on the ESI Funds

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CHAPTER II U.K. Evaluation

Article 54U.K.General Provisions

1.Evaluations shall be carried out to improve the quality of the design and implementation of programmes, as well as to assess their effectiveness, efficiency and impact. The impact of programmes shall be evaluated, in the light of the mission of [F183support for rural development], F184... , having regard to the size of the programme, in relation to GDP and unemployment in the programme area concerned, where appropriate.

2.[F185The relevant authority] shall provide the resources necessary for carrying out evaluations, and shall ensure that procedures are in place to produce and collect the data necessary for evaluations, including data related to common and where appropriate programme-specific indicators.

3.Evaluations shall be carried out by internal or external experts that are functionally independent of the authorities responsible for programme implementation. F186....

4.All evaluations shall be made available to the public.

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F187Article 55U.K.Ex ante evaluation

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Article 56U.K.Evaluation during the programming period

1.An evaluation plan shall be drawn up by the managing authority or [F188the relevant authority] and may cover more than one programme. It shall be submitted in accordance with the Fund-specific rules.

2.[F189The relevant authority] shall ensure that appropriate evaluation capacity is available.

3.During the programming period, the managing authority shall ensure that evaluations, including evaluations to assess effectiveness, efficiency and impact, are carried out for each programme on the basis of the evaluation plan and that each evaluation is subject to appropriate follow-up in accordance with the Fund-specific rules. At least once during the programming period, an evaluation shall assess how [F190support for rural development] has contributed to the objectives for each priority. All evaluations shall be examined by the monitoring committee F191....

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F194Article 57U.K.Ex post evaluation

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TITLE VIU.K. TECHNICAL ASSISTANCE

F195Article 58U.K.Technical assistance at the initiative of the Commission

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Article 59U.K.Technical assistance at the initiative of the Member States

1.At the initiative of a [F196relevant authority], [F197support for rural development] may support actions for preparation, management, monitoring, evaluation, information and communication, networking, complaint resolution, and control and audit. [F198Support for rural development ] may be used by the [F196relevant authority] to support actions for the reduction of the administrative burden on beneficiaries, including electronic data exchange systems, and actions to reinforce the capacity of [F196relevant authority] F199... and beneficiaries to administer and use those Funds. [F198Support for rural development] may also be used to support actions to reinforce the capacity of relevant partners in line with point (e) of Article 5(3) and to support exchange of good practices between such partners. The actions referred to in this paragraph may concern previous and subsequent programming periods.

[F2001a.Any programme may support technical assistance operations eligible under any other programme.]

2.The Fund-specific rules may add or exclude actions which may be financed by the technical assistance [F201under any programme].

[F613.Without prejudice to paragraph 2, [F202the relevant authority] may implement actions referred to in paragraph 1 through the direct award of a contract to:

F203(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)an international financial institution in which a [F204relevant authority] is a shareholder;

(c)a publicly-owned bank or institution, as referred to in point (b)(iii) of the first subparagraph of Article 38(4).]

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TITLE VIIU.K. FINANCIAL SUPPORT FROM THE ESI FUNDS

CHAPTER I U.K. Support from the ESI Funds

F205Article 60U.K.Determination of co-financing rates

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Article 61U.K.Operations generating net revenue after completion

[F121.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.]

Where not all the investment cost is eligible for co-financing, the net revenue shall be allocated pro rata to the eligible and non-eligible parts of the investment cost.

2.The eligible expenditure of the operation to be co-financed from [F206support for rural development] shall be reduced in advance taking into account the potential of the operation to generate net revenue over a specific reference period that covers both implementation of the operation and the period after its completion.

3.The potential net revenue of the operation shall be determined in advance by one of the following methods chosen by the managing authority for a sector, subsector or type of operation:

(a)application of a flat rate net revenue percentage for the sector or subsector applicable to the operation as defined in Annex V or in any of the delegated acts referred to in the second, third and fourth subparagraphs;

[F61(aa)application of a flat rate net revenue percentage established by a [F207relevant authority] 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;]

(b)calculation of the discounted net revenue of the operation, taking into account the reference period appropriate to the sector or subsector applicable to the operation, the profitability normally expected of the category of investment concerned, the application of the polluter-pays principle and, if appropriate, considerations of equity linked to the relative prosperity of the [F207relevant authority] or region concerned.

The [F208appropriate authority may make regulations] in duly justified cases to amend Annex V by adjusting the flat rates established therein taking into account historical data, the potential for cost recovery and the polluter-pays principle where applicable.

F209...

In addition, the [F210appropriate authority may make regulations] in duly justified cases with regard to adding sectors or subsectors, including subsectors for sectors in Annex V, falling under the thematic objectives defined in the first paragraph of Article 9 and [F211funded by support for rural development].

Where the method referred to in point (a) of the first subparagraph is applied, all the net revenue generated during implementation and after completion of the operation shall be considered to be taken into account by the application of the flat rate and shall therefore not be deducted subsequently from the eligible expenditure of the operation.

When a flat rate for a new sector or subsector has been established by [F212legislation in accordance with the fourth subparagraph], a managing authority may choose to apply the method set out in point (a) of the first subparagraph for new operations in relation to the sector or subsector concerned.

The [F213appropriate authority may make regulations], laying down the method referred to in point (b) of the first subparagraph. Where that method is applied, the net revenue generated during implementation of the operation, resulting from sources of revenue not taken into account in determining the potential net revenue of the operation, shall be deducted from the eligible expenditure of the operation, no later than in the final payment claim submitted by the beneficiary.

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[F125.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 [F207relevant authority], 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 [F215core contribution] applicable under the Fund-specific rules by the relevant flat rate referred to in that point.]

6.Where it is objectively not possible to determine the revenue in advance based on any of the methods set out in paragraphs 3 or 5, the net revenue generated within three years of the completion of an operation, or by the deadline for the submission of documents for programme closure fixed in the Fund-specific rules, whichever is the earlier, shall be deducted from the expenditure declared to the [F216relevant authority].

7.Paragraphs 1 to 6 shall not apply to:

F217(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)operations whose total eligible cost before application of paragraphs 1 to 6 does not exceed EUR 1 000 000;

(c)repayable assistance subject to an obligation for full repayment and prizes;

(d)technical assistance;

(e)support to or from financial instruments;

(f)operations for which public support takes the form of lump sums or standard scale unit costs;

(g)operations implemented under a joint action plan;

[F12(h)operations for which amounts or rates of support are defined in Annex II to [F218Regulation (EU) No 1305/2013] or in the EMFF Regulation.]

Notwithstanding point (b) of the first subparagraph of this paragraph, where a [F207relevant authority] applies paragraph 5, it may include in the relevant priority or measure operations whose total eligible cost before application of paragraphs 1 to 6 does not exceed EUR 1 000 000.

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CHAPTER II U.K. Special rules on support from the ESI Funds to PPPs

Article 62U.K.PPPs

[F220Support for rural development] may be used to support PPP operations. Such PPP operations shall comply with applicable law, in particular concerning F221... public procurement.

Textual Amendments

Article 63U.K.Beneficiary under PPP operations

1.In relation to a PPP operation, and by way of derogation from point (10) of Article 2, a beneficiary may be either:

(a)the public law body initiating the operation; or

(b)a body governed by private law of [F222a relevant authority] (the "private partner") selected or to be selected for the implementation of the operation.

2.The public law body initiating the PPP operation may propose that the private partner, to be selected after approval of the operation, be the beneficiary for the purposes of support from [F223support for rural development]. In that event, the approval decision shall be conditional on the managing authority satisfying itself that the selected private partner fulfils and assumes all the corresponding obligations of a beneficiary under this Regulation.

3.The private partner selected to implement the operation may be replaced as beneficiary during implementation where this is required under the terms and conditions of the PPP or the financing agreement between the private partner and the financial institution co-financing the operation. In that event the replacement private partner or public law body shall become the beneficiary provided that the managing authority satisfies itself that the replacement partner fulfils and assumes all the corresponding obligations of a beneficiary under this Regulation.

4.The [F224appropriate authority may make regulations] laying down additional rules on the replacement of a beneficiary and on the related responsibilities.

5.The replacement of a beneficiary shall not be considered a change in ownership within the meaning of point (b) of Article 71(1) if that replacement satisfies the applicable conditions set out in paragraph 3 of this Article and in [F225regulations made] pursuant to paragraph 4 of this Article.

