Reader on the 2003 version

Transcription

1 EuropeAid Grant Standard Contract for external actions: Reader on the 2003 version By the FDR sub-group on Financial Regulation, December 2006 CONTENT: Introduction by Olivier Consolo, Director of CONCORD Letter by Denis Salord, Head of Unit 'Financial & Contractual Matters' of European Commission Reader Annexes: 1. European Commission note on nationality and origin rules for tenders in the legal basis (valid up to 27 December 2005) 2. CONCORD note on EuropeAid and Untying of Community Aid (as of 28 December 2005) 3. Rules of nationality and origin for funding lines when there is no provision in the legal basis 4. CONCORD Explanatory note on claiming default interests within EuropeAid grant contracts

2 Introduction CONCORD, the confederation of European NGOs for relief and development, is happy to present this reader on the 2003 version of the EuropeAid Grant Standard Contract for external actions 1. The reader was compiled in by the CONCORD Funding for Development and Relief (FDR) subgroup on Financial Regulation (FR), through regular meetings with Europe Aid unit F3 - Financial and contractual matters. The reader gives a clear explanation on all articles in the Standard Contract and also indicates differences with the 2000 version. In annex 5, Mr. Denis Salord, Head of Unit F3, endorses the work that has been done on this reader. He is confident that it will help CONCORD members and other NGOs to better address different contractual issues concerning the implementation of the Grant Contract, even though the final interpretation falls within the mandate of the European Commission. CONCORD would like to thank Mr. Salord and his team for the constructive meetings and exchanges that led to this reader. I would also like to thank Alexandra Mège and the rest of the FDR subgroup for their excellent work. With this reader, the confederation has yet another strong example of how intense specialist work by a group of its members serves all CONCORD members and other NGOs in their day-to-day work. Olivier Consolo Director of CONCORD December The reader is now available on CONCORD website invite all members and NGOs are invited to publish it on their own website and spread it widely. 1 The standard contract was drawn up by Europe Aid Co-operation Office. It specifically applies to grants awarded by the Commission within the framework of external actions. As of 1 January 2000 it replaces all former standard contracts in this field. An updated version of the May 2003 standard contract is now applicable. All beneficiaries of grants for external actions are subject to the same rules whatever the Community programme financing the action. The Standard Grant Contract itself can also be found on EuropeAid s website

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4 TTeexxt t oof f thhee t aarrt ticcl lee (St( taannddaarrdd Grraannt t Coonnt trraacct t ) ) ARTICLE 1 - General Obligations Exxppl laannaat tioonn frroom f thhee t FFDR Diffeerreenncceess inn i thhee t vveerrssi ioonn oof f thhee t Staannddaarrdd ccoonnt trraacct t 1.1 The Beneficiary shall implement the Action under his own responsibility and in accordance with the Description of the Action in Annex I with a view to achieving the objectives laid down therein The Beneficiary shall implement the Action with the requisite care, efficiency, transparency and diligence, in line with best practice in the field concerned and in compliance with this Contract. For this purpose the Beneficiary shall mobilize all the financial, human and material resources required for full implementation of the Action as specified in the Description of the Action The Beneficiary shall act alone or in partnership with one or more NGOs or other bodies identified in the Description of the Action. He may subcontract a limited portion of the Action (works and services). The bulk of the Action must, however, be undertaken by the Beneficiary and, where applicable, his partners. If implementation of the Action involves the conclusion of contracts by the Beneficiary, the contract-award procedures and rules of nationality and origin set out in Annex IV shall apply. The Contracting Authority does not acknowledge any contractual link between itself and the Beneficiary s partner(s) or subcontractors. The Beneficiary alone shall be accountable to the Contracting Authority for the implementation of the Action. He shall undertake that the conditions applicable to him under Articles 1, 3, 4, 5, 6, 7, 8, 10, 14, 16 and 17 shall also apply to his partners, and those applicable under Articles 1, 3, 4, 5, 6, 8 and 16 to all his contractors. He shall include provisions to that effect as appropriate in his contracts with them. The project proposal sent to the EC is an integral part of your contract and therefore you should implement the project, as described in your proposal. Your project may require modifications : two scenario should be considered: for modifications that are known before the signature of the contract, you should discuss them with the EC (before the contract is signed). For modifications needed once the contract is already signed, you should send a request for contract modification. In both cases, you are also advised to change/adjust the logframe of the project and send the new version in order to keep the Commission informed about the evolution of the project. However, pay attention to article 6.2 of the special conditions, which implies that in case of conflict between what is written in your project and the provisions of the general conditions, the general conditions take precedence unless it is differently specified in article 7.2 of the special conditions. Contract award procedures: market consultation has to be organized for every purchase (works; supplies; services) above The extent of the consultation (from 3 quotations to an open international tender) depends on the amount of money that will be spent. Rule of nationality: refers to the nationality of the service providers, suppliers and consultants. Rule of origin: refers to the origin of goods and equipment. The origin must be certified by a certificate of origin that you should ask the supplier to provide when making the purchase. The certificate of origin must be made out by the competent authorities of the country of origin of the supplies or supplier (such as Chambers of commerce). Both nationality and origin rules must be complied with when making any purchases of goods or equipment as part of a project co-financed by EuropeAid, even for the goods that are not covered by the EC co-financing in the project s accounts (EC rules apply to the entire project budget presented, no matter the co-financing level).. The nationality rule must also be adhered for service contracts (nationality of the evaluator, for example), or works contracts (nationality of the construction company). EuropeAid applies the rules of nationality and origin (what can be procured from where) from the 1st euro. Version 2000 of the standard contract did not include annex IV as it is today. However, rules and principles were the same.

5 Up to 27 December 2005, rules on nationality and origin varied from one budget line to another (see ANNEX 1) In case a budget line doesn t include any specific provision on the rule of origin, then goods and supplies can originate from every country of the world. This last interpretation was only confirmed in April 2005 (see ANNEX 3) For the co-financing budget line, since the legal base expressly mentioned actions to be implemented in developing countries, it was decided that suppliers, consultants and service providers can either be European citizens or citizens of any developing country. As from 28 December 2005, the rules of nationality and origin have changed for all existing and new contracts signed with EuropeAid, whether these be contracts governed by the standard contract of December 2000, May 2003 and, even more relevant, the new provisions given on February The rules of nationality and origin can be interpreted in the same way and can be applied across all Budget Lines. (See ANNEX 2. ) Pay attention however: with the new instruments as of 2007, the untying regulations will cease to apply since the corresponding provisions will be disposed into the new legal basis. In case it is impossible to respect such rules, the NGO can ask for derogation if it is well justified and requested in advance. However, blanket derogations will not be granted. Since April 2005, European Commission Delegations have the power to decide on requests for derogations to the rules on nationality and origin submitted to them, provided that the contracts do not exceed the threshold for international calls for tenders ( euros for supply contracts, euros for service contracts and euros for work contracts). It is possible to group together your requests for derogations in an . For example, after the signature of the contract for certain purchases already scheduled and/or that will be made during the project implementation period. Partners should respect the rules of nationality and origin and the contract award procedures. Subcontractors should also respect these rules. There is however one exception: as of 28 December 2005, experts proposed by service providers (free lance or not) taking part in tender procedures or service contracts can be of any nationality The Beneficiary and the Contracting Authority are the only parties (the Parties ) to this Contract. Where the European Commission is not the Contracting Authority, it is not Party to this Contract, which confers on it only the rights and obligations explicitly mentioned therein. This provision refers particularly to the EDF contracts where the Contracting authority is most often the National Authorising Officer (NAO) and not the EC (Headquarters or Delegation). Nevertheless it shall endorse the Contract to ensure the financing of the Contracting Authority's grant from the European Communities budget, and the provisions in this Contract on visibility shall apply accordingly

6 ARTICLE 2 - Obligation to provide information and financial and technical reports 2.1. The Beneficiary must provide the Contracting Authority with all required information on the implementation of the Action. To that end, the Beneficiary must draw up interim reports and a final report. These reports shall consist of a technical section and a financial section. They shall cover the Action as a whole, regardless of which part of it is financed by the Contracting Authority. The Contracting Authority may request additional information at any time and that information must be supplied within 30 days of the request. Both narrative and financial reports should cover the whole operation, as it was presented in the application form and accepted by the Commission. Financial reports and audits should include all the expenditures and not only those paid with the EC grant. On 1 st February 2006, the EC published reporting formats (narrative & financial, interim & final) that have to be used for contracts signed after that date. You do have an option to use the new formats for existing contracts ruled by the 2000 or 2003 standard contract. However, please note that this is not obligatory and cannot be imposed by the Commission. The level of information contained in the new reporting formats constitutes the amount of information needed by the EC Of course, if the reports are not detailed enough, the EC is entitled to request additional information based on justified reasons and for clarification sake. As underlined by Mr Richelle, EuropeAid General Director, in his Note to the attention of Aidco staff and Delegation ( ), the Practical Guide contains all the requirements applicable to the contractual procedures. In order to ensure the success of the exercise of simplification and harmonisation undertaken, services will only be able to add additional requirements as a derogation, which in the case of EuropeAid and of the corresponding Delegations will have to be authorized on a case by case basis by the relevant geographical Director. When a request for additional information is made by the EC, the NGO has then 30 days to reply Each interim report must provide a full account of all aspects of the Action s implementation for the period covered. The report shall be laid out in such a way as to allow comparison between on the one hand the objective(s), the means proposed, the results expected in the Description of the Action and the budget details for the Action and on the other hand the means employed, the costs incurred and the results obtained (using the indicators of achievement provided for in the Description of the Action). The report shall include a statement of the beneficiary s, and as the case may be each partner s, outlay for the period covered and a work plan the next phase of the Action's implementation. There is no compulsory template for the interim or the final report with the 2000 and 2003 versions of the Standard contract. Therefore, the delegations should not impose their own format. The report could therefore be structured as one prefers as long as it respects the content of this article: the report must allow a comparison between what was described in the project proposal and what is achieved during the reporting period. An update of the logframe could therefore be a good way to show the achieved objectives, results and the activities implemented.. The financial report should have as a starting point the budget annexed to the contract. The same level of detail has to be used for the reports. The report (technical and financial) must be accompanied by a set of other documents : A statement of the beneficiary's, and as the case may be each partner's, outlay for the period covered a work plan for the next phase : no format either a request for payment (both interim and final report): according to article 15.1 (Option 2 last paragraph) «Further pre-financing may only be given if the part of the expenditure actually incurred which is financed by the Contracting Authority stands at 70% at least of the previous payment (and at 100% of any previous payments)», If this amount could not be reached when the report is due, NGOs are advised to delay the report and inform the EC accordingly instead of

7 only submitting a narrative report. an external financial audit report of the project must be supplied in the following cases: - an external audit to be attached with requests for payment of the balance for any grant of more than euros (final report) ; - an external audit to accompany any request for interim payments if the sum total of the request added to the previous request for payment exceeds euros (interim report). The audit will cover the whole of the Action s budget (budget given in article 3.1 of the SGC). The financial report must also state : The exchange rate used (see article 15.9) The amount of interests accrued during the period All these documents should be sent together: it is useless to send for instance the narrative report first and the financial report after The final report shall in addition contain a detailed description of the conditions in which the Action was carried out, information on the steps taken to ensure the visibility of EU financing, information with which to evaluate the Action's impact, the proof of the transfers of ownership referred to in Art 7.3 and a final statement of all the eligible costs of the Action, plus a full summary statement of the Action's income and expenditure and payments received. Final reports should additionally include: Information on EU visibility and on the action s impact; Handover to partners proofs for material and equipment (only for final report) In the version 2000 of the SC, the statement of the beneficiary was not to be sent. Visibility was not mentioned in the version 2000 of the SC With the 2000 version of the SC,if the size of the grant is EUR or more, a final audit will be carried out when the Operation ends, for the auditor to certify the accounts of the Operation. If, furthermore, the Operation s duration of execution exceeds 18 months, an annual audit will be carried out for every 12- month period of implementation after the start of the Operation; the final audit serving as annual audit for the last period. The Beneficiary may submit either external audit reports for the Operation or its own annual audit report, provided that the audit is carried out by the independent audit practice.

