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Draft

COMMISSION REGULATION (EC) No …/..

of […]

on the implementing rules for the cross-border co-operation programmes financed in the framework of the Regulation No 1638/2006 of the European Parliament and of the Council laying down general provisions establishing a European Neighbourhood and

Partnership Instrument

Article 1 Subject and scope

This Regulation lays down the implementing rules of Regulation (EC) N° 1638/2006 in relation to the cross-border cooperation programmes.

Article 2 Definitions

For the purposes of this Regulation, the following definitions shall apply:

1. "technical assistance", the activities linked to the preparation, the management, the monitoring, the evaluation, the information, audit and control as well as the possible activities of administrative capacity building necessary for the implementation of the joint operational programmes;

2. "beneficiary", the signatory body of a grant contract with the joint managing authority which assumes the full legal and financial responsibility for the project implementation with vis-à-vis that authority; it receives the financial contribution from the joint managing authority and ensures, in the case of a partnership, its management and possible distribution in accordance with the agreements drawn up with its partners; it is the unique body responsible vis-à-vis the joint managing authority and is directly accountable for the operational and financial progress of the activities;

3. "contractor", the signatory body of a service, work or supply contract with the joint managing authority and which assumes the full legal and financial responsibility for the implementation of this contract vis-à-vis the joint managing authority;

4. "strategy paper", the document mentioned in the article 7 paragraph 3 of the Regulation (EC) N° 1638/2006 which establishes, i.e. the list of the joint operational programmes, their multi-annual indicative envelope and territorial units eligible within each programme;

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5. "participating countries", all Member States and third partner countries taking part in the joint operational programme;

6. "third partner countries" the countries and territories listed in the annex of the Regulation (EC) N° 1638/2006;

7. "large-scale projects", the projects comprising a set of works, activities or services intended to fulfil an indivisible function of a precise nature aiming at clearly identified objectives of a common interest in order to implement cross-border investments;

8. "own resources of the countries participating in the joint operational programme", the financial resources coming from the central, regional or local budget of the participating countries;

9. "operational follow-up of the projects", the follow-up of the actions financed by the programme according to the method of project cycle management, namely from programming to evaluation, while passing through the technical monitoring of the implementation.

Chapter II Basic Documents

SECTION 1: JOINT OPERATIONAL PROGRAMMES

Article 3 Preparation of the joint operational programmes

Each joint operational programme is defined by common agreement of all participating countries, in accordance with the provisions of the Regulation (EC) N° 1638/2006, the strategy paper and this Regulation.

Article 4 Content of the joint operational programmes

Each joint operational programme describes the objectives, needs and indicators concerning the actions to be undertaken and clarifies their consistency with respect to other ongoing or foreseen bilateral and multilateral programmes in the concerned countries and areas, particularly in the framework of programmes financed by the European Union.

In particular, each joint operational programme:

(a) lists the territorial units eligible for the localisation of projects financed by the programme, as defined in the Regulation (EC) N° 1638/2006 and the strategy paper and defines the conditions for the participation in the programme of the adjacent areas of the third countries not covered by the Regulation (EC) N° 1638/2006 but allowed to participate in the cooperation on the basis of the strategy paper;

(b) defines the priorities and measures addressing the objectives identified in the strategy paper;

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(c) sets out the composition of the monitoring committee in accordance with the provisions of Article 11 of this Regulation;

(d) identifies the entity appointed by the participating countries to assume the function of the joint managing authority;

(e) describes the structure that will be set up by the joint managing authority for the management of the programme in accordance with articles 14, 15, 16 and 17 of this Regulation. This description is sufficiently detailed to give the Commission a reasonable assurance that an effective and efficient internal control based on the best international practices has been adopted;

(f) includes a financial table describing the provisional yearly allocations of the programme commitments and payments, established according to the priorities and specifying in particular the amounts allocated to technical assistance;

(g) identifies the programme implementation methods, in accordance with the contractual procedures referred to in article 23 of this Regulation;

(h) indicates the provisional indicative timetable for the launching of the procedures and the selection of the projects to be financed;

(i) describes the possible regulatory requirements regarding environmental impact assessment studies and indicates the provisional indicative timetable to carry out these studies;

(j) defines the language(s) adopted by the programme;

(k) includes the information and communication plan in accordance with Article 41.

The table referred to in the second indent, point f), indicates the European Community contribution and divides the provisional indicative amounts to be committed by the Commission each year until 2013 (the allocations for the period 2011-2013 shall be reconfirmed in the indicative Programme for 2011-2013). The table also includes the provisional indicative amounts of co-financing envisaged from the own resources of each participating country or body.

For the purposes of the second indent, point g) and as a general rule, the projects financed under the programme are selected following calls for proposals. Nevertheless, the participating countries may also, in cooperation with the European Commission, jointly identify large scale cross-border investment projects, which are not selected through calls for proposals: these projects must in this case be specifically mentioned in the programme or be selected at a later stage by the monitoring committee insofar as they are consistent with the programme priorities and measures and where a budget has been specifically foreseen for this purpose.

Article 5 Adoption of the joint operational programme

1. Each joint operational programme is submitted by the joint managing authority to the Commission after the explicit common agreement of all participating countries.