Textual Amendments

Article 64U.K.Support for PPP operations

[X11.In the case of a PPP operation where the beneficiary is a public law body, expenditure under a PPP operation which has been incurred and paid by the private partner may, by way of derogation from Article 65(2), be considered as incurred and paid by a beneficiary and [F226eligible for support for rural development] provided that the following conditions are met:]

(a)the beneficiary has entered into a PPP agreement with a private partner;

(b)the managing authority has verified that the expenditure declared by the beneficiary has been paid by the private partner and that the operation complies with applicable F227... national law, the programme and the conditions for support of the operation.

[X12.Payments to beneficiaries made in respect of expenditure F228... in accordance with paragraph 1 shall be paid into an escrow account set up for that purpose in the name of the beneficiary.]

3.The funds paid into the escrow account referred to in paragraph 2 shall be used for payments in accordance with the PPP agreement, including any payments to be made in the event of termination of the PPP agreement.

4.The [F229appropriate authority may make regulations] laying down the minimum requirements to be included in PPP agreements which are necessary for the application of the derogation laid down in paragraph 1 of this Article, including provisions related to termination of the PPP agreement and for the purpose of ensuring an adequate audit trail.

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Textual Amendments

CHAPTER III U.K. Eligibility of expenditure and durability

Article 65U.K.Eligibility

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

2.Expenditure shall be eligible for a contribution from [F230support for rural development] if it has been incurred by a beneficiary and paid between the date of submission of the programme to the Commission or from 1 January 2014, whichever is earlier, and 31 December 2023. In addition, expenditure shall only be eligible for [F231support for rural development] if the relevant aid is actually paid by the paying agency between 1 January 2014 and 31 December 2023.

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4.In the case of costs reimbursed pursuant to points (b) and (c) of the first subparagraph of Article 67(1), the actions constituting the basis for reimbursement shall be carried out between 1 January 2014 and 31 December 2023.

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6.Operations shall not be selected for support by [F234support for rural development] where they have been physically completed or fully implemented before the application for funding under the programme is submitted by the beneficiary to the managing authority, irrespective of whether all related payments have been made by the beneficiary.

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8.This paragraph shall apply to operations which generate net revenue during their implementation and to which paragraphs 1 to 6 of Article 61 do not apply.

The eligible expenditure of the operation [F236receiving support for rural development] shall be reduced by the net revenue not taken into account at the time of approval of the operation directly generated only during its implementation, not later than at the final payment claim submitted by the beneficiary. Where not all the costs are eligible for co-financing, the net revenue shall be allocated pro rata to the eligible and non-eligible parts of the cost.

This paragraph shall not apply to:

(a)technical assistance;

(b)financial instruments;

(c)repayable assistance subject to an obligation for full repayment;

(d)prizes;

F237(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f)operations for which public support takes the form of lump sums or standard scale unit costs provided that the net revenue has been taken into account ex ante;

(g)operations implemented under a joint action plan provided that the net revenue has been taken into account ex ante;

[F12(h)operations for which amounts or rates of support are defined in Annex II to [F238Regulation (EU) No 1305/2013] or in the EMFF Regulation with the exception of those operations for which reference is made to this paragraph in the EMFF Regulation; or]

[F12(i)operations for which the total eligible cost does not exceed EUR 100 000.]

For the purposes of this Article and Article 61, any payment received by the beneficiary arising from contractual penalties as a result of a breach of contract between the beneficiary and a third party or third parties or that has occurred as a result of the withdrawal of an offer by a third party chosen under public procurement rules (the 'deposit') shall not be considered as revenue and shall not be deducted from the eligible expenditure of the operation.

9.Expenditure that becomes eligible as a result of an amendment to a programme shall only be eligible from the date of submission to the [F239relevant authority] of the request for amendment F240....

The Fund-specific rules for the EMFF may derogate from the first subparagraph.

10.By way of derogation from paragraph 9, specific provisions on the starting date of eligibility may be established in [F241Regulation (EU) No 1305/2013].

[F109By way of derogation from paragraph 9, expenditure for operations for fostering crisis response capacities in the context of the COVID-19 outbreak shall be eligible as of 1 February 2020.]

[F24211.An operation may receive support for rural development or from one or more programmes and from CMO support or direct payment support or support under other retained direct EU legislation, provided that the expenditure declared is not declared more than once.]

Textual Amendments

Article 66U.K.Forms of support

[F243Support for rural development may be provided] in the form of grants, prizes, repayable assistance and financial instruments, or a combination thereof.

In the case of repayable assistance, the support repaid to the body that provided it, or to another competent authority F244..., shall be kept in a separate account or separated with accounting codes and reused for the same purpose or in accordance with the objectives of the programme.

Textual Amendments

Article 67U.K.Forms of grants and repayable assistance

1.Grants and repayable assistance may take any of the following forms:

(a)reimbursement of eligible costs actually incurred and paid, together with, where applicable, contributions in kind and depreciation;

(b)standard scales of unit costs;

[F12(c)lump sums;]

(d)flat-rate financing, determined by the application of a percentage to one or more defined categories of costs[F12;]

[F61(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 [F245legislation made under] paragraph 5a.]

Fund-specific rules may limit the forms of grants or repayable assistance applicable to certain operations.

[F61For 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.]

2.By way of derogation from paragraph 1, additional forms of grants and methods of calculation may be established in the EMFF Regulation.

[F612a.F246...

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 [F247receiving support for rural development], 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.

F246...]

3.The options referred to in paragraph 1 may be combined only where each option covers different categories of costs or where they are used for different projects forming a part of an operation or for successive phases of an operation.

[F124.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.]

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

[F12(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;]

[F61(aa)a draft budget established on a case-by-case basis and agreed ex ante by the managing authority, or in the case of [F248support for rural development] the authority responsible for the selection of operations, where the public support does not exceed EUR 100 000;]

F249(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)in accordance with the rules for application of corresponding scales of unit costs, lump sums and flat rates applied under schemes for grants funded entirely by [F250the relevant authority] for a similar type of operation and beneficiary;

(d)rates established by this Regulation or the Fund-specific rules;

(e)specific methods for determining amounts established in accordance with the Fund-specific rules.

[F615a.The [F251appropriate authority may make regulations] supplementing this Regulation with regard to the definition of the standard scales of unit costs or the flat-rate financing referred to in points (b) and (d) of the first subparagraph of paragraph 1 of this Article, the related methods referred to in point (a) of paragraph 5 of this Article and the form of support referred to in point (e) of the first subparagraph of paragraph 1 of this Article, by specifying detailed modalities concerning the financing conditions and their application.]

6.The document setting out the conditions for support for each operation shall set out the method to be applied for determining the costs of the operation and the conditions for payment of the grant.

Textual Amendments

[F12Article 68U.K. 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 [F252relevant authority] 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 [F252relevant authority] 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 F253... policies for a similar type of operation and beneficiary.

The [F254appropriate authority may make regulations] to supplement the provisions on the flat rate and the related methods referred to in point (c) of the first subparagraph of this paragraph.]

Textual Amendments

[F61Article 68aU.K. 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. [F255The relevant authority] 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.

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.

F256...

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.

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.

Textual Amendments

Article 68bU.K. 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 [F257relevant authority] to execute any calculation to determine the applicable rate.

For operations [F258receiving support for rural development] 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.]

Textual Amendments

Article 69U.K.Specific eligibility rules for grants and repayable assistance

1.Contributions in kind in the form of provision of works, goods, services, land and real estate for which no cash payment supported by invoices, or documents of equivalent probative value, has been made, may be eligible on condition that the eligibility rules of [F259support for rural development] and the programme so provide and that all the following criteria are fulfilled:

(a)the public support paid to the operation which includes contributions in kind does not exceed the total eligible expenditure, excluding contributions in kind, at the end of the operation;

(b)the value attributed to contributions in kind does not exceed the costs generally accepted on the market in question;

(c)the value and the delivery of the contribution can be independently assessed and verified;

(d)in the case of provision of land or real estate, a cash payment, for the purposes of a lease agreement of a nominal amount per annum not exceeding [F260one pound], may be made;

(e)in the case of contributions in kind in the form of unpaid work, the value of that work is determined by taking into account the verified time spent and the rate of remuneration for equivalent work.

The value of the land or real estate referred to in point (d) of the first subparagraph of this paragraph shall be certified by an independent qualified expert or duly authorised official body and shall not exceed the limit laid down in point (b) of paragraph 3.

2.Depreciation costs may be considered as eligible where the following conditions are fulfilled:

(a)the eligibility rules of the programme allow for it;

(b)the amount of the expenditure is duly justified by supporting documents having equivalent probative value to invoices for eligible costs where reimbursed in the form referred to in point (a) of the first subparagraph of Article 67(1);

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

(d)public grants have not contributed towards the acquisition of the depreciated assets.