8 2.4. The reports shall be drafted in the language of the Contract. They shall be submitted to the Contracting Authority at the following intervals: A. if payments are made in accordance with option 1 or option 3 of Article 15.1: a single final report shall be forwarded no later than three months after the implementation period as defined in Article 2 of the Special Conditions; B. if payments are made in accordance with option 2 of Article 15.1: an interim report must accompany every request for payment; the final report shall be forwarded no later than three months after the implementation period as defined in Article 2 of the Special Conditions. The deadline for submission of the final report is extended to six months where the Contracting Authority is a service at the headquarters of the European Commission. The reports need to be presented in the language that the contract was drawn up. There are no fixed dates for the submissions of the interim report, nor obligations on the period of time covered by the report. See however explanations on Article 2.6 here below. In theory, as soon as one has spent 70% of latest advanced payment (and 100% of all earlier payments), one is entitled to send an interim report and a request for further payment (even after 5 months from the beginning of the project, if 70% of the latest advance was already spent). Except if otherwise provided for in Article 7 of the Special conditions, at the end of the final 12 month period of a contract you should not send an interim report since no payments would be linked to this report. You will account for the final year of your project in your final report. The final report must be submitted 3 months after the end of the operation if the contract is directly signed by the delegations. The delay is extended to 6 months after the end of the operation if the contract is signed by the EC in Brussels The Special Conditions may stipulate that the Beneficiary must supply an extra copy of the reports for the European Commission Delegation in charge of monitoring the Action If the Beneficiary fails to supply the Contracting Authority with a final report by the final report deadline laid down in Article 2.4 and fails to furnish an acceptable and sufficient written explanation of the reasons why he is unable to comply with this obligation, the Contracting Authority may terminate the Contract in accordance with Article 12.2 a) and recover the amounts already paid and not substantiated. Furthermore, where payments are made in accordance with option 2 of Article 15.1 and the Beneficiary fails to present an interim report and a request for payment by the end of each twelve-month period following the date laid down in Article 2.2 of the Special Conditions, the Beneficiary must inform the Contracting Authority of the reasons why he is unable to do so, and provide a summary of progress in the Action. If the Beneficiary fails to comply with this obligation, the Contracting Authority may terminate the Contract in accordance with Article 12.2 a) and recover the amounts already paid and not substantiated. The specific conditions state the number of report to send to the EC and to whom to address them. You are advised to inform the Commission or the Delegation of any delay you may have in submitting the final report. If your report is sent in late and you don t inform and explain the reason for the delay, the Commission has the right to ask for the reimbursement of grant funding already paid. There are no fixed dates for the submission of interim reports (see explanations at article 2.4 here above). However, if 1 year after the beginning of the action (and at 12 months intervals from that date) you have not yet sent an interim report you have to send a letter explaining the reasons of the delay and outlining the progress of the project. A mere letter is sufficient; you don t need to do a full report. With the 2000 version of the SC, the final report is always to be sent 6 months after the end of the contract ARTICLE 3 - Liability 3.1. The Contracting Authority cannot under any circumstances or for any reason whatsoever be held liable for damage or injury sustained by the staff or property of the Beneficiary while the Action is being carried out. The Contracting Authority cannot therefore accept any claim for compensation or increases in payment in connection with such damage or injury. The NGO is completely responsible for all material s and staff used for the project. The fact that the European Commission is supporting the project financially does not transfer at all or in part, any of the responsibility over the European Commission.

9 3.2. The Beneficiary shall assume sole liability towards third parties, including liability for damage or injury of any kind sustained by them while the Action is being carried out. The Beneficiary shall discharge the Contracting Authority of all liability arising from any claim or action brought as a result of an infringement by the Beneficiary or the Beneficiary s employees or individuals for whom those employees are responsible of rules or regulations, or as a result of violation of a third party s rights. ARTICLE 4 - Conflict of interest The Beneficiary undertakes to take all necessary precautions to avoid conflicts of interests and shall inform the Contracting Authority without delay of any situation constituting or likely to lead to any such conflict. There is a conflict of interests where the impartial and objective exercise of the functions of any person under this Contract is compromised for reasons involving family, emotional life, political or national affinity, economic interest or any other shared interest with another person. A conflict of interest relates to any event influencing the capacity of a candidate, tenderer, contractor or grant beneficiary to give an objective and impartial professional opinion, or preventing at any moment, from giving priority to the interests of the European Commission. Any consideration relating to possible contracts in the future or conflict with other commitments, past or present, of a candidate, tenderer, contractor or grant beneficiary. These restrictions also apply to any sub-contractors and employees of the candidate, tenderer, contractor or grant beneficiary. There is also a conflict of interests within the meaning of Article 52 of the Financial Regulation where the impartial and objective exercise of the functions of a player in the implementation of the budget or an internal auditor is compromised for reasons involving family, emotional life, political or national affinity, economic interest or any other shared interest with the applicant NGO. Here is an example: you are advised to inform the Commission, for instance, if a member of your staff involved in procurement is linked to someone who owns one of the companies from which you buy your supplies or equipment. You should also inform the Commission if one of your staff members -in a position of responsibility- is linked to a person working at the Delegation, in charge of the follow up of your contract. ARTICLE 5 Confidentiality Subject to Article 16, the Contracting Authority and the Beneficiary undertake to preserve the confidentiality of any document, information or other material communicated to them in confidence until at least seven years after the final payment. Where the European Commission is not the Contracting Authority it shall still have access to all documents communicated to the Contracting Authority and will maintain the same confidentiality. This means that if you want that your reports or other information you communicate to the EC to be kept confidential, you must state it very clearly; otherwise the EC could publish them on the internet or disseminate them. We should indicate which part is confidential and agree on it with the contracting authority. ARTICLE 6 - Visibility 6.1. Unless the European Commission agrees or requests otherwise, the Beneficiary must take all necessary steps to publicise the fact that the European Union has financed or co-financed the Action. Such measures must comply with the relevant rules on the visibility of external actions laid down and published by the Commission. The visibility of the donor is a contractual requirement. You will need to make sure that you publicise that the EC has funded or part funded your project, unless you have prior permission not to do so (where your staff might be at risk). You can find detailed instructions on visibility on:

10 6.2. In particular, the Beneficiary shall mention the Action and the European Union s financial contribution in information given to the final recipients of the Action, in its internal and annual reports, and in any dealings with the media. It shall display the EU logo wherever appropriate Any notice or publication by the Beneficiary concerning the Action, including those given at a conference or seminar, must specify that the Action has received EU funding. Any publication by the Beneficiary, in whatever form and by whatever medium, including the internet, must include the following statement: This document has been produced with the financial assistance of the European Union. The contents of this document are the sole responsibility of < Beneficiary s name > and can under no circumstances be regarded as reflecting the positions of the European Union The Beneficiary authorizes the Contracting Authority and the European Commission to publish his name and address, the purpose of the grant, the maximum amount of the grant and rate of funding of the Action's eligible costs, as laid down in the Article 3.2 of the Special Conditions. A derogation from publication of this information may be granted if it could endanger the Beneficiary or harm his commercial interests. The EC s contribution will also be mentioned in internal, annual reports and in the media, where appropriate. You will have to include visibility in the final report (see art. 2.3 The Logo information can be found in the link above. The EC encourages us to use the EC s logo, as often as possible. In particular, the logo and the sentence mentioned in article 6.3 should be included in all the publications produced in the framework of the project supported by the EC: That is to say both if those are paid with the EC grant or if they are produced using the NGO s own funds or cofinancing funds. You must publicise the EC s contribution. The European Commission is regularly publishing the name and addresses of the grants recipients together with some details about the supported projects. If you have good reasons for not appearing in those publications (for instance security reasons) you can send to the EC a justified written request. ARTICLE 7 Ownership/use of results and equipment 7.1. Ownership of, and title and intellectual and industrial property rights to, the Action's results, reports and other documents relating to it shall be vested in the Beneficiary Notwithstanding the provisions of Article 7.1 and subject to Article 5, the Beneficiary grants the Contracting Authority (and the European Commission where it is not the Contracting Authority) the right to use freely and as it sees fit all documents deriving from the Action, whatever their form, provided it does not thereby breach existing industrial and intellectual property rights By the end of the implementation of the Action, the equipment, vehicles and supplies paid for by the Budget for the Action must be transferred to any local partners of the Beneficiary or the final recipients of the Action. Copies of the title transfers must be attached to the final report. The NGO is the owner of any intellectual or industrial right developed within the project such as brevets and patents, royalties etc. However, the EC can use, free of charge, all the documents produced in the project. Before the end of the action everything that is bought for the project (included material and equipment bought with co-financing funds) must be transferred to the local partners or to the final beneficiaries of the action. This also includes all the vehicles and equipment (computers, furniture, etc) bought for the local office of the European NGO or the partner organisation. Copies of handover certificates must be sent with the final report: however (see comment on Article 2.3) If your project continues beyond the end date of the operational duration of the contract, you can ask the EC for a written derogation to this article so that you can keep the material until the end of the project. However, this request must be very well justified and you should already announce when and to whom the material and equipment will be finally handed over. ARTICLE 8 Evaluation 8.1. If the Commission carries out an interim or ex post evaluation, the Beneficiary shall undertake to provide it and/or the persons authorised by it with any document or information which will assist with the evaluation, and grant them the access rights described in Article The EC has the right to conduct an evaluation of your project even after the contract is finished. During the evaluation they have the right to interview people from your organization, your partners and the beneficiaries of the project. If your NGO carries out an internal or external evaluation you have to provide the EC with

11 8.2. If either Party (or the European Commission) carries out or commissions an evaluation in the course of the Action, it must provide the other Party and the European Commission (or the Parties) with a copy of the evaluation report. a copy of the report. Moreover, you have the right to ask for a copy of the evaluation report, if the evaluation is carried out by the EC. ARTICLE 9 Amendment of the contract 9.1. Any amendment to the Contract, including the annexes thereto, must be set out in writing in an addendum. If an amendment is requested by the Beneficiary, he must submit that request to the Contracting Authority one month before the date on which the amendment should enter into force, unless there are special circumstances duly substantiated by the Beneficiary and accepted by the Contracting Authority However, where the amendment does not affect the basic purpose of the Action and the financial impact is limited to a transfer within the same budget heading, or a transfer between budget headings involving a variation of 15% or less of the amount originally entered under each relevant heading for eligible costs, the Beneficiary may apply the amendment and inform the Contracting Authority accordingly in writing. This method may not be used to amend the heading for administrative costs. Changes of address, changes of bank account and changes of auditor may simply be notified, although this does not stop the Contracting Authority from opposing the Beneficiary s choice of bank account or auditor. The Contracting Authority reserves the right to require that the auditor referred to in Article 7.1 of the Special Conditions be replaced if considerations which were unknown when the Contract was signed cast doubt on the auditor s independence or professional standards An addendum may not have the purpose or the effect of making changes to the Contract that would call into question the grant award decision or be contrary to the equal treatment of applicants. The maximum grant referred to in Article 3.2 of the Special Conditions may not be increased. There are different types of contract amendment : a) Budget reallocations: The budget submitted with the project should be respected. However, you can benefit from the flexibility within the budget, as long as the essential aim of your project remains the same: you can modify unilaterally the expenditures of a single budget heading as long as the total amount of the heading doesn t deviate from more than 15% from the original amount foreseen in the contract : for instance, if you budgeted one doctor you can replace him/her with 2 nurses you can transfer a part of the budget from a heading to others as far as this transfer does not imply a variation of more than 15% of the headings concerned by such transfer. Please note that all transfers are cumulative; as soon as you reach the 15% limit, a formal amendment of the contract is required from which point you can start anew with transfers up to a max. of 15%. In the case of introduction of new budget items which modify in a substantial way the composition of the main budget line, it is always prudent to check with the contracting Authority that it agrees that the modification does not change the main aim of the action. The term budget heading has to be understood as the main budget headings of the direct costs, i.e. the headings number 1 (human resources), 2 (travel), 3, 4, 5 and 6 and definitely not to any of the sub-headings or sub-sub headings With regards to a contractually approved budget (i.e. original or modified with an amendment/rider to the contract) if one budget heading is under-spent or overspent, these amounts will not be reimbursed (only costs incurred and eligible can be financed from the EC). In case of under-spending, this will not really have practical implications as long as underspending in one or more headings has not been used to cover excess expenses in other headings leading to an overspending of more than 15% in those headings b) Change in the co-financing percentage: While the maximum amount of the grant cannot be increased, the co-financing percentage covered by the EC grant can (if the total budget is reduced). This is applicable once the project is being implemented through a formal budget amendment.. On the other hand, if your co-financing percentage decreases before the signing of the contract, then the EC is entitled to decrease its percentage in line with your percentage decrease. c) Changes in the breakdown of the sources of funding are possible, but you need to request an amendment to the contract and sign a written addendum. The change must however respect the co-financing rules of the concerned budget line. d) Change in project are allowed as long as it does not affect the essential aim of the project (ex. specific objective of the logframe) Some copies of the 2000 version of the standard contract stipulate that any request for amendment must be sent 2 months before the date on which the amendment should enter info force. Please note that the standard 2000 template foresees 1 month. With the 2000 version of the SC the flexibility is limited to 10%

12 e) No-cost extensions: when the duration of the project is extended even if the budget remains the same. Very often, a no-cost extension is accompanied by a budget reallocation f) Request for derogation to rules of the general conditions (such as nationality and origin rules, obligation to open a specific account, financial guarantees etc.). Remember to send a request for amendment at least one month before the change has to be made. All requests for contract amendment must be well justified!! ARTICLE 10 Assignment The Contract and the payments attached to it may not be transferred or assigned to a third party in any manner whatsoever without the prior written consent of the Contracting Authority. So, in case of a project presented in Consortium, if the leader of the Consortium (who signed the contract) wants to withdraw from the project and transfer the contract to another member of the Consortium, this has to be clearly accepted in writing by the Commission. ARTICLE 11 - Implementation period of the action, extension, suspension, force majeure and end date The implementation period of the Action is laid down in Article 2 of the Special Conditions. The Beneficiary must inform the Contracting Authority without delay of any circumstances likely to hamper or delay the implementation of the Action. The Beneficiary may request an extension of the Action s implementation period no later than one month before it ends. The request must be accompanied by all the supporting evidence needed for its appraisal The Beneficiary may suspend implementation of all or part of the Action if circumstances (chiefly force majeure) make it too difficult or dangerous to continue. The Beneficiary must inform the Contracting Authority without delay and provide all the necessary details. Each Party may terminate the Contract in accordance with Article If the Contract is not terminated, the Beneficiary shall endeavour to minimise the time of its suspension and shall resume implementation once circumstances allow, and shall inform the Contracting Authority accordingly The Contracting Authority may request the Beneficiary to suspend implementation of all or part of the Action if circumstances (chiefly force majeure) make it too difficult or dangerous to continue. Each Party may terminate the Contract in accordance with Article If the Contract is not terminated, the Beneficiary shall endeavour to minimise the time of its suspension and shall resume implementation once circumstances allow, with the prior written approval of the Contracting Authority The implementation period of the Action shall be extended by a period equivalent to the length of suspension, without prejudice to amendments to the Contract that may be necessary to adapt the Action to the new implementing conditions. The end date of a project is defined in the Special conditions. A no-cost extension of the project can be granted in duly justified cases. This is a contract amendment, so the request must be introduced at the latest one month before the end of the project. In most of the cases, the request for extension has to be accompanied by a request for budget reallocation. In case of force majeure you can suspend the project. You should give the EC all the information about the problem you are facing, the foreseeable effects of the problem and the measure taken to minimize the damage; you should indicate the period of suspension and the reasons of the suspension. You should also agree with the EC the fixed costs that will remain eligible during the suspension. The EC can also ask you to suspend the project. In case of suspension: the months of suspension will be added to the original implementation period.