3.The following costs shall not be eligible for a contribution from [F261support for rural development]F262...:

(a)interest on debt, except in relation to grants given in the form of an interest rate subsidy or guarantee fee subsidy;

(b)the purchase of land not built on and land built on in the amount exceeding 10 % of the total eligible expenditure for the operation concerned. For derelict sites and for those formerly in industrial use which comprise buildings, that limit shall be increased to 15 %. In exceptional and duly justified cases, the limit may be raised above the respective aforementioned percentages for operations concerning environmental conservation;

(c)value added tax except where it is non-recoverable under national VAT legislation.

Textual Amendments

[F12Article 70U.K. Eligibility of operations depending on location

1.Subject to the derogations referred to in paragraph 2 and the Fund-specific rules, operations supported by [F263support for rural development] shall be located in the programme area.

Operations concerning the provision of services to citizens or businesses which cover the whole territory of a [F264relevant authority] shall be considered as being located in all programme areas within a [F265constituent nation]. 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 F266... provided that all the following conditions are satisfied:

(a)the operation is for the benefit of the programme area;

(b)[F267the total amount allocated under the programme to operations located outside the programme area does not exceed 15% of the support for rural development at the level of the priority at the time of the 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.

Where operations F268... 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.

F269...

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 [F270the constituent nations] provided that the expenditure is necessary for the satisfactory implementation of the operation.

F2714.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]

Textual Amendments

Article 71U.K.Durability of operations

1.An operation comprising investment in infrastructure or productive investment shall repay the contribution from [F272support for rural development] if within five years of the final payment to the beneficiary F273... it is subject to any of the following:

(a)a cessation or relocation of a productive activity outside the programme area;

(b)a change in ownership of an item of infrastructure which gives to a firm or a public body an undue advantage;

(c)a substantial change affecting its nature, objectives or implementation conditions which would result in undermining its original objectives.

Sums unduly paid in respect of the operation shall be recovered by the [F274relevant authority] in proportion to the period for which the requirements have not been fulfilled.

[F275The relevant authority] may reduce the time limit set out in the first subparagraph to three years in cases concerning the maintenance of investments or jobs created by SMEs.

2.An operation comprising investment in infrastructure or productive investment shall repay the contribution from [F272support for rural development] if within 10 years of the final payment to the beneficiary the productive activity is subject to relocation outside [F276the United Kingdom and its territorial sea], except where the beneficiary is an SME. F277...

F2783.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F124.Paragraphs 1, 2 and 3 of this Article shall not apply to contributions to or by financial instruments or for lease purchase under point (b) of Article 45(2) of Regulation (EU) No 1305/2013 nor to any operation which undergoes cessation of a productive activity due to a non-fraudulent bankruptcy.]

F2795.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F277Words in Art. 71(2) omitted (31.12.2020 immediately after IP completion day) by virtue of The State Aid (Revocations and Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1470), reg. 1(3), Sch. 1 para. 7(8)(b) (with Sch. 3)

F280TITLE VIIIU.K.MANAGEMENT AND CONTROL

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Textual Amendments

TITLE IXU.K.FINANCIAL MANAGEMENT, EXAMINATION AND ACCEPTANCE OF ACCOUNTS AND FINANCIAL CORRECTIONS, DECOMMITMENT

CHAPTER IU.K.Financial management

F281Article 76U.K.Budget commitments

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Textual Amendments

F281Article 77U.K.Common rules for payments

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Textual Amendments

F281Article 78U.K.Common rules for calculating interim payments, and payment of the final balance

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Textual Amendments

F281Article 79U.K. Payment applications

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Textual Amendments

[F282Article 80U.K.Use of the euro

Amounts set out in programmes relating to support for rural development, forecasts of expenditure, payment applications, accounts and expenditure mentioned in the annual and final implementation reports shall be denominated in euros.]

Textual Amendments

F283Article 81U.K.Payment of initial pre-financing

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Textual Amendments

F283Article 82U.K.Clearance of initial pre-financing

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Textual Amendments

F283Article 83U.K.Interruption of the payment deadline

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Textual Amendments

CHAPTER IIU.K.Examination and acceptance of accounts

F283Article 84U.K.Deadline for the examination and acceptance of accounts by the Commission

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Textual Amendments

CHAPTER IIIU.K.Financial corrections

F283Article 85U.K.Financial corrections by the Commission

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Textual Amendments

CHAPTER IVU.K.Decommitment

F283Article 86U.K.Principles

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Textual Amendments

F283Article 87U.K.Exception to the decommitment

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Textual Amendments

F283Article 88U.K.Procedure

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Textual Amendments

Textual Amendments

F284PART THREEU.K.GENERAL PROVISIONS APPLICABLE TO THE ERDF, THE ESF AND THE COHESION FUND

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Textual Amendments

[F1PART FOURU.K.GENERAL PROVISIONS APPLICABLE TO THE FUNDS AND THE EMFF

TITLE IU.K.MANAGEMENT AND CONTROL

CHAPTER IU.K.Management and control systems

Article 122U.K.Responsibilities of Member States

1.Member States shall ensure that management and control systems for operational programmes are set up in accordance with Articles 72, 73 and 74.

2.Member States shall prevent, detect and correct irregularities and shall recover amounts unduly paid, together with any interest on late payments. [X1They shall notify the Commission of irregularities that exceed EUR 10 000 in contribution from any of the Funds or the EMFF, and] shall keep it informed of significant progress in related administrative and legal proceedings.

The Member States shall not notify the Commission of irregularities in relation to the following:

(a)cases where the irregularity consists solely of the failure to execute, in whole or in part, an operation included in the co-financed operational programme owing to the bankruptcy of the beneficiary;

(b)cases brought to the attention of the managing authority or certifying authority by the beneficiary voluntarily and before detection by either authority, whether before or after the payment of the public contribution;

[X1(c ) cases which are detected and corrected by the managing authority or certifying authority before inclusion of the expenditure concerned in a payment application submitted to the Commission.]

In all other cases, in particular those preceding a bankruptcy or in cases of suspected fraud, the detected irregularities and the associated preventive and corrective measures shall be reported to the Commission.

[F12When 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.]

The Commission shall be empowered to adopt delegated acts in accordance with Article 149 laying down additional detailed rules on the criteria for determining the cases of irregularity to be reported, the data to be provided and on the conditions and procedures to be applied to determine whether amounts which are irrecoverable shall be reimbursed by Member States.

The Commission shall adopt implementing acts setting out the frequency of the reporting of irregularities and the reporting format to be used. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 150(2).

3.Member States shall ensure that no later than 31 December 2015, all exchanges of information between beneficiaries and a managing authority, a certifying authority, an audit authority and intermediate bodies can be carried out by means of electronic data exchange systems.

The systems referred to in the first subparagraph shall facilitate interoperability with national and Union frameworks and allow for the beneficiaries to submit all information referred to in the first subparagraph only once.

The Commission shall adopt implementing acts laying down detailed rules concerning the exchanges of information under this paragraph. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 150(3).

4.Paragraph 3 shall not apply to the EMFF.

Editorial Information

Textual Amendments

CHAPTER IIU.K.Management and control authorities

Article 123U.K.Designation of authorities

1.Each Member State shall designate, for each operational programme, a national, regional or local public authority or body or a private body as managing authority. The same managing authority may be designated for more than one operational programme.

2.The Member State shall designate, for each operational programme, a national, regional or local public authority or body as a certifying authority, without prejudice to paragraph 3. The same certifying authority may be designated for more than one operational programme.

3.The Member State may designate for an operational programme a managing authority, which is a public authority or body, to carry out, in addition, the functions of the certifying authority.

4.The Member State shall designate, for each operational programme, a national, regional or local public authority or body, functionally independent from the managing authority and the certifying authority, as audit authority. The same audit authority may be designated for more than one operational programme.

[F125 . 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.]

Where the total amount of support from the Funds to an operational programme exceeds EUR 250 000 000 or from the EMFF exceeds EUR 100 000 000, the audit authority may be part of the same public authority or body as the managing authority either if, pursuant to the applicable provisions for the previous programming period, the Commission has informed the Member State prior to the date of adoption of the operational programme concerned of its conclusion that it can rely principally on its audit opinion, or if the Commission is satisfied on the basis of the experience of the previous programming period that the institutional organisation and accountability of the audit authority provide adequate guarantees of its functional independence and reliability.

6.The Member State may designate one or more intermediate bodies to carry out certain tasks of the managing or the certifying authority under the responsibility of that authority. The relevant arrangements between the managing authority or certifying authority and the intermediate bodies shall be formally recorded in writing.

7.The Member State or the managing authority may entrust the management of part of an operational programme to an intermediate body by way of an agreement in writing between the intermediate body and the Member State or managing authority (a 'global grant'). The intermediate body shall provide guarantees of its solvency and competence in the domain concerned, as well as of its administrative and financial management capacity.

8.The Member State may, at its own initiative, designate a coordinating body whose responsibility shall be to liaise with and provide information to the Commission, to coordinate activities of the other relevant designated bodies and to promote the harmonised application of applicable law.

9.The Member State shall lay down in writing rules governing its relationship with the managing authorities, certifying authorities and audit authorities, the relations between such authorities, and the relationship of such authorities with the Commission.

Textual Amendments

Article 124U.K.Procedure for the designation of the managing authority and the certifying authority

1.The Member State shall notify the Commission of the date and form of the designations, which shall be carried out at an appropriate level, of the managing authority and, where appropriate, of the certifying authority prior to the submission of the first application for interim payment to the Commission.

2.The designations referred to in paragraph 1 shall be based on a report and an opinion of an independent audit body that assesses the fulfilment by the authorities of the criteria relating to the internal control environment, risk management, management and control activities, and monitoring set out in Annex XIII. The independent audit body shall be the audit authority, or another public or private law body with the necessary audit capacity, which is independent of the managing authority and, where applicable, of the certifying authority, and which shall carry out its work taking account of internationally accepted audit standards. Where the independent audit body concludes that the part of the management and control system, concerning the managing authority or the certifying authority, is essentially the same as for the previous programming period, and that there is evidence, on the basis of audit work done in accordance with the relevant provisions of Regulation (EC) No 1083/2006 and Council Regulation (EC) No 1198/2006(11), of their effective functioning during that period, it may conclude that the relevant criteria are fulfilled without carrying out additional audit work.

3.Where the total amount of support from the Funds to an operational programme exceeds EUR 250 000 000 or from the EMFF exceeds EUR 100 000 000, the Commission may request, within one month of notification of the designations referred to in paragraph 1, the report and the opinion of the independent audit body referred to in paragraph 2 and the description of the functions and procedures in place for the managing authority or, where appropriate, the certifying authority. The Commission shall decide whether to request those documents on the basis of its risk assessment, taking into account information on significant changes in the functions and procedures of the managing authority or, where appropriate, the certifying authority compared to those in place for the previous programming period, and relevant evidence of their effective functioning.

The Commission may make observations within two months of receipt of the documents referred to in the first subparagraph. Without prejudice to Article 83, the examination of those documents shall not interrupt the treatment of applications for interim payments.

4.Where the total amount of support from the Funds to an operational programme exceeds EUR 250 000 000 or from the EMFF exceeds EUR 100 000 000 and there are significant changes in the functions and procedures of the managing authority or, where appropriate, of the certifying authority compared to those in place for the previous programming period, the Member State may, at its own initiative, submit to the Commission, within two months of the notification of the designations referred to in paragraph 1, the documents referred to in paragraph 3. The Commission shall make observations on those documents within three months of their receipt.

5.Where existing audit and control results show that the designated authority no longer fulfils the criteria referred to in paragraph 2, the Member State shall, at an appropriate level, fix, according to the severity of the problem, a period of probation, during which the necessary remedial action shall be taken.

Where the designated authority fails to implement the required remedial action within the period of probation determined by the Member State, the Member State, at an appropriate level, shall end its designation.

The Member State shall notify the Commission without delay when a designated authority is put under probation, providing information on the respective period of probation, when, following implementation of remedial actions, the probation is ended, as well as when the designation of an authority is ended. The notification that a designated body is put on probation by the Member State, without prejudice to the application of Article 83, shall not interrupt the treatment of applications for interim payments.

6.Where the designation of a managing authority or a certifying authority is ended, Member States shall designate, in accordance with the procedure provided for in paragraph 2, a new body, to take over the functions of the managing authority or of the certifying authority, and shall notify the Commission thereof.

7.The Commission shall, in order to ensure uniform conditions for the implementation of this Article, adopt implementing acts concerning the model for the report and opinion of the independent audit body and the description of the functions and procedures in place for the managing authority and, where appropriate, the certifying authority. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 150(3).

Article 125U.K.Functions of the managing authority

1.The managing authority shall be responsible for managing the operational programme in accordance with the principle of sound financial management.

2.As regards the management of the operational programme, the managing authority shall:

(a)support the work of the monitoring committee referred to in Article 47 and provide it with the information it requires to carry out its tasks, in particular data relating to the progress of the operational programme in achieving its objectives, financial data and data relating to indicators and milestones;

(b)draw up and, after approval by the monitoring committee, submit to the Commission annual and final implementation reports referred to in Article 50;

(c)make available to intermediate bodies and beneficiaries information that is relevant to the execution of their tasks and the implementation of operations respectively;

(d)establish a system to record and store in computerised form data on each operation necessary for monitoring, evaluation, financial management, verification and audit, including data on individual participants in operations, where applicable;

(e)ensure that the data referred to in point (d) is collected, entered and stored in the system referred to in point (d), and that data on indicators is broken down by gender where required by Annexes I and II of the ESF Regulation.

3.As regards the selection of operations, the managing authority shall:

(a)draw up and, once approved, apply appropriate selection procedures and criteria that:

(i)

ensure the contribution of operations to the achievement of the specific objectives and results of the relevant priority;

(ii)

are non-discriminatory and transparent;

(iii)

take into account the general principles set out in Articles 7 and 8;

[X1(b ) ensure that a selected operation falls within the scope of the EMFF, the Fund or Funds concerned and can be attributed to a category of intervention or, in the case of the EMFF, a measure identified in the priority or priorities of the operational programme;]

[F12(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;]

(d)satisfy itself that the beneficiary has the administrative, financial and operational capacity to fulfil the conditions referred to in point (c) before approval of the operation;

(e)satisfy itself that, where the operation has started before the submission of an application for funding to the managing authority, applicable law relevant for the operation has been complied with;

(f)ensure that operations selected for support from the Funds or the EMFF do not include activities which were part of an operation which has been or should have been subject to a procedure of recovery in accordance with Article 71 following the relocation of a productive activity outside the programme area;

(g)determine the categories of intervention or, in the case of the EMFF, the measures to which the expenditure of an operation shall be attributed.

4.As regards the financial management and control of the operational programme, the managing authority shall:

[F12(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:

(i)

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;

(ii)

in the case of costs reimbursed pursuant to points (b) to (e) of the first subparagraph of Article 67(1), that the conditions for reimbursement of expenditure to the beneficiary have been met;]

(b)ensure that beneficiaries involved in the implementation of operations reimbursed on the basis of eligible costs actually incurred maintain either a separate accounting system or an adequate accounting code for all transactions relating to an operation;

(c)put in place effective and proportionate anti-fraud measures taking into account the risks identified;

(d)set up procedures to ensure that all documents regarding expenditure and audits required to ensure an adequate audit trail are held in accordance with the requirements of point (g) of Article 72;

(e)draw up the management declaration and annual summary referred to in [F12points (a) and (b) of Article 63(5) and Article 63(6) and (7) of the Financial Regulation].

By way of derogation from point (a) of the first subparagraph, the ETC Regulation may establish specific rules on verification applicable to cooperation programmes.

5.Verifications pursuant to point (a) of the first subparagraph of paragraph 4 shall include the following procedures:

(a)administrative verifications in respect of each application for reimbursement by beneficiaries;

(b)on-the-spot verifications of operations.

The frequency and coverage of the on-the-spot verifications shall be proportionate to the amount of public support to an operation and to the level of risk identified by such verifications and audits by the audit authority for the management and control system as a whole.

6.On-the-spot verifications of individual operations pursuant to point (b) of the first subparagraph of paragraph 5 may be carried out on a sample basis.

7.Where the managing authority is also a beneficiary under the operational programme, arrangements for the verifications referred to in point (a) of the first subparagraph of paragraph 4 shall ensure adequate separation of functions.

8.The Commission shall be empowered to adopt delegated acts, in accordance with Article 149, laying down rules specifying the information in relation to the data to be recorded and stored in computerised form within the monitoring system established under point (d) of paragraph 2 of this Article.

The Commission shall adopt implementing acts laying down the technical specifications of the system established under point (d) of paragraph 2 of this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 150(3).

9.The Commission shall be empowered to adopt delegated acts, in accordance with Article 149, laying down the detailed minimum requirements for the audit trail referred to in point (d) of the first subparagraph of paragraph 4 of this Article in respect of the accounting records to be maintained and the supporting documents to be held at the level of the certifying authority, managing authority, intermediate bodies and beneficiaries.