13 11.5. Force majeure shall mean any unforeseeable exceptional situation or event beyond the parties control which prevents either of them from fulfilling any of their contractual obligations, is not attributable to error or negligence on their part (or the part of their contractors, agents or employees), and proves insurmountable in spite of all due diligence. Defects in equipment or material or delays in making them available, labour disputes, strikes or financial difficulties cannot be invoked as force majeure. This article defines what has to be understood as force majeure. Pay attention to the fact that defects in equipment or material or delays in making them available, labour disputes, strikes or financial difficulties cannot be invoked as force majeure. A Party shall not be held in breach of its contractual obligations if it is prevented from fulfilling them by force majeure. Without prejudice to Articles 12.2 and 12.3, the Party faced with force majeure shall inform the other Party without delay, stating the nature probable duration and foreseeable effects of the problem, and take any measure to minimise possible damage The payment obligations of the European Community under this Contract shall end 18 months after the implementation period laid down in Article 2 of the Special Conditions, unless the Contract is terminated under Article 12. The Contracting Authority shall notify the Beneficiary of any postponement of the end date. Pay attention to the payment of balance (10%) of your budget: in fact, the Commission is obliged to make this payment at the latest 18 months after the end of the project. ARTICLE 12 Termination of the contract If a Party believes that the Contract can no longer be executed effectively or appropriately, it shall consult the other Party. Failing agreement on a solution, either Party may terminate the Contract by serving two months written notice, without being required to pay compensation. Pay attention to the fact that the Commission can put an end to your contract if you don t deal with conflict of interest stipulated in article 4, if you transfer the contract (article 10) or if after an audit, it is demonstrated that you don t comply with the rules described in article The Contracting Authority may terminate the Contract, without giving notice and without paying compensation of any kind, where the Beneficiary: a) fails, without justification, to fulfil any of the obligations incumbent on him and, after being given notice by letter to comply with those obligations, still fails to do so or to furnish a satisfactory explanation within 30 days of sending of the letter; b) is bankrupt or being wound up, is having its affairs administered by the courts, has entered into an arrangement with creditors, has suspended business activities, is the subject of proceedings concerning those matters or is in any analogous situation arising from a similar procedure provided for in national legislation or regulations; c) has been convicted of an offence concerning professional conduct by a judgement which has the force of res judicata or is guilty of grave professional misconduct proven by any justified means; d) engages in any act of fraud or corruption or is involved in a criminal organisation or any other illegal activity detrimental to the Communities financial interests: this also applies to the partners, contractors and agents of the Beneficiary; e) changes legal personality, unless an addendum recording that fact is drawn up; f) does not comply with Articles 4, 10 and 16;

14 g) makes false or incomplete statements to obtain the grant provided for in the Contract or provides reports that do not reflect reality In the event of termination the Beneficiary shall be entitled to payment of the grant only for the part of the Action carried out, excluding costs connected with current commitments that would be implemented after termination. For this purpose the Beneficiary shall introduce a payment request and a final report in accordance with Article However, in the event of wrongful termination of the Contract by the Beneficiary under Article 12.1 and in the cases specified in Article 12.2 d), e) and g), the Contracting Authority may request full or partial repayment of sums already paid from the grant, in proportion to the gravity of the failings in question and after allowing the Beneficiary to submit his observations Prior to, or instead of, terminating the Contract as provided for in this Article, the Contracting Authority may suspend payments as a precautionary measure without prior notice This Contract shall be terminated automatically if it has not given rise to any payment within three years of its signature. ARTICLE 13 - Applicable law and dispute settlement This Contract shall be governed by the law of the Contracting Authority or, where the Contracting Authority is the European Commission, by Belgian law The Parties shall do everything possible to settle amicably any dispute arising between them during implementation of this Contract. To that end, they shall communicate their positions and any solution that they consider possible in writing, and meet each other at either s request. A Party must reply to a request for an amicable settlement within 30 days. Once this period has expired, or if the attempt to reach amicable settlement has not produced agreement within 120 days of the first request, each Party may notify the other that it considers the procedure to have failed In the event of failure to reach an amicable agreement, the dispute may by common agreement of the Parties be submitted to the conciliation of the European Commission if it is not the Contracting Authority. If no settlement is reached within 120 days of the opening of the conciliation procedure, each Party may notify the other that it considers the procedure to have failed In the event of failure of the above procedures, each Party may submit the dispute to the courts of the country of the Contracting Authority, or to the Brussels courts where the Contracting Authority is the European Commission. In cases where disputes between your organization and the contracting authority cannot be settled amicably they should be brought to court. Since the EC Delegations are part of the EC structure they fall under Belgian law. Thus where the contracting authority is the EC headquarters in Brussels or one of its Delegations the dispute has to be settled in Belgium. On the other hand, when the contracting authority is the National Authorising Officer (for instance in case of EDF funds) then the case has to be brought to court in the country of the contracting authority and is thus governed by the laws of that country. However, before bringing the case to court both parties should try everything to settle the dispute amicably. In case of disputes with Delegations for example on the interpretation of contract rules, which cannot be resolved in dialogue NGOs, shall involve the respective Regional Directorates at EuropeAid ( finance, contract and audit unit ). Version 2000 of the standard contract did not include articles 13(3) to 13(4), did not distinguish between the European Commission and other contracting authorities and was not as specific as the version ARTICLE 14 - Eligible costs To be considered eligible as direct costs of the Action, costs must: be necessary for carrying out the Action, be provided for in the In principle, only those cost items which have been approved with the project budget are eligible and can be accounted for. If changes are required during the project Besides the costs for the final audit the contract version 2000

15 Contract and comply with the principles of sound financial management, in particular value for money and costeffectiveness; have actually been incurred by the Beneficiary or his partners during the implementation period of the Action as defined in Article 2 of the Special Conditions, whatever the time of actual disbursement by the Beneficiary or a partner; this does not affect the eligibility of costs of the final audit; be recorded in the accounts or tax documents of the Beneficiary or his partners and be identifiable, verifiable and backed by originals of supporting evidence Subject to the above and where relevant to the provisions of Annex IV being respected, the following direct costs shall be eligible: the cost of staff assigned to the Action, corresponding to actual salaries plus social security charges and other remunerationrelated costs; salaries and costs must not exceed those normally borne by the Beneficiary or his partners, as the case may be; travel and subsistence costs for staff taking part in the Action, provided they do not exceed those normally borne by the Beneficiary or his partners, as the case may be. Any flat-rate reimbursement must not exceed the scales approved annually by the European Commission; purchase costs for equipment (new or used) and services, provided they correspond to market rates; costs of consumables and supplies; subcontracting expenditure; costs deriving directly from the requirements of the Contract (dissemination of information, evaluation specific to the Action, audits, translation, reproduction, insurance, etc.) including financial service costs (in particular the cost of transfers and financial guarantees); implementation the NGO must give an explanation about the reason of the changes. For the margins as to when such a change requires a formal contract amendment please refer to article 9.2 and the respective explanations above. The explanation of what exactly is understood by incurred has been given by AIDCO F3 in preparation of the new revision of the standard contract. It is understood that this definition also applies to the standard contracts 2000 and Are considered to have been incurred during the implementation period of the Action the costs of goods/services7works used/provided/delivered during the implementation period of the Action. The relevant contracts may have been awarded by the Beneficiary or his partners before the implementation period of the Action started, provided the provisions of Annex IV were respected. Such costs must be paid for before the final report is finalised. (Art Standard Grant Contract 2006) Pay attention to the cost of ex-post evaluation costs. The standard contract only makes reference to the costs of the final audit as being eligible though incurred after the project s implementation period. Even if some guidelines and frequently asked questions clearly stated the eligibility of ex post evaluation costs, their costs should be explicitly mentioned in the special provisions, even if they are included in the budget. So we recommend you to ask for a contract modification to make sure that these costs are eligible. Please be also informed that EuropeAid F3 sent a note to Delegations, inviting them to accept the eligibility of ex-post evaluation costs. All costs incurred referring to the entire budget and not only to the EC grant must be recorded in the accounts. The supporting documents (tenders, orders, vouchers, invoices, receipts etc.) must be in place and tally with the recorded costs (see also below article 16). The eligibility of costs is also determined by the compliance with the procurement rules laid down in Annex IV. Where these rules have not been properly observed, the EC may not accept the respective costs and may demand reimbursement of part of their grant. Cost of staff assigned to the Action at headquarter level can be eligible costs whenever these staff are explicitly mentioned in the project proposal and are essential to the implementation of the action. However, some call for proposals have restricted the opportunity to charge to the direct costs budget staff at HQ level, which should be covered only by the administrative costs. The daily allowance rates (per diems) approved by the European Commission include food, accommodation, local transportation and sundry expenses. They are available at the following address: and are regularly updated. They are a maximum: you can set a lower rate if you wish, but not higher. Be careful: daily allowances are the only costs that are considered to be a reimbursable lump sum. All other costs must be considered real incurred costs. also explicitly confirms the eligibility of the costs of preparing the operation even though incurred outside the actual project implementation period The following costs shall not be considered eligible: Taxes including the VAT are in principle ineligible, unless the Beneficiary cannot reclaim them, the applicable Regulation authorises coverage of taxes and those have Corresponds to Article 14(5) of the contract version 2000.

16 debts and provisions for losses or debts; interest owed; items already financed in another framework; purchases of land or buildings, except where necessary for the direct implementation of the Action, in which case ownership must be transferred to the final recipients at the end of the Action; currency exchange losses; taxes, including VAT, unless the Beneficiary (or, where applicable, his partners) cannot reclaim and the applicable regulations authorise coverage of taxes. been foreseen in the contract s budget. If it has been proven that the beneficiary cannot reclaim VAT and under the condition that the legal base (regulation) accepts the payments of such costs, they should be included in the total cost of each item in the budget Therefore you should undertake the necessary steps in order to avoid paying the VAT on goods and equipment, bought in Europe that you are going to export for your project. In the country of your operation you should make sure that you completed the appropriate administrative procedure to be exonerated from paying tax on those goods, or to be able to reclaim the tax back A lump sum not exceeding 7% of the direct eligible costs of the Action may be claimed as indirect costs to cover the administrative overheads incurred by the Beneficiary for the Action. Indirect costs are eligible provided that they do not include costs assigned to another heading of the Contract budget. Indirect costs are ineligible if the Beneficiary receives in other respects an operating grant from the European Commission. This Article 14.4 does not apply in the case of an operating grant Any contributions in kind made by the Beneficiary or his partners, which must be listed separately at Annex III, do not represent actual expenditure and are not eligible costs. They may not be treated as cofinancing by the Beneficiary. However, the Beneficiary undertakes to make such contributions as stipulated in the Description of the Action. Contingency reserve A maximum of 7% of the total direct eligible costs of the Action can be included in the budget. Example: Total direct eligible costs: % = admin overheads = total costs. The final amount of the admin overheads, which can be claimed of course, depends on the final amount of total direct costs accounted for in the final report and accepted by the EC. Costs already budgeted under the direct costs (e.g. costs of transfers) cannot be included under the indirect costs. However, as a lump sum, no supporting documents are required to justify the 7%. NGOs already receiving a grant to cover their full operational budget cannot claim these 7% in the framework of a different contract. 7% is a maximum and you can choose to charge a smaller percentage. This is advisable if you are already receiving operating grants from other donors: in fact, even though these administrative costs are a lump sum and don t have to be justified, they cannot allow you to have a profit from the EC grant. Although contributions in kind (valorisations) are not accepted as eligible costs, they must be shown in the accounts and financial reports. Pay attention: staff assigned to the project and whose remuneration can be justified by appropriate payslips (employed by your organisation or by your partners) can be regarded as eligible costs rather than contribution in kind. This question should be determined on a case by case basis However, see above Art. 14.2: Some call for proposals have restricted the opportunity to charge to the direct costs budget staff at HQ level, which should be covered only by the administrative costs. The contract version 2003 does not include a provision for contingencies, thus projects governed by this contract version cannot make use of a contingency reserve. However, the contingency reserve of 5% has been re-introduced in the contract version Corresponds to Article 14(3) of the contract version Corresponds to Article 14(6) of the contract version Projects ruled by the contract version 2000 do dispose of a contingency reserve of 5% and can make use of it after prior written authorization by the EC (Article 14(4) of contract version 2000)