10.The Commission shall, in order to ensure uniform conditions on the implementation of this Article, adopt implementing acts concerning the model for the management declaration referred to in point (e) of the first subparagraph of paragraph 4 of this Article. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 150(2).

Editorial Information

Textual Amendments

Article 126U.K.Functions of the certifying authority

The certifying authority of an operational programme shall be responsible in particular for:

(a)

drawing up and submitting payment applications to the Commission, and certifying that they result from reliable accounting systems, are based on verifiable supporting documents and have been subject to verifications by the managing authority;

(b)

drawing up the accounts referred to in [F12point (a) of Article 63(5) and Article 63(6) of the Financial Regulation];

(c)

certifying the completeness, accuracy and veracity of the accounts and that the expenditure entered in the accounts complies with applicable law and has been incurred in respect of operations selected for funding in accordance with the criteria applicable to the operational programme and complying with applicable law;

(d)

ensuring that there is a system which records and stores, in computerised form, accounting records for each operation, and which supports all the data required for drawing up payment applications and accounts, including records of amounts recoverable, amounts recovered and amounts withdrawn following cancellation of all or part of the contribution for an operation or operational programme;

(e)

ensuring, for the purposes of drawing up and submitting payment applications, that it has received adequate information from the managing authority on the procedures and verifications carried out in relation to expenditure;

(f)

taking account when drawing up and submitting payment applications of the results of all audits carried out by, or under the responsibility of, the audit authority;

(g)

maintaining, in a computerised form, accounting records of expenditure declared to the Commission and of the corresponding public contribution paid to beneficiaries;

(h)

keeping an account of amounts recoverable and of amounts withdrawn following cancellation of all or part of the contribution for an operation. [X1Amounts recovered shall be repaid to the budget of the Union prior to the closure of the operational programme by deducting them from the subsequent payment application.]

Editorial Information

Textual Amendments

Article 127U.K.Functions of the audit authority

1.The audit authority shall ensure that audits are carried out on the proper functioning of the management and control system of the operational programme and on an appropriate sample of operations on the basis of the declared expenditure. The declared expenditure shall be audited based on a representative sample and, as a general rule, on statistical sampling methods.

A non- statistical sampling method may be used on the professional judgement of the audit authority, in duly justified cases, in accordance with internationally accepted audit standards and in any case where the number of operations for an accounting year is insufficient to allow the use of a statistical method.

In such cases, the size of the sample shall be sufficient to enable the audit authority to draw up a valid audit opinion in accordance with [F12Article 63(7) of the Financial Regulation].

The non-statistical sample method shall cover a minimum of 5 % of operations for which expenditure has been declared to the Commission during an accounting year and 10 % of the expenditure which has been declared to the Commission during an accounting year.

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

3.The audit authority shall ensure that audit work takes account of internationally accepted audit standards.

4.The audit authority shall, within eight months of adoption of an operational programme, prepare an audit strategy for performance of audits. The audit strategy shall set out the audit methodology, the sampling method for audits on operations and the planning of audits in relation to the current accounting year and the two subsequent accounting years. The audit strategy shall be updated annually from 2016 until and including 2024. Where a common management and control system applies to more than one operational programme, a single audit strategy may be prepared for the operational programmes concerned. The audit authority shall submit the audit strategy to the Commission upon request.

5.The audit authority shall draw up:

(a)an audit opinion in accordance with [F12Article 63(7) of the Financial Regulation];

(b)a control report setting out the main findings of the audits carried out in accordance with paragraph 1, including findings with regard to deficiencies found in the management and control systems, and the proposed and implemented corrective actions.

Where a common management and control system applies to more than one operational programme, the information required under point (b) of the first subparagraph may be grouped in a single report.

6.The Commission shall, in order to ensure uniform conditions for the implementation of this Article, adopt implementing acts laying down models for the audit strategy, the audit opinion and the control report. Those implementing acts shall be adopted in accordance with the advisory procedure referred to in Article 150(2).

7.The Commission shall be empowered to adopt delegated acts, in accordance with Article 149, to set out the scope and content of audits of operations and audits of the accounts and the methodology for the selection of the sample of operations referred to in paragraph 1 of this Article.

8.The Commission shall be empowered to adopt delegated acts, in accordance with Article 149, laying down detailed rules on the use of data collected during audits carried out by Commission officials or authorised Commission representatives.

Textual Amendments

CHAPTER IIIU.K.Cooperation with audit authorities

Article 128U.K.Cooperation with audit authorities

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

2.To facilitate this cooperation in cases where a Member State designates more than one audit authority, the Member State may designate a coordination body.

3.The Commission, the audit authorities and any coordination body shall meet on a regular basis and, as a general rule, at least once a year, unless otherwise agreed, to examine the annual control report, the audit opinion and the audit strategy, and to exchange views on issues relating to improvement of the management and control systems.

TITLE IIU.K. [X1FINANCIAL MANAGEMENT, PREPARATION, EXAMINATION AND ACCEPTANCE OF ACCOUNTS AND FINANCIAL CORRECTIONS]

CHAPTER IU.K.Financial management

Article 129U.K.Common rules for payments

The Member State shall ensure that by the closure of the operational programme, [X1the amount of public expenditure paid to beneficiaries is at least equal to the contribution from the Funds and the EMFF paid by the Commission to the Member State.]

Article 130U.K.Common rules for calculating interim payments and payment of the final balance

1.The Commission shall reimburse as interim payments 90 % of the amount resulting from applying the co-financing rate for each priority, laid down in the decision adopting the operational programme, to the eligible expenditure for the priority included in the payment application. The Commission shall determine the remaining amounts to be reimbursed as interim payments or to be recovered in accordance with Article 139.

[X12 . The contribution from the Funds or the EMFF to a priority through the interim payments and payment of the final balance shall not be higher than:

( a ) the eligible public expenditure indicated in the payment applications for the priority; or

( b ) the contribution from the Funds or the EMFF for the priority laid down in the decision of the Commission approving the operational programme,

whichever is the lower.]

[F753 . By way of derogation from paragraph 2, the contribution from the Funds or the EMFF through payments of the final balance for each priority per Fund and per category of regions in the final accounting year shall not exceed, by more than 10 %, the contribution from the Funds or the EMFF for each priority per Fund and per category of regions as laid down in the decision of the Commission approving the operational programme.

The contribution from the Funds or the EMFF through payments of the final balance in the final accounting year shall not exceed the eligible public expenditure declared or the contribution from each Fund and category of regions to each operational programme as laid down in the decision of the Commission approving the operational programme, whichever is the lower.]

Textual Amendments

[F12 Article 131 U.K. 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.

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.

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.

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.

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.

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).]

Textual Amendments

Article 132U.K.Payment to beneficiaries

1.Subject to the availability of funding from initial and annual pre-financing and interim payments, the managing authority shall ensure that a beneficiary receives the total amount of eligible public expenditure due in full and no later than 90 days from the date of submission of the payment claim by the beneficiary.

No amount shall be deducted or withheld and no specific charge or other charge with equivalent effect shall be levied that would reduce amounts due to beneficiaries.

2.The payment deadline referred to in paragraph 1 may be interrupted by the managing authority in either of the following duly justified cases:

(a)the amount of the payment claim is not due or the appropriate supporting documents, including the documents necessary for management verifications under point (a) of the first subparagraph of Article 125(4), have not been provided;

(b)an investigation has been initiated in relation to a possible irregularity affecting the expenditure concerned.

The beneficiary concerned shall be informed in writing of the interruption and the reasons for it.

Article 133U.K.Use of the euro

1.Member States which have not adopted the euro as their currency on the date of an application for payment shall convert the amounts of expenditure incurred in national currency into euro. Those amounts shall be converted into euro using the monthly accounting exchange rate of the Commission in the month during which the expenditure was registered in the accounts of the certifying authority of the operational programme concerned. The exchange rate shall be published electronically by the Commission each month.

2.By way of derogation from paragraph 1, the ETC Regulation may establish specific rules on the timing for conversion into euro.

3.When the euro becomes the currency of a Member State, the conversion procedure set out in paragraph 1 shall continue to apply to all expenditure recorded in the accounts by the certifying authority before the date of entry into force of the fixed conversion rate between the national currency and the euro.