17 ARTICLE 15 - Payment and interest on late payment Payment procedures are set out in Article 4 of the Special Conditions and correspond to one of the three options below: Option 1: Actions with an implementation period not exceeding 12 months or where the financing provided by the Contracting Authority does not exceed EUR The Contracting Authority will pay the grant to the Beneficiary in the following manner: * pre-financing of 80% of the sum referred to in Article 3.2 of the Special Conditions within 45 days of receipt by the Contracting Authority of : the Contract signed by both parties, a request for payment conforming to the model attached at Annex V, and a financial guarantee if required under Article 15.7; *the balance within 45 days of the Contracting Authority approving the final report in accordance with Article 15.2, accompanied by a request for payment of the balance conforming to the model in Annex V. Option 2: Actions with an implementation period of more than 12 months and where the financing provided by the Contracting Authority is more than EUR The Contracting Authority shall pay the grant to the Beneficiary in the following manner: *an initial pre-financing instalment of 80% of that part of the estimated budget for the first 12 months financed by the Contracting Authority, as specified in Article 4 of the Special Conditions, within 45 days of receipt by the Contracting Authority of : the Contract signed by both Parties, a request for payment conforming to the model in Annex V, and a financial guarantee if required under Article 15.7; *further pre-financing instalments of the amount specified in Article 4 of the Special Conditions within 45 days of the Contracting Authority approving an interim report in accordance with Article 15.2, accompanied by: a request for payment conforming to the model in Annex V, an audit report if required under Article 15.6, a financial guarantee if required under Article 15.7; The frequency with which the EC payments are being made depends on the duration of the project and on the total amount of the EC contribution. The respective option applicable for the project in question will therefore be stated in the Special Conditions of the contract governing the project in question. Option 1: For projects, which last no longer than 12 months OR where, the EC contribution does not exceed , the EC will make 2 payments. 80% of the approved EC contribution will be paid after the contract has been signed by both parties and a respective payment request has been submitted by the NGO (along with a financial guarantee if required). The remaining part of the EC contribution (up to 20% of the approved amount) will be paid after the end of the project, i.e. when the final report has been submitted to and approved by the EC and a respective payment request was submitted by the NGO along with that final report. Option 2: For projects which last more than 12 months AND where the EC contribution is more than , the EC will split their contribution on the basis of a 12 months interval in the following manner: The 1 st payment will be made after the contract has been signed by both parties and a respective payment request has been submitted by the NGO (along with a financial guarantee if required). This payment will, however, cover only 80% of the EC contribution foreseen for the 1 st year of the project s duration according to the approved budget. Example: Total costs foreseen for a 3-years-project: , total EC contribution foreseen 50% = Total budget foreseen for the 1 st year: with an EC contribution of 50% = st EC payment will be 80% of the foreseen contribution, i.e. 80% of = only. Interim payments will be calculated on a 12 months interval, i.e. for a project lasting 36 months 2 interim payments will be foreseen and listed accordingly in Article 4(2) of the contract s special conditions. Be careful: If a project is planned to last for 42 months this will be treated by the EC as a 4-years-project leading to 3 interim payments. The interim payments will only be made if the requests are accompanied by an interim report (see Article 2.4 above). If needed, these reports have to include an audit report as well as a financial guarantee (see Articles 15.6 and 15.7 below). As a rule the amounts of the interim payments stipulated in Article 4.2 of the Special Conditions cannot be changed, but well the date on which the requests are made. The contract does not set fixed dates for the submission of the intermediate reports and corresponding payment requests. The Beneficiary will therefore submit them more or less quickly according to the rate of progress of the Action and therefore of the expenditures. Balance payment: 10% of the approved EC contribution will only be paid after the end of the project s implementation, i.e. after the final report along with a request for payment has been submitted to and approved by the EC. If required, the final report has to be accompanied by an audit report (see article 15.6 below). In case the final amount of eligible costs is less than originally foreseen the balance payment may even be less than 10% of the approved contribution (since the EC will only contribute to the final costs according to their approved percentage share). It is not possible for the NGO to charge interest to the EC on the pre-financed amounts withheld until submission of the final report. For the example project mentioned above the provisional payment schedule could Version 2000 excludes the contingencies from all prefinancing payments (since the utilization of the contingency reserve requires prior approval) and gives the EC a longer delay for the first payment (60 days instead of 45 days in version 2003). For the interim and balance payments, however, the delay is shorter since it is counted 60 days from the authorising department s recording a request for payment (see below).

18 *the balance within 45 days of the Contracting Authority approving the final report in accordance with Article 15.2, accompanied by: a request for payment of the balance conforming to the model in Annex V, an audit report in accordance with Article Further pre-financing may only be given if the part of the expenditure actually incurred which is financed by the Contracting Authority (by applying the percentage set out in Article 3.2 of the Special Conditions) stands at 70% at least of the previous payment (and at 100% of any previous payments) as attested in the corresponding interim report and, where applicable, in an audit report as specified in Article The sum total of pre-financing under the Contract may not exceed 90% of the amount referred to in Article 3.2 of the Special Conditions. therefore look like as follows: Total EC contribution foreseen st payment (see above), interim payment , interim payment , balance payment The interim payments will normally be calculated as: (Total EC contribution 1 st payment balance payment). / Number of interim payments. The interim financial reports must limit the EC contribution to the expenses accounted for to the approved percentage share. Based on this share at least 70% of the last EC payment (and 100% of all other previous payments) must have been spent in order to be able to request another payment. Option 3: This will only apply in cases where the grant beneficiary is able and willing to pre-finance the entire EC contribution. Option 3: All Actions The grant shall be paid to the Beneficiary by the Contracting Authority in one payment within 45 days of the Contracting Authority approving the final report in accordance with Article 15.2, accompanied by: a request for payment of the balance conforming to the model in Annex V, an audit report if required under Article Any report shall be considered approved if there is no written reply from the Contracting Authority within 45 days of its receipt accompanied by the required documents. The Contracting Authority may suspend the time-limit for approval of a report by notifying the Beneficiary that the report cannot be approved and that it finds it necessary to carry out additional checks. In such cases, the Contracting Authority may request clarification, alteration or additional information, which must be produced within 30 days of the request. The time-limit starts running again on the date the required information is received. Reports shall be presented in accordance with Article 2. If your organization has not received any feedback from the EC or a Delegation 45 days (plus mailing time!) after you submitted your report you can consider your report as being approved. If, however, the EC has questions on the report (narrative or financial part) and seeks clarifications (see article 2.1), the time limit of 45 days starts anew from the day the EC receives the requested alteration or additional information. However, even if your reports are approved (explicitly or because there is no reaction from the EC within 45 days) this doesn t mean that all the reported expenditures are considered to be accepted. In fact, the EC can audit your project and your accounts up to 7 years after the final payment was made, and in this occasion can ask your organisation to reimburse a part of the grant if some costs are considered to be not eligible. Version 2000 makes no difference between the approval of the report and that of the payment request. Thus, in the case of interim and final reports the delay for payment is shorter than in the version 2003 (60 days instead of 45+45) The time-limit of 45 days for payment referred to in Article 15.1 above shall expire on the date on which the Contracting Authority s account is debited. Without prejudice to Article 12.5, the Contracting Authority may suspend this time-limit by notifying the Beneficiary that the request for payment is inadmissible, either because the amount in question is not due or because proper supporting documents have not been supplied or it thinks it necessary to conduct further checks, including on-the-spot checks, to make sure that the expenditure is eligible. The time-limit for payment shall start running again on the date on which a correctly formulated request for payment is recorded Once the time-limit referred to above has expired, the Beneficiary unless the Beneficiary is a government department or public body in a Community Member State - may, within two months of receipt of the late After having approved a report the EC has another 45 days to pay the requested instalment. This limit can once again be extended in cases the EC has questions or doubts regarding the request for payment. The time-limit of 45 days starts anew from the day the EC receives the corrected payment request. Altogether this gives the EC at least 90 days from the day they receive the report to execute the payment. If the EC payment is credited to your account later than 90 days after a) Having submitted an interim or final report along with a payment request without any previous feedback from the EC

19 payment, claim default interest: at the rediscount rate applied by the central bank of the country of the Contracting Authority if payments are in the currency of that country; at the rate applied by the European Central Bank to its main refinancing transactions in euro, as published in the Official Journal of the European Union, C series, if payments are in euro, on the first day of the month in which the time-limit expired, plus three and a half percentage points. The interest shall be payable for the time elapsed between the expiry of the payment deadline (exclusive) and the date on which the Contracting Authority's account is debited (inclusive). This interest is not considered income for the purposes of Article Any partial payments shall first cover the default interest thus established. b) Having provided additional information/clarification/alteration you have two months time to claim default interest. In doing so you should refer to this article and state the date when the payment should have arrived and the date when it finally arrived. The NGO has to make the calculation and to present the request for payment, and the Commission afterwards has to verify the calculation and pay the appropriate amount. (See ANNEX 4 on how claiming default interest) All references to days in this article 15 are to calendar days An external audit of the Action's accounts, produced by an approved auditor who is a member of an internationally recognised supervisory body for statutory auditing, shall be attached to: any request for a further pre-financing payment if the sum total of the earlier and the new pre-financing payments exceeds EUR ; any request for payment of the balance in the case of a grant of more than EUR ; any payment request of over EUR for the financial year, in the case of an operating grant. In an audit certificate conforming to the model in Annex VI the auditor certifies that the submitted accounts (income and expenditure) are accurate, reliable and justified by adequate supporting documents, and identifies the eligible expenditure incurred in accordance with the Contract. The amounts that the audit report certifies as incurred in conformity with the Contract shall be deducted from the sum total of pre-financing under the Contract (clearance). Where the Beneficiary is a government department or a public body of a Member State of the European Community, the Contracting Authority may exempt it from the audit requirement. In EC terms all payments except for the balance payment are pre-financing payments. As soon as a request for a pre-financing payment together with the amount of funds already received exceeds this request must be accompanied by an external audit on the expenses incurred so far. This will thus only apply to very large projects (e.g. consortia projects under budget line ). An external audit of the entire project s accounts is needed for each project where the entire EC contribution is more than This audit has to be submitted once, along with the final report. The period that must be covered by an audit must cover the expenses incurred since the previous audit report. In case that no previous audits were required since the pre-financing never reached , the final audit has to cover the expenditures of the entire project. The audit issue has been repeatedly a subject of FDR s dialogue with AIDCO F3. For the EC audits are considered as important tools for verifying a project s accounts and expenses according to EC rules and regulations. The requirements are stricter than foreseen in the Financial Regulations because the audits are necessary to clear pre-financing and to avoid bank guarantees (see below). In the case where the contracting partner is the European NGO whereas all projectrelevant accounting is done in the field,-where also all supporting documents are kept, it is possible to use only one auditor. It should be up to this auditor to decide how to verify the entire project account. This may include auditor accepting European or field audits done by other auditors. It is up to the NGO to choose the auditor. The name of the auditor has to be indicated in the contract, in order to enable the EC to make sure that the auditor does not raise problems (They must be member of an internationally recognised supervisory body of statutory auditors) The audit certificate attached to the standard contract as Annex VI is obligatory for all projects governed by this contract version.. Contract version 2000, Article 16(4): In addition to a final audit for grants exceeding an annual audit report has to be submitted for each project running more than 18 months. However, the beneficiary can decide whether to submit audit reports for the project or its own annual audit report. The respective audit firm is to be stipulated in Article 7 of the Special Conditions If the sum total of pre-financing under the Contract is more than 80% of In EC terms all payments except for the balance payment are pre-financing payments. According to Version 2000

20 the Contract amount, its payment must be fully covered by a financial guarantee. Where the Beneficiary is a non-governmental organisation, such guarantee is requested if the sum total of pre-financing under the Contract is more than EUR 1 million or 90% of the Contract amount. The financial guarantee must be denominated in euro and provided by an approved bank or financial institution established in one of the Member States of the European Community and conforming to the model in Annex VII. This guarantee shall remain in force until its release by the Contracting Authority when the total amount of pre-financing under the Contract is once again less than EUR 1 million or after payment of the balance. This provision shall not apply if the Beneficiary is a government department or public body of a European Community Member State The payments owed by the Contracting Authority shall be made to the Action-specific bank account or sub-account referred to in the financial identification form in Annex V, which identifies the funds paid by the Contracting Authority The Contracting Authority shall make payments in the currency of the country to which it belongs or in euro, in accordance with the Special Conditions. In the latter case, any conversion into euro of the real costs borne in other currencies shall be done at the rate published in InforEuro for the month in which the expenditure is incurred, unless otherwise provided in the Special Conditions. In the event of an exceptional exchange-rate fluctuation, the Parties shall consult each other with a view to restructuring the Action in order to lessen the impact of such a fluctuation. Where necessary, the Contracting Authority may take additional measures. However, in determining whether a bank guarantee is needed, the total estimated prefinancing of the contract is not relevant, since actual pre-financing is cleared as and when expenses actually incurred are justified by the annual audit reports. Thus, a bank guarantee is only needed when the sum of pre-financing payments which have not been cleared by annual audit reports exceeds 1 million or 90% of the approved grant amount. Thus, audit requirements are there to actually avoid bank guarantees except for very large projects. In order to calculate whether or not your organisation has to provide a bank guarantee the EC has to take into account only one contract at the time and should not add up several re-financing coming from different contracts. The revised contract version 2006 will once again allow for booking accounts as long as it is ensured that EC funds can be traced and interest produced by such funds can be calculated. However, projects governed by the 2003 version of the standard contract are obliged to have a project-specific bank account or sub-account. These bank-accounts do, however, not necessarily have to be interest-bearing accounts. Please note that such specific bank accounts are compulsory only in the country where the funds are transferred from the Commission: Therefore, if funds are transferred in a Bank in Europe, the EC cannot ask to open a local bank account as well. Please not that there is a note from Brussels Headquarters to the Delegations suggesting to include in the specific conditions a provision which overrules the requirement for specific bank accounts. However, for contracts which do not include this provision, the latter cannot be applied, except through an addendum to the initial contract. (see also Art. 16 below) This conversion system requires a monthly-based accounting for expenses in non-eur currencies. For each month the expenses incurred are converted into EUR using the monthly InforEuro rate published on the following website: The monthly converted expenses are then summed up to show the expenses incurred in EUR during the reporting period. This conversion has to be done individually for each foreign currency and the conversion has to take place directly without intermediate conversion. The revised contract version 2006 will simplify the system by using the average inforeuro rate for the reporting period. Though still artificial, the inforeuro system is likely to result in smaller deviations from the real exchange rate (of transfers executed) than the conversion system of the 2000 contract version. There is no definition on what is an exceptional exchange-rate fluctuation; however, this should be used only exceptionally. The first measure to be taken in the event this is Article 15(4) advances of EUR 1 million or more must be fully secured by a financial guarantee remaining valid until it is released by the Commission following final payment. No reference is made to the possibility to clear off pre-financing by annual audits. Therefore projects governed by the contract version 2000 had to provide a bank guarantee for the full amount of the grant in case of this grant being more than 1 million. Version 2000 only requires project-specific bank accounts for projects involving the payment of an advance of 1 million or more (Article 15.6) For projects governed by the contract version 2000, a totally different system applies: Foreign currencies have to be converted into EUR using either : a) The rate published by the European Central Bank in the "C" series of the Official Journal on the first working day of the month in which the request for payment is made; or b) For foreign currencies not

21 invoked is to restructure the project, for example to remove an aspect. Under no circumstances will the amount of the grant be increased quoted in the Offical journal, the rates published in the Financial Times on the first Tuesday of the month in which the request for payment is made. Thus, all expenditures of the reporting period are to be converted using the exchange rate of one specific day only. Deviations from the real exchange rates are therefore likely to be frequent and high which may require claiming for adjustment because of exceptional exchange-rate fluctuation. On the question which payment request is to be taken as reference AIDCO gave a clear directive: both the payment request that preceeds the reporting period the NGO is reporting on, and the payment request which accompanies the report are valid Any interest or equivalent benefits accruing from pre-financing paid by the Contracting Authority to the Beneficiary shall be mentioned in the interim and final reports and refunded to the Contracting Authority at its request, in accordance with Article 18. They are not taken into account when calculating the sum total of pre-financing under the Contract. Interest earned on the EC contribution have to been shown as income in the interim and final reports. They will be set off against i.e. deducted from the EC payments (either with each payment or altogether with the balance payment). Thus, it is not possible any more to use interest earned for project purposes in addition to the approved EC contribution. Version 2000 Article 15(8) still allows using interest earned to cover eligible costs for the project (in addition to the approved EC contribution) ARTICLE 16 - Accounts and Technical and Financial Checks The Beneficiary shall keep accurate and regular records and accounts of the implementation of the Action using a dedicated double-entry book-keeping system as part of or as an adjunct to the Beneficiary s own accounts. This dedicated system shall be run in accordance with the procedures dictated by professional practice. Separate accounts must be kept for each Action, detailing all income and expenditure. They must provide precise details of interest accruing on funds paid by the Contracting Your organisation should use double entry accounting systems to manage funds from this grant. You need to make sure that funds are kept in a separate bank or sub account. Some NGO's are advising their staff to open non-interest bearing account to avoid the administrative burden of calculating the interest and returning to the EC. This is acceptable for the EC However, as long as your organisation's accounting procedures allow EC funds to be easily traced within your accounting systems and interest produced can be calculated and returned to the EC, then you can ask for a written amendment to the obligation of having a specific bank account and the Commission should be able to grant you a derogation at the contract s negotiation stage, under article 7 of the special conditions. The version 2000 of the standard contract did not include a provision asking to open a specific bank account.

22 16.2. The Beneficiary will allow the European Commission, the European Anti- Fraud Office and the European Court of Auditors to verify, by examining the documents or by means of on-the-spot checks, the implementation of the Action and conduct a full audit, if necessary, on the basis of supporting documents for the accounts, accounting documents and any other document relevant to the financing of the Action. These inspections may take place up to 7 years after the payment of the balance. Furthermore, the Beneficiary will allow the European Anti-Fraud Office to carry out checks and verification on the spot in accordance with the procedures set out in the European Community legislation for the protection of the financial interests of the European Communities against fraud and other irregularities. To this end, the Beneficiary undertakes to give appropriate access to staff or agents of the European Commission, of the European Anti-Fraud Office and of the European Court of Auditors to the sites and locations at which the Action is implemented, including its information systems, as well as all documents and databases concerning the technical and financial management of the Action and to take all steps to facilitate their work. Access given to agents of the European Commission, European Anti-Fraud Office and the European Court of Auditors shall be on the basis of confidentiality with respect to third parties, without prejudice to the obligations of public law to which they are subject. Documents must be easily accessible and filed so as to facilitate their examination and the Beneficiary must inform the Contracting Authority of their precise location. All NGO's, receiving funds from the European Commission, will need to allow personnel from the European Commission, European Anti-Fraud Office and the European Court of Auditors to have easy access to all documents and systems (financial and tools) used to manage this project. They will require access to documents in country, where the project is operational, and at your Head Office. As part of reviewing all the documents they may conduct a full audit of the project. The types of documents that need to be kept are outlined in article These documents need to be available to the European Commission for them to be sure that we have not misspent their funds in any way and being compliant with EC financial regulations, (article.49 of the Implementing Rules). The information provided to the Commission will be confidential and not shared openly with other organisations, without prejudice to the obligations of public law to which the agents are subject. Please note that you will need to hold all the relevant information outlined up to 7 years after the final payment has been made to the NGO, even if it's not a requirement or contradicts national rules of the country where the project is being implemented The documents referred to in Article include: A. Works, supplies and services bids from suppliers; contracts and order forms; invoices and proofs of payment or settled invoices; if supplies come from the Beneficiary's stocks, invoices shall reflect the price paid at the time of purchase. A copy of the purchase invoice must be attached; for fuel and oil the Beneficiary shall keep a summary list of the distance covered, the average consumption of the vehicles used, fuel costs and maintenance costs. B. Staff costs: a statement of expenditure on local staff recruited on fixed-term contracts, with details of remuneration paid, duly substantiated by the person in charge locally, broken down into gross salary, social security charges, insurance and net salary; a statement of expenditure on expatriate and/or European-based staff (if the Action is implemented in Europe) per month of actual work; expenditure will be assessed on the basis of unit prices per verifiable block of time worked and broken down into gross salary, social security charges, insurance and net salary. Documents that the EC will need to see is outlined under section A and B under article 16.3 A: They will need all the paper work related to the procurement done for all the works, supplies and service contracts that have been funded with European Commission funds. In case of an audit, the EC will verify that all the purchases have been done following the procurement rules. It is therefore advisable that you file together all the documents that can prove that you correctly consulted the market (text of the calls for tender, bids from the candidates, result of the selection procedure etc ) B: Staff costs: Make sure that clear records of all local staff and expatriate staff costs that relate to the project are kept. The type of information that should be kept is gross salary, social security charges, insurance and net salary. All these costs should already be kept by your organisation. There has to be some record that the person in charge has signed off on all local staff costs. Please note that for expatriate (based in country) or European-based staff, there will have to be a more detailed record of how much time that person has spent working on the project per month. The same level of information should be kept on record as above. (Gross salary, social security charges, insurance and net salary). This does not mean to set up time-sheets as long as all the necessary information is already available. If you have hired a consultant for a specific period of time for the EC project, the contract should give you all the relevant information of their participation to the project. Please

23 note that consultants are a type of service and therefore, in order to recruit them, you have to apply the rules described in annex IV (market consultation and nationality rule). If you have an expatriate member of staff who is dedicating 40% of his/her time to the project you should be able to demonstrate that he/she have indeed spent 40% of his/her time on this project The Contractor guarantees that the rights of the European Commission, of the European Anti-Fraud Office and of the European Court of Auditors to carry out audits, checks and verification will be equally applicable, under the same conditions and according to the same rules as those set out in this Article 16, to the Beneficiary's partners and contractors. The same rules outlined above in articles 16.1, 16.2 and 16.3 apply to our partners and contractors that are taking part in the EC funded project. You will need to make sure that your partners and contractors are made aware of this including in your contracts with them (or MOU) a provision that authorizes officials from the EC to check their documents and accounts. ARTICLE 17- Final Amount of Financial by the Contracting Authority 17.1 The total amount to be paid by the Contracting Authority to the Beneficiary may not exceed the maximum grant laid down in Article 3.2 of the Special Conditions, even if the total of actual eligible expenditure exceeds the estimated total budget set out in Annex III. If your project overspends, the EC will not pay you the excess that you have overspent on the project. The EC will only pay you the total EC contribution stipulated in the contract signed by you and the Commission. The amount approved is stated under article 3.2 of your contract (Special Conditions) If the eligible costs at the end of the Action are less than the estimated total cost referred to in Article 3.1 of the Special Conditions, the Contracting Authority's contribution shall be limited to the amount obtained by applying the percentage laid down in Article 3.2 of the Special Conditions to the actual eligible costs approved by the Contracting Authority. If on the other hand, you spend less on your project, as outlined in your approved budget, the EC will lower their contribution to the project to reflect the percentages that you and the EC should be providing to the project outlined in the contract (or amendment, see Art.9). This information can be taken from article 3.2 from your contract (Special Conditions). So, suppose you had a budget of 100 and the Commission is giving you 50 (equal to 50%). If at the end of the project you show that you only spent 90, the Commission will pay you only 45 (50% of 90). In case you face a decrease in another donor s contribution to your project you can ask for a budget amendment in order to increase the percentage covered by the EC. An increase in the percentage can be granted on the basis of a respective request for contract amendment However, this percentage will never be higher than the one allowed in the guidelines of the call for proposals under which your project was submitted, and the maximum amount of the grant will never be increased The Beneficiary accepts that the grant can under no circumstances result in a profit for himself and that it must be limited to the amount required to balance income and expenditure for the Action. Profit shall be defined as: In the case of a grant for an Action, a surplus of receipts over the costs of the Action in question when the request is made for payment of the balance. However, in the case of Actions designed specifically to strengthen the financial capacity of the Beneficiary, it is distribution to the members making up the beneficiary body of the surplus revenue resulting from its You cannot, in any way, benefit from funds given by the EC. All the funds received should be spent on what was approved in your proposal. You cannot: Request a final payment from the Commission that is more than the actual costs spent on the project. Give EC funds to individuals to benefit from activities that were intended to build the financial capacity of your/ partner organisation Keep EC funds left over from a completed project

24 activity leading to their personal enrichment. In the case of an operating grant, a surplus balance on the operating budget of the Beneficiary. Please note that article 17.3 does not apply to any individuals obtaining grants intended for their studies, research, training scholarships or prizes awarded. These provisions shall not apply to study, research or training scholarships paid to natural persons, nor in the case of prizes awarded following contests In addition and without prejudice to the right to terminate the Contract in accordance with Article 12.2, the Contracting Authority may, by a duly reasoned decision, if the Action is not implemented or is implemented poorly, partially or late, reduce the grant initially provided for in line with the actual implementation of the Action on the terms laid down in this Contract. In addition, and without prejudice to article 12.12, the Commission can also terminate your contract if you do not: Implement the project as a whole, making sure all the activities indicated in your original proposal, overall objective and results have been achieved, as approved by the EC and stated in your contract. Make sure that the implementation of your project is of good quality; all the activities are carried out in the timeframe stipulated in your contract and proposal. If the Commission considers that you only implemented a part of your project they can reduce your grant proportionally (e.g. you reached only 50% of the planned results; you will get only 50% of the grant, even if you spent the entire budget). Please note that you must let the Delegations know if you are having any problems with the implementation of your project. Any delays in informing them may jeopardise your relationship with the EC and forfeit your contract. Make sure you get approval from the EC before you make changes to the contract and that these are reflected in your modified contract. Article 17.4 was not included in the 2000 version of the standard contract. ARTICLE 18 - Recovery The Beneficiary undertakes to repay any amounts paid in excess of the final amount due to the Contracting Authority within 45 days of receiving a request to do so Should the Beneficiary fail to make repayment within the deadline set by the Contracting Authority, the Contracting Authority may (unless the Beneficiary is a government department or public body of a Member State of the Community) increase the amounts due by adding interest: at the rediscount rate applied by the central bank of the country of the Contracting Authority if payments are in the currency of that country; at the rate applied by the European Central Bank to its main refinancing transactions in euro where payments are in euro, on the first day of the month in which the time-limit expired, plus three and a half percentage points. The default interest shall be incurred over the time which elapses between the date of the payment deadline set by the Contracting Authority (exclusive), and the date on which payment is actually made (inclusive). Any partial payments shall first cover the interest thus established. If any excess EC funds remain after the implementation of the project, due to the EC paying more funds than was needed for the project, you will need to repay the excess amount back to the EC. To do this, you have to wait for the EC to issue a recovery order, after which you have 45 days to pay the money back. If you fail to pay back these excess funds in the time stipulated by the EC, they will start to charge interest on the funds. How the interest will be calculated is explained in article 18.2 In the 2000 contract they gave us 60 days to refund these funds.

25 18.3. Amounts to be repaid to the Contracting Authority may be offset against amounts of any kind due to the Beneficiary. This shall not affect the Parties' right to agree on payment in instalments Bank charges incurred by the repayment of amounts due to the Contracting Authority shall be borne entirely by the Beneficiary. The EC can recover re-payments for one project against another. I.e. if you owe money on one contract, they ll subtract it from the next payment for another/different contract (even under a different budget line) This will make accounting even more difficult, as the project-specific account will show less money coming in then we will need to account for as the EC %. Please note that we agreed with the EC that they do not automatically do this, but they will inform the NGOs when such re-payments are done. Aidco services have been recalled to contact and inform the relevant NGO before issuing recovery orders (note from 2004). If you have to return to the EC and are charged by your bank for doing so, you will have to take on the burden of these costs, as you cannot reclaim this cost from the EC.