Article 134U.K.Payment of pre-financing

1.The initial pre-financing amount shall be paid in instalments as follows:

(a)in 2014: 1 % of the amount of support from the Funds and the EMFF for the entire programming period to the operational programme or 1,5 % of the amount of support from the Funds and the EMFF for the entire programming period to the operational programme when a Member State has been receiving financial assistance since 2010, in accordance with Articles 122 and 143 TFEU, or from the European Financial Stability Facility (EFSF), or is receiving financial assistance on 31 December 2013 in accordance with Articles 136 and 143 TFEU;

(b)in 2015: 1 % of the amount of support from the Funds and the EMFF for the entire programming period to the operational programme or 1,5 % of the amount of support from the Funds and the EMFF for the entire programming period to the operational programme when a Member State has been receiving financial assistance since 2010, in accordance with Articles 122 and 143 TFEU, or from the EFSF, or is receiving financial assistance on 31 December 2014 in accordance with Articles 136 and 143 TFEU;

(c)in 2016: 1 % of the amount of support from the Funds and the EMFF for the entire programming period to the operational programme.

If an operational programme is adopted in 2015 or later, the earlier instalments shall be paid in the year of adoption.

[F2851a . In addition to the instalments provided for in points (b) and (c) of paragraph 1, an additional initial pre-financing amount of 3,5 % of the amount of support from the Funds and the EMFF for the entire programming period shall be paid to operational programmes in Greece each year in 2015 and 2016.

The additional initial pre-financing shall not apply to programmes under the European territorial cooperation goal nor to the specific allocation for the Youth Employment Initiative.

If, by 31 December 2016 , the total amount of the additional initial pre-financing paid on the basis of this paragraph in 2015 and 2016 to an operational programme by Fund, where applicable, is not covered by payment applications submitted by the certifying authority for that programme, Greece shall repay to the Commission the total amount of the additional initial pre-financing for that Fund paid to that programme. Those repayments shall not constitute a financial correction and shall not reduce support from the Funds or the EMFF to the operational programmes. The amounts repaid shall constitute internal assigned revenue in accordance with point (c) of Article 21(3) of the Financial Regulation.]

2.An annual pre-financing amount shall be paid before 1 July in the years 2016 to 2023. It shall be a percentage of the amount of the support from the Funds and the EMFF for the whole programming period to the operational programme as follows:

  • 2016: 2 %

  • 2017: 2,625 %

  • 2018: 2,75 %

  • 2019: 2,875 %

  • [F2862020: 3 %]

  • [F2872021 to 2023: 2 %.]

3.When calculating the amount of initial pre-financing referred to in paragraph 1, the amount of support for the entire programming period shall exclude the amounts from the performance reserve which were initially allocated to the operational programme.

When calculating the amount of annual pre-financing referred to in paragraph 2 up to and including 2020, the amount of support for the entire programming period shall exclude the amounts from the performance reserve which were initially allocated to the operational programme.

Textual Amendments

Article 135U.K.Deadlines for presentation of interim payment applications and for their payment

1.The certifying authority shall submit on a regular basis an application for interim payment in accordance with Article 131(1) covering amounts entered in its accounting system in the accounting year. However, the certifying authority, where it considers it to be necessary, may include such amounts in payment applications submitted in subsequent accounting years.

2.The certifying authority shall submit the final application for an interim payment by 31 July following the end of the previous accounting year and, in any event, before the first application for interim payment for the next accounting year.

3.The first application for interim payment shall not be made before the notification to the Commission of the designation of the managing authorities and certifying authorities in accordance with Article 124.

4.Interim payments shall not be made for an operational programme unless the annual implementation report has been sent to the Commission in accordance with the Fund-specific rules.

5.Subject to available funding, the Commission shall make the interim payment no later than 60 days after the date on which a payment application is registered with the Commission.

Article 136U.K.Decommitment

1.The Commission shall decommit any part of the amount in an operational programme that has not been used for payment of the initial and annual pre-financing and interim payments by 31 December of the third financial year following the year of budget commitment under the operational programme or for which a payment application drawn up in accordance with Article 131 has not been submitted in accordance with Article 135.

2.That part of commitments still open on 31 December 2023 shall be decommitted if any of the documents required under Article 141(1) has not been submitted to the Commission by the deadline set out in Article 141(1).

CHAPTER IIU.K.Preparation, examination and acceptance of accounts and closure of operational programmes and suspension of payments

Section IU.K.Preparation, examination and acceptance of accounts

Article 137U.K.Preparation of the accounts

1.The accounts referred to in [F12point (a) of Article 63(5) and Article 63(6) of the Financial Regulation] shall be submitted to the Commission for each operational programme. The accounts shall cover the accounting year and shall include at the level of each priority and, where applicable, fund and category of regions:

(a)the total amount of eligible expenditure entered into the accounting systems of the certifying authority which has been included in payment applications submitted to the Commission in accordance with Article 131 and Article 135(2) by 31 July following the end of the accounting year, the total amount of the corresponding public expenditure incurred in implementing operations, and the total amount of corresponding payments made to beneficiaries under Article 132(1);

(b)the amounts withdrawn and recovered during the accounting year, the amounts to be recovered as at the end of the accounting year, the recoveries effected pursuant to Article 71, and the irrecoverable amounts;

(c)the amounts of programme contributions paid to financial instruments under Article 41(1) and advances of State aid under Article 131(4);

(d)for each priority, a reconciliation between the expenditure stated pursuant to point (a) and the expenditure declared in respect of the same accounting year in payment applications, accompanied by an explanation of any differences.

2.Where expenditure previously included in an application for interim payment for the accounting year is excluded by a Member State from its accounts due to an ongoing assessment of that expenditure's legality and regularity, any or all of that expenditure subsequently found to be legal and regular may be included in an application for interim payment relating to subsequent accounting years.

3.The Commission shall, in order to lay down uniform conditions for the implementation of this Article, adopt implementing acts setting out the model for the accounts referred to in this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 150(3).

Textual Amendments

Article 138U.K.Submission of information

For each year from 2016 until and including 2025, Member States shall submit, by the deadline set out in [F12Article 63(5), and the second subparagraph of Article 63(7), of the Financial Regulation], the documents referred to in that Article namely:

(a)

the accounts, referred to in Article 137(1) of this Regulation, for the preceding accounting year;

(b)

the management declaration and the annual summary referred to in point (e) of the first subparagraph of Article 125(4) of this Regulation, for the preceding accounting year;

(c)

the audit opinion and the control report referred to in points (a) and (b) of the first subparagraph of Article 127(5) of this Regulation, for the preceding accounting year.

Textual Amendments

Article 139U.K.Examination and acceptance of accounts

1.The Commission shall carry out an examination of the documents submitted by the Member State under Article 138. Upon request by the Commission, the Member State shall provide all necessary additional information to enable the Commission to determine whether the accounts are complete, accurate and true, by the deadline set out in Article 84.

2.The Commission shall accept the accounts where it is able to conclude that the accounts are complete, accurate and true. The Commission shall reach such a conclusion where the audit authority has provided an unqualified audit opinion regarding the completeness, accuracy and veracity of the accounts unless the Commission has specific evidence that the audit opinion on the accounts is unreliable.

3.The Commission shall inform the Member State by the deadline set out in Article 84 as to whether it is able to accept the accounts.

4.If, for reasons attributable to Member State, the Commission is unable to accept the accounts by the deadline set out in Article 84, the Commission shall notify the Member States specifying the reasons in accordance with paragraph 2 of this Article and the actions which are required to be undertaken and the time period for their completion. At the end of the time period for the completion of those actions the Commission shall inform the Member State as to whether it is able to accept the accounts.

5.Issues related to legality and regularity of the underlying transactions concerning expenditure entered in the accounts shall not be taken into account for the purposes of acceptance of the accounts by the Commission. The procedure for examination and acceptance of the accounts shall not interrupt the treatment of applications for interim payments and shall not lead to suspension of payments, without prejudice to Articles 83 and 142.

6.On the basis of the accepted accounts, the Commission shall calculate the amount chargeable to the Funds and to the EMFF for the accounting year and the consequent adjustments in relation to the payments to the Member State. The Commission shall take into account:

(a)the amounts in the accounts referred to in point (a) of Article 137(1) and to which the co-financing rate for each priority is to be applied;

(b)the total amount of payments made by the Commission during that accounting year, consisting of:

(i)

the amount of interim payments paid by the Commission in accordance with Article 130(1) and Article 24; and

(ii)

the amount of the annual pre-financing paid under Article 134(2).

7.After the calculation carried out under paragraph 6, the Commission shall clear the respective annual pre-financing and pay any additional amount due within 30 days of the acceptance of the accounts. Where there is an amount recoverable from the Member State, it shall be subject to a recovery order issued by the Commission which shall be executed, where possible, by offsetting against amounts due to the Member State under subsequent payments to the same operational programme. [X1Such recovery shall not constitute a financial correction and shall not reduce support from the Funds and the EMFF to the operational programme.] The amount recovered shall constitute assigned revenue in accordance with Article 177(3) of the Financial Regulation.