26 ANNEXES CONTENT: 1. European Commission note on nationality and origin rules for tenders in the legal basis (valid up to 27 December 2005) 2. CONCORD note on EuropeAid and Untying of Community Aid (as of 28 December 2005) 3. Rules of nationality and origin for funding lines when there is no provision in the legal basis 4. CONCORD Explanatory note on claiming default interests within EuropeAid grant contracts

27 ANNEX 1 NATIONALITY & ORIGINE RULES FOR TENDERS IN THE LEGAL BASES [Valid up to 27 December 2005 except for the European Development 1 ] I. General provisions related to the budget and the European Development Fund Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (applicable since January 2003). Article Participation in tendering procedures shall be open on equal terms to all persons coming within the scope of the Treaties and, in accordance with the specific provisions in the basic instruments governing the cooperation sector concerned, to all such natural and legal persons who are nationals of the beneficiary third countries or of any other third country as are expressly mentioned in those instruments. 2. In duly substantiated exceptional cases, it may be decided, on the basis of the specific conditions laid down in the basic acts governing cooperation, to allow third-country nationals other than those referred to in paragraph 1 to tender for contracts. 3. Where an agreement on widening the market for procurement of goods or services to which the Community is party applies, the contracts for procurement financed by the budget shall also be open to third-country nationals other than those referred to in paragraphs 1 and 2, under the conditions laid down in this agreement. Annex IV to the ACP-EC Partnership Agreement signed in Cotonou (Articles 20 and 22), and Decision N 2/2002 of the ACP-EC Council of Ministers of 7 October 2002 regarding the implementation of Articles 28, 29 and 30 of Annex IV to the Cotonou Agreement Article 2.1 (a) Participation in invitations to tender and in the award of contracts financed by the EDF shall be open on equal terms to: - natural persons, companies or firms or public or semi-public agencies of the ACP States and the Member States, - cooperative societies and other legal persons governed by public or private law, of the Member States and/or the ACP States and - joint ventures or groupings of companies or firms of ACP States and/or of Member States. This nationality rule also applies to the experts proposed by service providers taking part in tender procedures or service contracts financed by the Community. (b) All supplies purchased under a supply contract must originate in the Community and/or the ACP States. The same goes for supplies and equipment purchased by a contractor for works or service contracts if 1 The 2005 "untying" regulations have no effect on the Financial Regulation nor annex IV of the Cotonou Agreement, only on the basic acts for the programmes in question. Consequently, the Financial Regulation articles as well as annex IV for the European Development Fund (EDF) are still valid.

28 the supplies and equipment are destined to become the property of the project once the contract is completed. Article 2.2 In order to ensure the optimum cost-effectiveness of the system, natural or legal persons from non-acp developing countries may be authorised to participate in contracts financed by the Community at the request of the ACP States concerned. The ACP States concerned shall, on each occasion, provide the Head of Delegation with he information needed for the Community to decide on such derogation, with particular attention being given to: (a) the geographical location of the ACP State concerned; (b) the competitiveness of contractors, suppliers and consultants from the Member States and the ACP States; (c) the need to avoid excessive increases in the cost of performance of the contract; (d) transport difficulties or delays due to delivery times or other similar problems; and (e) technology that is the most appropriate and best suited to local conditions. Participation by third countries in contracts financed by the Community may also be authorised: (a) where the Community participates in the financing of regional or inter-regional schemes involving such countries; (b) in the case of co-financing projects and programmes; (c) in the case of emergency assistance. In exceptional cases and in agreement with the Commission, consultancy firms with experts who are nationals of third countries may participate in service contracts. Moreover, during the execution of operations and subject to the requirement to inform the Head of Delegation, the contracting authority shall decide on: (a) the purchase of goods, irrespective of their origin, on the local market; (b) use of construction equipment and machinery not originating in the member states or ACP States provided there is no production of comparable equipment and machinery in the Community and in the ACP States. II. Community instruments with thematic and geographical scope PART A. Community instruments with a thematic scope 1. Regulation (EC) No 806/2004 of the European Parliament and of the Council of 21 April 2004 on promoting gender equality in development cooperation nationality Article 9 1. Participation in invitations to tender and the award of procurement contracts shall be open on equal terms to all natural and legal persons of the Member States, assimilated countries, and in all developing countries. It shall be open to other third countries on the condition of reciprocity. It may be extended, under exceptional and duly justified circumstances, to other third countries. origin Article 9 2. Supplies shall originate in the Member States, the beneficiary country or other developing countries. In the cases mentioned in paragraph 1, supplies may originate in other third countries

29 2. Regulation (EC) No 1568/2003 of the European Parliament and of the Council of 15 July 2003 on aid to fight poverty diseases (HIV/AIDS, tuberculosis and malaria) in developing countries nationality Article 8 1. Participation in invitations to tender for the award of contracts shall be open on equal terms to all natural and legal persons in the Member States and in all developing countries. It may be extended, in exceptional cases, to other third countries. origin Article 8 2. Supplies shall originate in the beneficiary country, other developing countries or the Member States. In exceptional cases, supplies may originate from other third countries. 3. Regulation (EC) No 1567/2003 of the European Parliament and of the Council of 15 July 2003 on aid for policies and actions on reproductive and sexual health and rights in developing countries nationality Article 8 1. Participation in invitations to tender for the award of contracts shall be open on equal terms to all natural and legal persons in the Member States and in all developing countries. It may be extended, in exceptional cases, to other third countries. origin Article 8 2. Supplies shall originate in the beneficiary country, other developing countries or the Member States. In exceptional cases, supplies may originate from other third countries. 4. Regulation (EC) No 1724/2001 of the European Parliament and of the Council of 23 July 2001 concerning action against anti-personnel landmines in developing countries nationality Article 4 2. Participation in invitations to tender and the award of contracts shall be open on equal terms to natural and legal persons of the Member States and of the beneficiary country. In exceptional cases which are fully justified, participation may be extended to third countries. origin No specific provision 5. Council Regulation (EC) No 381/2001 of 26 February 2001 creating a rapid-reaction mechanism No specific provision 6. Regulation (EC) No 2493/2000 of the European Parliament and of the Council of 7 November 2000 on measures to promote the full integration of the environmental dimension in the development process of developing countries nationality

30 Article 8 8. Participation in invitations to tender and the award of contracts shall be open on equal terms to all natural and legal persons of the Member States and of the recipient country. It may be extended to other developing countries and, in exceptional cases, which are fully justified, to other third countries. origin Article 8 9. Supplies shall originate in the Member States, the recipient country or other developing countries. In exceptional cases, where circumstances warrant, supplies may originate in other countries. 7. Regulation (EC) No 2494/2000 of the European Parliament and of the Council of 7 November 2000 on measures to promote the conservation and sustainable management of tropical forests and other forests in developing countries nationality Article 9 8. Participation in invitations to tender and the award of contracts shall be open on equal terms to all natural and legal persons of the Member States and of the recipient country. It may be extended to other developing countries and, in exceptional cases which are fully justified, to other third countries. origin Article 9 9. Supplies shall originate in the Member States, the recipient country or other developing countries. In exceptional cases, where circumstances warrant, supplies may originate in other countries. 8. Council Regulation (EC) No 976/1999 of 29 April 1999 laying down the requirements for the implementation of Community operations, other than those of development cooperation, which, within the framework of Community cooperation policy, contribute to the general objective of developing and consolidating democracy and the rule of law and to that of respecting human rights and fundamental freedoms in third countries nationality Article 9 1. Participation in invitations to tender and the award of contracts shall be open on equal terms to natural or legal persons from the recipient country and the Member States. It may be extended to other countries in exceptional and duly justified cases. origin Article 9 2. Supplies shall originate in the Member States or the recipient country. They may originate in other countries in exceptional and duly justified cases. 9. Council Regulation (EC) No 975/1999 of 29 April 1999 laying down the requirements for the implementation of development cooperation operations which contribute to the general objective of developing and consolidating democracy and the rule of law and to that of respecting human rights and fundamental freedoms nationality

31 Article 8 1. Participation in invitations to tender and the award of contracts shall be open on equal terms to natural or legal persons from the recipient country and the Member States. It may be extended to other countries in exceptional and duly justified cases. origin Article 8 2. Supplies shall originate in the Member States or the recipient country. They may originate in other countries in exceptional and duly justified cases. 10. Council Regulation (EC) No 856/1999 of 22 April 1999 establishing a special framework of assistance for traditional ACP suppliers of bananas Nationality Article 5 5. Participation in invitations to tender and contracts shall be open on equal terms to all natural and legal persons in the Member States, the recipient country and the ACP States. Participation may be extended to include other developing countries in duly substantiated cases and in order to ensure the best cost-effectiveness ratio.. Origin Article 5 6. Supplies shall originate in the Member States or the ACP States. In duly substantiated exceptional cases, they may originate in other developing countries. 11. Council Regulation (EC) No 1659/98 of 17 July 1998 on decentralised cooperation as modified by the Regulation (EC) No 955/2002 of the European Parliament and of the Council of 13 May 2002 nationality Article 7 5. Participation in invitations to tender and the award of contracts shall be open on equal terms to all natural and legal persons of the Member States and of the recipient country. It may be extended to other developing countries and, in exceptional cases which are fully justified, to other third countries. origin Article 7 6. Supplies shall originate in the Member States, the recipient country or other developing countries. In exceptional cases, where circumstances warrant, supplies may originate in other third countries. 12. Council Regulation (EC) No 1658/98 of 17 July 1998 on co-financing operations with European non-governmental development organisations (NGOs) in fields of interest to the developing countries No specific provision 13. Commission Regulation (EC) No 2519/97 of 16 December 1997 laying down general rules for the mobilization of products to be supplied under Council Regulation (EC) No 1292/96 as Community food aid

32 nationality Article 2 1. Participation in the tender procedures provided for under this Regulation shall be open on equal terms to any natural or legal person, hereinafter called 'undertaking`, - from the Community pursuant to Article 58 of the Treaty, - from a Member State established in the case of an undertaking outside the Community, or a maritime company established outside the Community and controlled by nationals of a Member State if their vessels are registered in that Member State in accordance with its legislation, - from a recipient country included in the list annexed to Regulation (EC) No 1292/96, - from the country where the mobilization is carried out under the conditions set out in Articles 11 and 17 of Regulation (EC) No 1292/96. origin Article 4 1. Depending on the conditions laid down for a particular supply, the product to be supplied shall be purchased in the Community, the recipient country or a developing country listed in the Annex to Regulation (EC) No 1292/96, belonging if possible to the same geographical region, in accordance with the provisions of Article 11 of that Regulation In exceptional circumstances and in accordance with the procedures laid down in Article 11 (2) of Regulation (EC) No 1292/96, products may be purchased on the market of a country other than those referred to in paragraph (1). 3. Where products are mobilized in the Community, they may be purchased on the market from an intervention agency designated in the tender notice or be manufactured from goods purchased from such an agency. In the event of a purchase from an intervention agency, the purchase shall be effected on the basis of a fixed-price sale in accordance with current Community agricultural rules. 4. Where products are mobilized outside the Community, the Commission may indicate the country of origin of the products to be supplied under a particular operation. 14. Council Regulation (EC) No 2046/97 of 13 October 1997 on north-south cooperation in the campaign against drugs and drug addiction nationality Article 9 7. Participation in invitations to tender and the award of contracts shall be open on equal terms to natural and legal persons of the Member States and of the recipient country. It may be extended to other developing countries. origin Article 9 8. Supplies shall originate in the Member States, the recipient country or other developing countries. In exceptional cases, where circumstances warrant, supplies may originate elsewhere. 15. Council Regulation (EC) No 1484/97 of 22 July 1997 on aid for population policies and programmes in the developing countries nationality Article Participation in invitations to tender and the award of contracts shall be open on equal terms to natural and legal persons of the Member States and of the recipient country. It may be extended to other developing countries. origin

33 Article Supplies shall originate in the Member States, the recipient country or other developing countries. In exceptional cases, where circumstances so warrant, supplies may originate elsewhere. 16. Council Regulation (EC) No 2258/96 of 22 November 1996 on rehabilitation and reconstruction operations in developing countries nationality Article 6 7. Participation in invitations to tender and the award of contracts shall be open on equal terms to natural and legal persons of the Member States and of the recipient country. It may be extended to other developing countries and, in exceptional cases which are fully justified, to third countries. origin Article 6 8. Supplies shall originate in the Member States, the recipient country or other developing countries. In exceptional cases, where circumstances warrant, supplies may originate elsewhere. 17. Council Regulation (EC) No 1292/96 of 27 June 1996 on food-aid policy and food-aid management and special operations in support of food security nationality Article 17 Participation in invitations to tender and other procedures for the award of public contracts shall be open on equal terms to all natural and legal persons in the European Union and the recipient countries. It may be extended by the Commission to operations under Article 11 (2) to include natural and legal persons in the countries where the aid is mobilized. origin Article Products shall be mobilized on the Community market, in the recipient country or in one of the developing countries (listed in the Annex) if possible one belonging to the same geographical region as the recipient country. 2. Exceptionally, products may be mobilized on the market of a country other than those provided for in paragraph 1 of this Article in accordance with the procedure laid down in Article 27: - if the requisite type or quality of product is unavailable on the market of the Community or any of the developing countries, - if there is a serious food shortage, where such purchases are likely to increase the effectiveness of the operation. 3. Food products available on the internal market may be mobilized on the market of a developing country, if the economic efficiency of doing so compares favourably with that of mobilizing products on the European market. 4. Where food is purchased in the recipient country or in a developing country, steps must be taken to ensure that such purchases threaten neither to disrupt the market of the country concerned or of any other developing countries in the same region nor to affect adversely the supply of food to their inhabitants. Such purchases shall be integrated as thoroughly as possible into the implementation of Community development policy towards these countries, particularly with regard to the promotion of food security in the country concerned or at regional level.