[F109By way of derogation from the first subparagraph, the Commission shall not issue a recovery order for amounts recoverable from the Member State for the accounts submitted in 2020. Amounts not recovered shall be used to accelerate investments related to the COVID-19 outbreak and eligible under this Regulation and Fund-specific rules.

The amounts not recovered shall be cleared or recovered at closure.]

8.Where, after applying the procedure set out in paragraph 4, the Commission is unable to accept the accounts, the Commission shall determine, on the basis of the available information and in accordance with paragraph 6, [X1the amount chargeable to the Funds and the EMFF for the accounting year, and shall inform the Member State. Where the Member State notifies the Commission of its agreement within two months of the transmission by the Commission of the information, paragraph 7 shall apply. In the absence of such agreement, the Commission shall adopt a decision, by means of implementing acts, setting out the amount chargeable to the Funds and the EMFF for the accounting year. Such decision shall not constitute a financial correction and shall not reduce support from the Funds and the EMFF to the operational programme]. On the basis of the decision, the Commission shall apply the adjustments to the payments to the Member State in accordance with paragraph 7.

9.The acceptance of the accounts by the Commission, or a decision by the Commission under paragraph 8 of this Article, shall be without prejudice to the application of corrections under Articles 144 and 145.

10.Member States may replace irregular amounts which are detected after the submission of the accounts by making the corresponding adjustments in the accounts for the accounting year in which the irregularity is detected, without prejudice to Articles 144 and 145.

Textual Amendments

Article 140U.K.Availability of documents

1.Without prejudice to the rules governing State aid, [X1the managing authority shall ensure that all supporting documents regarding expenditure supported by the Funds and the EMFF on operations] for which the total eligible expenditure is less than EUR 1 000 000, are made available to the Commission and the European Court of Auditors upon request for a period of three years from 31 December following the submission of the accounts in which the expenditure of the operation is included.

In the case of operations other than those referred to in the first subparagraph, all supporting documents shall be made available for a two year period from 31 December following the submission of the accounts in which the final expenditure of the completed operation is included.

A managing authority may decide to apply to operations for which the total eligible expenditure is less than EUR 1 000 000 the rule referred to in the second subparagraph.

[X1The time period referred to in the first or second subparagraph shall be interrupted either in the case of legal proceedings or by a duly justified request of the Commission.]

2.The managing authority shall inform beneficiaries of the start date of the period referred to in paragraph 1.

3.The documents shall be kept either in the form of the originals, or certified true copies of the originals, or on commonly accepted data carriers including electronic versions of original documents or documents existing in electronic version only. [F61Where documents are kept on commonly accepted data carriers in accordance with the procedure laid down in paragraph 5, no originals shall be required.]

4.The documents shall be kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the data were collected or for which they are further processed.

5.The procedure for certification of conformity of documents held on commonly accepted data carriers with the original document shall be laid down by the national authorities and shall ensure that the versions held comply with national legal requirements and can be relied on for audit purposes.

6.Where documents exist in electronic form only, the computer systems used shall meet accepted security standards that ensure that the documents held comply with national legal requirements and can be relied on for audit purposes.

Textual Amendments

Section IIU.K.Closure of operational programmes

Article 141U.K.Submission of closure documents and payment of the final balance

1.In addition to the documents referred to in Article 138, for the final accounting year from 1 July 2023 to 30 June 2024, Member States shall submit a final implementation report for the operational programme or the last annual implementation report for the operational programme supported by the EMFF.

2.The final balance shall be paid no later than three months after the date of acceptance of accounts of the final accounting year or one month after the date of acceptance of the final implementation report, whichever date is later.

Section IIIU.K.Suspension of payments

Article 142U.K.Suspension of payments

1.All or part of the interim payments at the level of priorities or operational programmes may be suspended by the Commission if one or more of the following conditions are met:

(a)there is a serious deficiency in the effective functioning of the management and control system of the operational programme, which has put at risk the Union contribution to the operational programme and for which corrective measures have not been taken;

[X1(b ) expenditure in a payment application is linked to an irregularity having serious financial consequences which has not been corrected;]

(c)the Member State has failed to take the necessary action to remedy the situation giving rise to an interruption under Article 83;

(d)there is a serious deficiency in the quality and reliability of the monitoring system or of the data on common and specific indicators;

(e)there is a failure to complete actions to fulfil an ex ante conditionality subject to the conditions set out in Article 19;

(f)there is evidence resulting from the performance review for a priority that there has been a serious failure in achieving that priority's milestones relating to financial and output indicators and key implementation steps set out in the performance framework subject to the conditions set out in Article 22.

The Fund-specific rules for the EMFF may lay down specific bases for suspension of payments linked to non-compliance with rules applicable under the Common Fisheries Policy, which shall be proportionate, having regard to the nature, gravity, duration and recurrence of the non-compliance.

2.The Commission may decide, by means of implementing acts, to suspend all or part of interim payments, after having given the Member State the opportunity to present its observations.

3.The Commission shall end suspension of all or part of interim payments where the Member State has taken the necessary measures to enable the suspension to be lifted.

CHAPTER IIIU.K.Financial corrections

Section IU.K.Financial corrections by Member States

Article 143U.K.Financial corrections by Member States

1.The Member States shall in the first instance be responsible for investigating irregularities and for making the financial corrections required and pursuing recoveries. In the case of a systemic irregularity, the Member State shall extend its investigation to cover all operations potentially affected.

2.Member States shall make the financial corrections required in connection with individual or systemic irregularities detected in operations or operational programmes. Financial corrections shall consist of cancelling all or part of the public contribution to an operation or operational programme. The Member States shall take into account the nature and gravity of the irregularities and the financial loss to the Funds or the EMFF and shall apply a proportionate correction. [X1Financial corrections shall be recorded in the accounts for the accounting year in which the cancellation is decided.]

3.The contribution from the Funds or the EMFF cancelled in accordance with paragraph 2 may be reused by the Member State within the operational programme concerned, subject to paragraph 4.

4.The contribution cancelled in accordance with paragraph 2 may not be reused for any operation that was the subject of the correction or, where a financial correction is made for a systemic irregularity, for any operation affected by the systemic irregularity.

5.The Fund-specific rules for the EMFF may lay down specific bases for financial corrections by the Member States linked to non-compliance with rules applicable under the Common Fisheries Policy, which shall be proportionate, having regard to the nature, gravity, duration and recurrence of the non-compliance.

Section IIU.K.Financial corrections by the Commission

Article 144U.K.Criteria for financial corrections

1.The Commission shall make financial corrections, by means of implementing acts, by cancelling all or part of the Union contribution to an operational programme in accordance with Article 85, where, after carrying out the necessary examination, it concludes that:

(a)there is a serious deficiency in the effective functioning of the management and control system of the operational programme which has put at risk the Union contribution already paid to the operational programme;

(b)the Member State has not complied with its obligations under Article 143 prior to the opening of the correction procedure under this paragraph;

(c)expenditure contained in a payment application is irregular and has not been corrected by the Member State prior to the opening of the correction procedure under this paragraph.

The Commission shall base its financial corrections on individual cases of identified irregularity and shall take account of whether an irregularity is systemic. Where it is not possible to quantify precisely the amount of irregular expenditure charged to the Funds or the EMFF, the Commission shall apply a flat rate or extrapolated financial correction.

2.The Commission shall, when deciding on a correction under paragraph 1, respect the principle of proportionality by taking account of the nature and gravity of the irregularity and the extent and financial implications of the deficiencies in management and control systems found in the operational programme.

3.Where the Commission bases its position on reports of auditors other than those of its own services, it shall draw its own conclusions regarding the financial consequences after examining the measures taken by the Member State concerned under Article 143(2), the notifications sent under Article 122(2), and any replies from the Member State.

4.In accordance with Article 22(7), where the Commission, based on the examination of the final implementation report of the operational programme for the Funds or the last annual implementation report for the EMFF, establishes a serious failure to achieve the targets set out in the performance framework, it may apply financial corrections in respect of the priorities concerned, by means of implementing acts.

[X15 . When a Member State does not comply with its obligations under Article 95, the Commission may, in relation to the degree of non-compliance with those obligations, make a financial correction by cancelling all or part of the contribution from the Funds or the EMFF to the Member State concerned.]