34 PART B. Community instruments with a geographical scope 18. Council Regulation (EC) No 2500/2001 of 17 December 2001 concerning pre-accession financial assistance for Turkey and amending Regulations (EEC) No 3906/89, (EC) No 1267/1999, (EC) No 1268/1999 and (EC) No 555/2000 nationality Article 8 7. Participation in invitations to tender and contracts shall be open, on equal terms to all natural and legal persons from the Member States, the candidate countries for accession to the European Union and countries which are recipients under Regulation (EC) No 1488/96 and Regulation (EC) No 2666/2000. Participation by countries which are recipients under Regulation (EC) No 99/2000, shall also be authorised by the Commission, on a case-by-case basis, if the programmes or projects concerned require specific forms of expertise specifically available in such countries. In the case of co-financing, the participation of undertakings from third countries in invitations to tender and contracts may be authorised by the Commission on a case-by-case basis. Origin Article 8 8. The provisions referred to in paragraph 7 shall apply to the origin of supplies. 19. Regulation (EC) No 2130/2001 of the European Parliament and of the Council of 29 October 2001 on operations to aid uprooted people in Asian and Latin American developing countries nationality Article Participation in invitations to tender and the award of contracts shall be open on equal terms to all natural and legal persons of the Member States and of the host country. It may be extended to operators in other developing countries and, in exceptional cases, to other third countries. origin Article Supplies shall originate in the host country, other developing countries or the Member States. In exceptional cases supplies may originate elsewhere. 20. Regulation (EC) No 257/2001 of the European Parliament and of the Council of 22 January 2001 regarding the implementation of measures to promote economic and social development in Turkey nationality Article 6 7. Participation in invitations to tender and the award of contracts shall be open on equal terms to all natural and legal persons in the Member States and Turkey. origin Article 6 8. Supplies shall originate in the Member States or Turkey.

35 21. Council Regulation (EC) No 2666/2000 of 5 December 2000 on assistance for Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the Former Yugoslav Republic of Macedonia, repealing Regulation (EC) No 1628/96 and amending Regulations (EEC) No 3906/89 and (EEC) No 1360/90 and Decisions 97/256/EC and 1999/311/EC nationality Article 7 3. Participation in invitations to tender and contracts shall be open on equal terms to all natural and legal persons from Member States, States which are recipients under this Regulation and candidate countries for accession to the European Union.Participation by countries which are recipients under the TACIS and MEDA programmes shall also be authorised by the Commission on a case-by-case basis. 4. In the case of co-financing, the Commission may authorise participation in invitations to tender and contracts by nationals of other countries on a case-by-case basis. origin No specific provision 22. Regulation (EC) No 1726/2000 of the European Parliament and of the Council of 29 June 2000 on development cooperation with South Africa nationality Article 7 6. Participation in invitations to tender and contracts shall be open on equal terms to all natural and legal persons in the Member States, South Africa and the other ACP States. Participation may be extended to include other countries in duly substantiated cases and in order to ensure the best cost-effectiveness ratio. origin Article 7 7. Supplies shall originate in the Member States, South Africa or the other ACP States. In duly substantiated exceptional cases, they may originate in other countries. 23. Council Regulation (EC) No 764/2000 of 10 April 2000 regarding the implementation of measures to intensify the EC-Turkey customs union nationality article 6 7. Participation in invitations to tender and the award of contracts shall be open on equal terms to any natural or legal person of the Member States and Turkey. origin article 6 8. Supplies shall originate in the Member States or Turkey. 24. Council Regulation (EC, EURATOM) No 99/2000 of 29 December 1999 concerning the provision of assistance to the partner States in Eastern Europe and Central Asia nationality Article Supply and works contracts shall be awarded by means of open invitations to tender except in the cases provided for in Article 116 of the Financial Regulation.

36 4. Participation in invitations to tender and contracts shall be open on equal terms to all natural and legal persons in the Member States, in the partner States, and in countries benefiting from the Phare programme. Participation by natural and legal persons from Mediterranean countries with traditional economic, trade or geographical links may be authorised by the Commission on a case-by-case basis if the programmes or projects concerned require specific forms of expertise specifically available in such countries. 5. In the case of co-financing, the participation of third countries concerned in invitations to tender and contracts may be authorised by the Commission, but on a case-by-case basis. In these cases the participation of undertakings from third countries shall be acceptable only if reciprocity is granted. origin No specific provision 25. Council Regulation (EC) No 1268/1999 of 21 June 1999 on Community support for preaccession measures for agriculture and rural development in the applicant countries of central and eastern Europe in the pre-accession period No specific provision 26. Council Regulation (EC) No 1267/1999 of 21 June 1999 establishing an Instrument for Structural Policies for Pre-accession No specific provision 27. Council Regulation (EC) No 1488/96 of 23 July 1996 on financial and technical measures to accompany (MEDA) the reform of economic and social structures in the framework of the Euro-Mediterranean partnership, as amended by Council Regulation (EC) No 2698/2000 of 27 November 2000 nationality Article 8 1. Invitations to tender and contract shall be open on equal terms to all natural and legal persons in the Member States and the Mediterranean partners. 8. In the case of co-financing, participants from countries other than the Mediterranean partners concerned in invitations to tender and contracts may be authorized by the Commission on a case-by-case basis. In these cases participation of undertakings from third countries shall be acceptable only if reciprocity is granted. origin No specific provision 28. Council Regulation (EC) No 1734/94 of 11 July 1994 on financial and technical cooperation with the Occupied Territories as modified by the Council Regulation (EC) No 2840/98 of 21 December 1998 No specific provision 29. Council Regulation (EEC) No 443/92 of 25 February 1992 on financial and technical assistance to, and economic cooperation with, the developing countries in Asia and Latin America

37 Nationality and origin Article 13 Participation in invitations to tender and purchasing and other contracts shall be open on equal terms to all natural or legal persons of the Member States. With regard to financial and technical assistance, such participation shall usually be extended to the recipient State and may also be extended, case by case, to other developing countries. In exceptional cases which are duly justified, other countries of origin may be allowed for specific components. 30. Council Regulation (EC) No 382/2001 of 26 February 2001 concerning the implementation of projects promoting cooperation and commercial relations between the European Union and the industrialised countries of North America, the Far East and Australasia and repealing Regulation (EC) No 1035/1999 No specific provision

38 ANNEX 2 EUROPEAID AND UNTYING OF COMMUNITY AID [Valid as of 28 December 2005] As part of the CONCORD sub-group Financial Regulation-standard contract 2, on 7 April we held an important meeting with the unit in charge of rules and procedures within EuropeAid, which enabled us to clarify once and for all the rules of nationality and origin applicable to the various contracts signed with EuropeAid. This clarification was necessary given that, since 28 December 2005, two new Regulations on the untying of Community aid have been adopted. The Regulations clarifies who (service providers, consultants, suppliers, contractors) can take part in the procurement (services, supplies and works); and who (NGOs etc) is now eligible to apply directly to the different European Commission calls. These changes affect existing and new contracts from 28/12/05. I. Procurement changes As of 28 December 2005, the rules of nationality and origin 3 (what can be procured from where) have changed for all existing and new contracts signed with EuropeAid, whether these be contracts governed by the standard contract of December 2000, May 2003 and, even more relevant, the new provisions given in February 2006 and August ) For projects taking place in Least Developed Countries (LDCs) 4 All procurement and goods need to originate from the countries listed below: The 25 Member States of the European Union, The 3 Member States in the European Economic Area (Iceland, Norway and Lichtenstein) Developing Countries (according to the DAC list of ODA recipients) International organisations (Red Cross, United Nations, World Bank, for example) The following OECD countries: Australia, Canada, USA, Japan, New Zealand and Switzerland. 2) For projects taking place in a Developing Country that is classified as Lower Income Countries (LICs), Lower Middle Income Countries (LMICs) or Upper Middle Income Countries (UMICs) 5 All procurement and goods need to originate from the countries listed below: The 25 Member States of the European Union, The 3 Member States in the European Economic Area (Iceland, Norway and Lichtenstein) Developing Countries (according to the DAC list of ODA recipients) 2 By standard contract, we mean Annex II and IV of the contracts signed with Europe Aid, that is the General conditions applicable to grant contracts within the framework of external European Community actions and Procedures for the awarding of applicable contracts by the beneficiaries of grants within the framework of external European Community actions. 3 Rule of nationality: nationality of service providers, suppliers and consultants Rule of origin: place of manufacturing of goods and equipment 4 LDC listed in the OECD s Development Assistance Committee (DAC) list of ODA Recipients. 5 These are countries known as other low income countries [LICs], for example: India, Indonesia, Kenya, Nicaragua, Uzbekistan, Tajikistan, Vietnam, Lower Middle-Income Countries [LMICs] e.g. Albania, Algeria, Bosnia, Egypt, Honduras, Morocco, Philippines, Serbia-Montenegro, Sri Lanka, Thailand, Tunisia etc-, Upper Middle-Income Countries [UMICs] e.g. Brazil, Lebanon.

39 International organisations (Red Cross, United Nations, World Bank, for example) HOWEVER, you cannot for the moment procure goods, services and works from the OECD countries not previously included under old rules, i.e. Australia, Canada, USA, Japan, New Zealand and Switzerland. Indeed, the conditions for reciprocal access to external assistance have not yet been established for these countries. 3) Difference between thematic and geographic budget lines: These new rules of nationality and origin are valid for all budget lines, be they thematic or geographic. The only exception is for contracts signed for the PHARE programme intended for candidate countries for EU membership, which is ruled out by different rules. We shall, however, make a distinction between thematic and geographic budget lines: for thematic budget lines, rules of nationality and origin include: (1) All developing countries, (2) In addition, and when it is mentioned in the thematic budget line s regulation, other countries those from a developing country. for geographic budget lines, rules of nationality and origin include: (1) only those developing countries that are mentioned in the regulation of the geographic budget line 6 (2) in addition countries other than developing countries, mentioned in the regulation of the geographic budget line 7 4) Derogation Please note: that you are able to ask for a Derogation to this rule (to procure from other countries listed), only in exceptional cases, which can be clearly justified. These can be on the basis of the unavailability of products and services in the markets of the countries concerned; for reasons of extreme urgency of the project s implementation and if the rules would impede the realisation of the project. Based on substantiated reasons, the European Commission will need to review each derogation, on a case-by-case basis. 5) Consultants and Service Providers Eligible tenders should respect the new rules (tendering process and the rules of nationality) as outlined above. However, the persons that performs the consultancy (free lance or belonging to a service provider) can be of any nationality. EXAMPLES: 1- Before and including 27 December 2005: You would have applied existing Annex 4 procurement rules and the rules of nationality and origin that used to be different from one funding line to another. 2- From 28 December 2005: First of all, you need to identify where your project country is ranked on OECD DAC list of ODA recipients. So if your project is taking place in India, i.e. classified as a Lower Income Country then you can procure goods, services and works, from: The 25 Member States of the European Union, The 3 Member States in the European Economic Area (Iceland, Norway and Lichtenstein) Developing Countries (according to the DAC list of ODA recipients) International organisations (Red Cross, United Nations, World Bank, for example) 6 Note that the ALA regulation for Asia and Latin America does not provide a list of countries, but all countries in the region are eligible. 7 Such as Russia for TACIS or Israel for MEDA.

40 Additionally, you want to procure a product that originates from the USA but you are buying from an EC supplier. In this case, the USA producer is the only one producing this product. Alternative products are of low quality and slightly different build and you cannot use the alternatives. Therefore, we would have to ask the European Commission (whoever manages your contract: Delegations or staff based in Brussels) for a derogation. You will need to clearly state the reasons why you would need to purchase a product that originated from the USA and why this product is integral to your project. If on the other hand, you were working in Afghanistan, which is classified as LDC, then you would not have to ask for a derogation, as you would automatically be able to procure products that originate from the USA. II. Applicant eligibility changes For EC calls for proposals for projects taking place in LDCs, applicants from the following countries can apply directly for EC funding: The 25 Member States of the European Union, The 3 Member States in the European Economic Area (Iceland, Norway and Lichtenstein) Developing Countries (according to the DAC list of ODA recipients) International organisations (Red Cross, United Nations, World Bank, for example) The following OECD countries: Australia, Canada, USA, Japan, New Zealand and Switzerland. Please note that Australia, Canada, USA, Japan, New Zealand and Switzerland are ONLY automatically eligible to apply for EC funds for projects taking place in LDCs. For all other calls for proposals where the project takes place in LICs, LMICs or UMICs, applicants from the following countries can apply directly for EC funding: The 25 Member States of the European Union, The 3 Member States in the European Economic Area (Iceland, Norway and Lichtenstein) Developing Countries (according to the DAC list of ODA recipients, listed in annex II of the council regulation attached) International organisations (Red Cross, United Nations, World Bank, for example) HOWEVER, for the moment OECD countries not previously included under old rules, i.e. Australia, Canada, USA, Japan, New Zealand and Switzerland may not be considered eligible for EU funding. for projects taking place in LICs, LMICs or UMICs. Indeed, the conditions for reciprocal access to external assistance have not yet been established for these countries. EXCEPTIONS TO THE RULE ECHO (DG humanitarian aid) contracts have NOT been untied. So the existing rules of Annex 5 of the Framework Partnership Agreement with ECHO still apply until these have been modified to reflect the new regulations. The NGO Co-financing line ( , ex B7-6000), Development Education, Block Grants are open only to European organisations. European Development Fund (EDF) grants follow the rules outlined in the Cotonou agreement, as amended on 25 June 2005.

41 For NGOs projects: rules of nationality and origin usually include the 25 EU countries and the ACP countries 8. III. Things to look out for The OECD s classification of the different countries changes over the years but this will not affect the rules of nationality and origin valid for your country of operation: note that if the OECD-list changes, it will not automatically have an impact on the untying regulations which need in such a case be duly modified to include an eventual new list. Consequently, there is no need to monitor the OECD-list as such. The same monitoring applies to regional projects covering several countries, where there could be a mixture of LDCs and countries belong to any other categories listed in the DAC Lists of Recipient countries. Please make sure that you always check the eligibility criteria listed in each call for proposals issued by the EC, as the EC has the right to impose more restrictive access for specific calls for proposals. With the new instruments as of 2007, the untying regulations will cease to apply since the corresponding provisions will be disposed into the new legal basis. 8 See annex IV to the ACP-EC Partnership Agreement signed in Cotonou (Articles 20 and 22) as revised on 25 June Please refer to :

42 ANNEX 3 RULES OF NATIONALITY AND ORIGIN FOR FUNDING LINES WHEN THERE IS NO PROVISION IN THE LEGAL BASIS De: Laurent.Sarazin@cec.eu.int Envoyé: lundi 18 avril :42 À: Simonetta RISAIO (belgique) Cc: Alexandra MEGE; annette.becker@eed.de; dominichaslam@wateraid.org; winnubst@tiscali.be; reicher.peter@axelero.hu; Veronique.Janssen@cec.eu.int; Emmanuelle.ROURE-MARTEIL@cec.eu.int Dear Mrs Risaio, This is a very good question, which has given rise to lengthy discussions and contradicting views within the Commission over time! The "most recent" answer, confirmed with the Commission's Legal Service, differs between the rule of nationality and the rule of origin: as regards nationality, in the absence of provisions in the legal basis, article of the Financial Regulation restricts nationality to EU Member States. as regards origin of goods, in the absence of provisions in the legal basis there are no constraints. We will clarify this in the forthcoming revision of the Practical Guide and in particular of annex IV to the standard grant contract. Best regards, Laurent Sarazin -----Original Message----- From: Simonetta RISAIO [mailto:simonetta.risaio@handicap.be] Sent: Friday, April 15, :10 PM To: SARAZIN Laurent (AIDCO) Cc: amege@handicap-international.org; annette.becker@eed.de; dominichaslam@wateraid.org; winnubst@tiscali.be; reicher.peter@axelero.hu; JANSSEN Veronique (AIDCO) Subject: RE: Dear Mr. Sarazin, Thank you very much for this document. I just had a very quick look at it: could you please tell us which are the implications when "No specific provisions" are included in the legal bases for the nationality and/or the origin rules? Thank you, Simonetta Risaio

43 ANNEX 4 EXPLANATORY NOTE ON CLAIMING DEFAULT INTERESTS WITHIN EUROPEAID GRANT CONTRACTS 1. Timeline for claiming default interest p 2 a. Within the 2000 grant standard contract p 2 i. Default interest within a first late advance p 3 ii. Default interest within further late payments p 4 b. Within the 2003 grant standard contract p 5 i. Default interest within a first late advance p 6 ii. Default interest within further late payments p 7 2. Calculation of default interest p 9 3. How claiming default interest p 9

44 1. TIMELINE FOR CLAIMING DEFAULT INTEREST a. General conditions applicable to European Community grant contracts for external aid (December 2000 version) This version of the grant standard contract is applicable to all grant agreements signed with EuropeAid between December 2000 and May Please refer in particular to articles 15.2 and 15.3 of these general conditions regarding default interests 9. Two cases shall be distinguished: default interests within a first advance, default interests with further payments. First instalment (2000 grant standard contract) : CALENDAR OPERATIONS Date A Sending by the NGO of : - the Contract signed by both parties, - a request for payment conforming to the model attached as Annex V, and - a financial guarantee if it is required (see article 15.1 of the 2000 general conditions) Date B Reception of the documents by the EC Date C (= Date B + 60 calendar days) Payment shall be made (see article 15.1 of the 2000 general conditions) Date D Date on which the Commission s account is debited. 9 Article 15.2 of the General Conditions (2000 version) : The payment deadline of 60 calendar days referred to in Article 15(1) above shall expire on the date on which the Commission s account is debited. Without prejudice to the terms of Article 11(3) [termination of the contract at the initiative of the European Commission], the Commission may halt the countdown towards this deadline by notifying the Beneficiary that the request for payment is inadmissible, either because the amount in question is not due or because the relevant report cannot be approved and the Commission thinks it necessary to conduct further checks. In such cases, the Commission may request clarification, alteration or additional information, which must be produced within 30 days of the request. The countdown towards the deadline will resume on the date on which a correctly formulated request for payment is recorded. Article 15.3 of the General Conditions (2000 version) : Once the deadline referred to above has expired, the Beneficiary (unless the Beneficiary is a government department or public body in a Community Member State) may, within two months of late payment, claim late-payment interest at the rate applied by the European Central Bank to its main refinancing transactions in EUR on the first day of the month in which the deadline expired, plus one and a half percentage points. The late-payment interest shall apply to the time which elapses between the date of the payment deadline (inclusive), and the date on which the Commission s account is debited (exclusive). This interest shall not be considered income for the purposes of Article 17(3).

45 Date E Reception of the late payment by the NGO Date E + max 2 months Within two months of reception of late payment, the NGO has the possibility to claim late-payment interest at the rate applied by the European Central Bank to its main refinancing transactions in EUR on the first day of the month in which the 60- day deadline expired, plus one and a half percentage points. The late-payment interest shall apply to the time which elapses between the date of the payment deadline (inclusive) Date C, and the date on which the Commission s account is debited (exclusive) Date D. (See article 15.3 of the 2000 general conditions) Further instalments (2000 grant standard contract) : CALENDAR OPERATIONS Date A Sending by the NGO of: - an intermediary or final report - request for payment - an (external or internal) audit report if required. (see articles 15.1, 16.4 and 16.5 of the 2000 general conditions) Date B Reception of the documents by the EC Date C1 (= Date B + 60 calendar days) Payment should be made subject to approval of that report (see article 15.1 of the general conditions) Eventually the EC may request additional information within that 60 day period. If the EC does so, it suspends the countdown of the 60 days for the payment (see article 15.2 of the 2000 general conditions). Date B + maximum 60 calendar days + maximum 30 calendar days The grant beneficiary has then up to 30 days to answer the EC (see article 15.2 of the 2000 general conditions). Usually: Date B + maximum 60 calendar days + maximum 30 calendar days But we could imagine several exchanges following successive questions from the European Commission, hence suspending the countdown of the 60-day period and thus postponing the payment The countdown towards the deadline will resume on the date on which a correctly formulated request for payment is recorded by the European Commission (see article 15.2 of the 2000 general conditions). Date C2 Following a satisfactory answer communicated to the

46 European Commission, payment shall be made Date D Date on which the Commission s account is debited. Date E Reception of the late payment by the NGO Date E + max 2 months Within two months of reception of late payment, the NGO has the possibility to claim late-payment interest at the rate applied by the European Central Bank to its main refinancing transactions in EUR on the first day of the month in which the 60- day deadline expired, plus one and a half percentage points. The late-payment interest shall apply to the time which elapses between the date of the payment deadline (inclusive) Dates C1 or C2, and the date on which the Commission s account is debited (exclusive) Date D. See article 15.3 of the 2000 general conditions b. General conditions applicable to European Community-financed grant contracts for external actions (May 2003 version) This version of the grant standard contract is applicable to all grant agreements signed with EuropeAid as 1 June 2003 and until 31 January Please refer in particular to articles 15.3 and 15.4 of these general conditions regarding default interest 10 Here again, we shall make the distinction between: default interests within a first advance, default interests with further payments. 10 Article 15.3 of the General Conditions (2003 version): The time-limit of 45 days for payment referred to in Article 15.1 above shall expire on the date on which the Contracting Authority s account is debited. Without prejudice to Article 12.5 [suspension of payments as a precautionary measure by the European Commission], the Contracting Authority may suspend this time-limit by notifying the Beneficiary that the request for payment is inadmissible, either because the amount in question is not due or because proper supporting documents have not been supplied or it thinks it necessary to conduct further checks, including on-the-spot checks, to make sure that the expenditure is eligible. The time-limit for payment shall start running again on the date on which a correctly formulated request for payment is recorded.» Article 15.4 of the General Conditions (2003 version): Once the time-limit referred to above has expired, the Beneficiary unless the Beneficiary is a government department or public body in a Community Member State - may, within two months of receipt of the late payment, claim default interest: at the rediscount rate applied by the central bank of the country of the Contracting Authority if payments are in the currency of that country; at the rate applied by the European Central Bank to its main refinancing transactions in euro, as published in the Official Journal of the European Union, C series, if payments are in euro, on the first day of the month in which the time-limit expired, plus three and a half percentage points. The interest shall be payable for the time elapsed between the expiry of the payment deadline (exclusive) and the date on which the Contracting Authority's account is debited (inclusive). This interest is not considered income for the purposes of Article Any partial payments shall first cover the default interest thus established.

47 First instalment (2003 grant standard contract) : CALENDAR OPERATIONS Date A Sending by the NGO of: - the Contract signed by both parties, - a request for payment conforming to the model attached at Annex V, and a financial guarantee if required. (see articles 15.1 and 15.7 of the 2003 general conditions) Date B Reception of the documents by the EC Date C (= date B+ 45 calendar days) Payment should be made (see article 15.1 of the 2003 general conditions) Date D Date on which the Commission s account is debited. Date E Reception of the late payment by the NGO Date E + max 2 months The default interest must be calculated within two months of receipt of a late payment. Default interests are calculated according to: the rediscount rate applied by the central bank of the country of the Contracting Authority if payments are in the currency of that country; the rate applied by the European Central Bank to its main refinancing transactions in euro, as published in the Official Journal of the European Union, C series, if payments are in euro, on the first day of the month in which the time-limit expired, plus three and a half percentage points. The interest shall be payable for the time elapsed between the expiry of the payment deadline (exclusive) date C- and the date on which the Contracting Authority's account is debited (inclusive) date D. (see article 15.4 of the 2003 general conditions) Further instalments (2003 grant standard contract): CALENDAR OPERATIONS Date A Sending by the NGO of: - an interim or final report, - a request for payment conforming to the model in Annex V, - an audit report if required, - a financial guarantee if required. (See article 15.1, 15.6 and 15.7 of the 2003 general conditions)

48 Date B Reception of the documents by the EC Date B + 45 calendar days Approbation of the interim or final report by the EC (see article 15.2 of the 2003 general conditions) The European Commission may suspend the time-limit for approval of a report by notifying the NGO that the report cannot be approved and further clarifications are needed. Date C1 (= Date B + 45 calendar days + 45 calendar days) Payment shall be made and therefore reach the association within 90 days of sending the report, if there has been no written reaction from the EC. Date B + maximum 45 calendar days + max 30 calendar days The NGO must answer EC s questions within 30 days of the request. (See article 15.2 of the 2003 general conditions). Date B + maximum 45 calendar days + max 30 calendar days The time-limit of 45 days for the approbation of the report starts running again on the date the required information is received. (See article 15.2 of the 2003 general conditions). Date C2 Usually : Date C2 (= Date B + maximum 45 calendar days + max 30 calendar days + 45 calendar days) Following a satisfactory answer communicated to the European Commission reg. the report plus a 45-day delay, payment shall be made But we could imagine several exchanges following successive questions from the European Commission, hence suspending the countdown of the 45-day period for approbation of the report and thus postponing the other 45- day delay for the payment. Date D Date E Date E + 2 max months Date on which the Commission s account is debited. Reception of the late payment by the NGO The default interest must be calculated within two months of receipt of a late payment. Default interests are calculated according to: the rediscount rate applied by the central bank of the country of the Contracting Authority if payments are in the currency of that country; the rate applied by the European Central Bank to its main refinancing transactions in euro, as published in the Official Journal of the European Union, C series, if payments are in euro, on the first day of the month in which the time-limit expired, plus three and a half percentage points. The interest shall be payable for the time elapsed between the expiry of the payment deadline (exclusive) date C- and the date on which the Contracting Authority's account is debited (inclusive) date D. (see article 15.4 of the 2003 general conditions)

49 2. CALCULATION OF DEFAULT INTERESTS: Default interest are calculated as follows: Amount of the late payment x number of days of delay* x (rate** + pts***) Default interest = x 100 * either or or Date C (exclusive) Date D (inclusive) Date C1 (exclusive) Date D (inclusive) Date C2 (exclusive) Date D (inclusive) ** For rate, see the following website: The rate to be used is interest rate applied by the European Central Bank to its main refinancing operations, as published in the Official Journal of the EU, C-series in the first days of the month in which the time-limit expires. (See for instance C240 for October 2006). *** For contracts within the 2000 general conditions: For contracts within the 2003 general conditions: + 1,5 points + 3,5 points 3. HOW CLAIMING DEFAULT INTERESTS Send a written request to the EC service in charge of the management of the contract (either Delegation in the field or EuropeAid services in Brussels). Your mail should at least contain the following information: reference to the articles of the general conditions base on which you request the payment of default interest; a chronogram of the exchanges with the EC (see for instance the suggested table) to justify your request; Dates Description of the operation (ex: sending of the doct, reception of the late payment, etc) Amount of the payment Rate Default interest a detailed calculation of the amount of default interest