6.The Commission shall be empowered to adopt delegated acts in accordance with Article 149, laying down detailed rules concerning the criteria for determining serious deficiencies in the effective functioning of management and control systems, including the main types of such deficiencies, the criteria for establishing the level of financial correction to be applied and the criteria for applying flat rates or extrapolated financial corrections.

7.The Fund-specific rules for the EMFF may lay down specific bases for financial corrections by the Commission linked to non-compliance with rules applicable under the Common Fisheries Policy which shall be proportionate having regard to the nature, gravity, duration and recurrence of the non-compliance.

Article 145U.K.Procedure

1.Before taking a decision on a financial correction, the Commission shall launch the procedure by informing the Member State of the provisional conclusions of its examination and requesting the Member State to submit its comments within two months.

2.Where the Commission proposes a financial correction on the basis of extrapolation or a flat rate, the Member State shall be given the opportunity to demonstrate, through an examination of the documentation concerned, that the actual extent of irregularity is less than the Commission's assessment. In agreement with the Commission, the Member State may limit the scope of this examination to an appropriate proportion or sample of the documentation concerned. Except in duly justified cases, the time allowed for that examination shall not exceed a further period of two months after the two-month period referred to in paragraph 1.

3.The Commission shall take account of any evidence provided by the Member State within the time limits set out in paragraphs 1 and 2.

4.Where the Member State does not accept the provisional conclusions of the Commission, the Member State shall be invited to a hearing by the Commission, in order to ensure that all relevant information and observations are available as a basis for conclusions by the Commission on the application of the financial correction.

[X15 . In the event of an agreement, and without prejudice to paragraph 7 of this Article, the Member State may reuse the Funds concerned or the EMFF in accordance with Article 143(3).]

6.In order to apply financial corrections the Commission shall take a decision, by means of implementing acts, within six months of the date of the hearing, or of the date of receipt of additional information where the Member State agrees to submit such additional information following the hearing. The Commission shall take account of all information and observations submitted during the course of the procedure. If no hearing takes place, the six month period shall begin to run two months after the date of the letter of invitation to the hearing sent by the Commission.

[X17 . Where the Commission in carrying out its responsibilities under Article 75, or the European Court of Auditors, detects irregularities demonstrating a serious deficiency in the effective functioning of the management and control systems, the resulting financial correction shall reduce support from the Funds or the EMFF to the operational programme.]

The first subparagraph shall not apply in the case of a serious deficiency in the effective functioning of a management and control system which, prior to the date of detection by the Commission or the European Court of Auditors:

(a)had been identified in the management declaration, annual control report or the audit opinion submitted to the Commission in accordance with [F12Article 63(5), (6) and (7) of the Financial Regulation], or in other audit reports of the audit authority submitted to the Commission and appropriate measures taken; or

(b)had been the subject of appropriate remedial measures by the Member State.

The assessment of serious deficiencies in the effective functioning of management and control systems shall be based on the applicable law when the relevant management declarations, annual control reports and audit opinions were submitted.

When deciding on a financial correction the Commission shall:

(a)respect the principle of proportionality by taking account of the nature and gravity of the serious deficiency in the effective functioning of a management and control system and its financial implications for the budget of the Union;

(b)for the purpose of applying a flat rate or extrapolated correction, exclude irregular expenditure previously detected by the Member State which has been the subject of an adjustment in the accounts in accordance with Article 139(10), and expenditure subject to an ongoing assessment of its legality and regularity under Article 137(2);

(c)take into account flat rate or extrapolated corrections applied to the expenditure by the Member State for other serious deficiencies detected by the Member State when determining the residual risk for the budget of the Union.

8.The Fund-specific rules for the EMFF may lay down additional rules of procedure for financial corrections referred to in Article 144(7).

Textual Amendments

Article 146U.K.Obligations of Member States

A financial correction by the Commission shall not prejudice the Member State's obligation to pursue recoveries under Article 143(2) of this Regulation and to recover State aid within the meaning of Article 107(1) TFEU and under Article 14 of Council Regulation (EC) No 659/1999(12).

Article 147U.K.Repayment

[X11. Any repayment due to be made to the budget of the Union shall be effected before the due date indicated in the order for recovery drawn up in accordance with [F12Article 98 of the Financial Regulation] . The due date shall be the last day of the second month following the issuing of the order.]

2.Any delay in effecting repayment shall give rise to interest on account of late payment, starting on the due date and ending on the date of actual payment. The rate of such interest shall be one-and-a-half percentage points above the rate applied by the European Central Bank in its main refinancing operations on the first working day of the month in which the due date falls.

Textual Amendments

TITLE IIIU.K.PROPORTIONAL CONTROL OF OPERATIONAL PROGRAMMES

Article 148U.K.Proportional control of operational programmes

[F121 . 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.]

2.For operational programmes for which the most recent audit opinion indicates that there are no significant deficiencies, the Commission may agree with the audit authority in the subsequent meeting referred to in Article 128(3) that the level of audit work required may be reduced so that it is proportionate to the risk established. In such cases, the Commission shall not carry out its own on-the-spot audits unless there is evidence suggesting deficiencies in the management and control system affecting expenditure declared to the Commission in an accounting year for which the accounts have been accepted by the Commission.

3.For operational programmes for which the Commission concludes that the opinion of the audit authority is reliable, it may agree with the audit authority to limit the Commission's own on-the-spot audits to audit the work of the audit authority unless there is evidence of deficiencies in the work of the audit authority for an accounting year for which the accounts have been accepted by the Commission.

4.Notwithstanding paragraph 1, the audit authority and the Commission may carry out audits of operations in the event that a risk assessment or an audit by the European Court of Auditors establishes a specific risk of irregularity or fraud, in the case of evidence of serious deficiencies in the effective functioning of the management and control system of the operational programme concerned, and, during the period referred to in Article 140(1). The Commission may, for the purpose of assessing the work of an audit authority, review the audit trail of the audit authority or take part in the on-the-spot audits of the audit authority and, where, in accordance with internationally accepted audit standards, it is necessary for the purpose of obtaining assurance as to the effective functioning of the audit authority, the Commission may carry out audits of operations.]

Textual Amendments

PART FIVEU.K.DELEGATIONS OF POWER, IMPLEMENTING, TRANSITIONAL AND FINAL PROVISIONS

CHAPTER IU.K.Delegations of power and implementing provisions

[F288Article 149U.K. Regulations

1.Regulations made by the Secretary of State or the Welsh Ministers under this Regulation are to be made by statutory instrument.

2.For regulations made under this Regulation by the Scottish Ministers, see section 27 of the Interpretation and Legislative Reform (Scotland) Act 2010.

3.Any power of the Department of Agriculture, Environment and Rural Affairs to make regulations under this Regulation is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979.

4.A statutory instrument containing regulations made by the Secretary of State under this Regulation is subject to annulment in pursuance of a resolution of either House of Parliament.

5.A statutory instrument containing regulations made by the Welsh Ministers under this Regulation is subject to annulment in pursuance of a resolution of the National Assembly for Wales.

6.Regulations made by the Scottish Ministers under this Regulation are subject to the negative procedure (see section 28 of the Interpretation and Legislative Reform (Scotland) Act 2010).

7.Regulations made by the Department of Agriculture, Environment and Rural Affairs under this Regulation are subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954 as if they were a statutory instrument within the meaning of that Act.

8.Regulations under this Regulation may:

(a)contain consequential, incidental, supplementary, transitional or saving provision (including provision amending, repealing or revoking enactments);

(b)make different provision for different purposes.

9.Before making any regulations under this Regulation, the person or Department making the regulations must consult:

(a)such bodies or persons as appear to the person or Department to be representative of the interests likely to be substantially affected by the regulations, and

(b)such other bodies or persons as the person or Department may consider appropriate.]

Textual Amendments

F289Article 150U.K.Committee Procedure

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Textual Amendments

CHAPTER IIU.K.Transitional and final provisions

F289Article 151U.K.Review

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Textual Amendments

F289Article 152U.K.Transitional provisions

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Textual Amendments

F289Article 153U.K.Repeal

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Textual Amendments

Article 154U.K.Entry into force

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

Articles 20 to 24, Article 29(3), point (a) of Article 38(1), Articles 58, 60, 76 to 92, 118, 120, 121 and Articles 129 to 147 shall apply with effect from 1 January 2014.

The second sentence of the seventh subparagraph of Article 39(2) and the fifth paragraph of Article 76 shall apply with effect from the date on which the amendment to the Financial Regulation relating to the decommitment of appropriations has entered into force.

[F290Articles 92a and 92b shall not apply to or in the United Kingdom. References to Member States in those provisions shall be understood as not including the United Kingdom.]

Textual Amendments

F291...

Textual Amendments

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