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2. The Commission reviews the joint operational programme in order to verify that it contains all the elements referred to in article 4, in particular:

(a) by evaluating its conformity with the strategy paper;

(b) by checking the quality and the consistency of the analysis with the proposed priorities and measures, as well as its consistency with the other ongoing or foreseen bilateral and multilateral programmes in the regions concerned by the programme;

(c) by assessing the level of cooperation resulting from the programme and the proposed projects between the different participating countries;

(d) by verifying the programme's conformity with the applicable Community legislation;

(e) by checking whether the possibly required environmental impact assessment studies have been carried out or are foreseen before the proposed projects are implemented;

(f) by ensuring the consistency of the programme financial table, particularly as far as the amounts to be committed by the Commission are concerned;

(g) by ensuring the management capacity of the joint managing authority in relation to the volume, the content and the complexity of the operations foreseen under the programme. The Commission especially verifies that the joint managing authority has fully dedicated to the programme, both in terms of quality and quantity, that it has the necessary computerised management and accountancy tools as well as financial circuits in conformity with the applicable Community legislation. This review may be carried out through an on-the-spot ex-ante audit, if considered necessary by the Commission;

(h) by ensuring that the joint managing authority has foreseen and set up sound internal control and audit systems, based on the best international practices.

3. Following the review of the joint operational programme, the Commission may ask the participating countries to provide additional information or, when necessary, to revise certain parts.

4. The adoption of each joint operational programme equals to ex-ante accreditation by the Commission of the management and control structures set up within the joint managing authority.

5. Each joint operational programme is adopted by a Commission decision for the whole programme duration.

Article 6 Monitoring and evaluation of the joint operational programme

1. The monitoring and evaluation of each joint operational programme aim to improve the quality, the effectiveness and the consistency of its implementation. The results of the evaluations will be taken into account in the future programming exercise.

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2. A mid-term evaluation of the joint operational programme is carried out in the framework of the programme revision in accordance with the strategy paper.

This evaluation is carried out by the Commission and its results, communicated to the monitoring committee and to the joint managing authority of the programme, can lead to the adjustments in the indicative programming.

3. In addition to the mid-term evaluation, the joint operational programme, or part of it, can be evaluated at any moment.

4. In the year following the end of the implementation phase of the projects financed by the joint operational programme, an ex-post evaluation of the programme is carried out by the Commission.

Article 7 Revision of the joint operational programmes

1. Adjustments in the joint operational programme financial table limited to the transfer of Community funds from one priority to another and involving a variation of a maximum 20% of the initial amounts foreseen for each priority, can be directly applied by the joint managing authority, after prior approval by the monitoring committee. The joint managing authority shall inform the Commission about these modifications.

This rule may apply to the technical assistance financed by the Community funds only after written prior approval by the Commission.

2. Upon motivated request from the monitoring committee or at the initiative of the Commission in agreement with the monitoring committee, the joint operational programmes may be reviewed and, if necessary, revised in the following cases:

(a) in order to take into account major socio-economic changes or substantial modifications of Community, national or regional priorities in the area covered by the programme;

(b) following implementation difficulties leading notably to substantial delays;

(c) in the case of transfer of Community funds from one priority to another beyond the flexibility margin referred to in the paragraph 1 of this article;

(d) following the evaluations referred to in article 6 paragraphs 2 and 3;

(e) in the case where the programme is possibly stopped as referred to in Article 43.

3. The revision of a joint operational programme referred to in paragraph 2 is adopted by a decision of the Commission and requires the signature of an amendment to the financing agreements referred to in article 10.

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Article 8 Use of languages

1. The management structures of a joint operational programme shall use one or more of the European Union official languages as a working language.

2. In order to take into account the partnership nature of the programmes, the project beneficiaries may submit to the joint managing authority the documents concerning their project in their national language provided that this possibility is specifically mentioned in the programme and that the monitoring committee envisages setting up, through the joint managing authority, the necessary means of interpretation and translation.

3. The interpretation and translation costs are foreseen to be financed :

(a) at the level of the joint operational programme, from the budget of the Technical Assistance.

(b) at the level of the projects, from the budget of each individual project.

Article 9 Starting phase of the joint operational programmes

1. Following the adoption of the joint operational programme by Commission decision, the programme immediately starts in the Member States with the allocations of the European Neighbourhood and Partnership Instrument dedicated to the cross-border cooperation from heading 1B of the financial perspectives (Inter-institutional agreement 2006/C 139/01)1. Joint actions required to launch the programme can also be undertaken, namely:

(a) the establishment of the joint managing authority and of the joint technical secretariat ;

(b) the first meetings of the monitoring committee, including the representatives of the third partner countries which have not yet signed a financing agreement;

(c) the preparation and the launching of the tender procedures or of the calls for proposals, if necessary under suspension clause pending to the signature of the financing agreements.

2. The Commission decision referred to in paragraph 1 is applicable in each third partner country of the programme as from the signature of a financing agreement with this country in accordance with article 10.

1 Inter-institutional Agreement between the European Parliament, the Council and the Commission on

budgetary discipline and sound financial management, OJ C 139, 14.06.2006, p.1.

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SECTION 2: FINANCING AGREEMENT

Article 10 Signature of the financing agreement

1. A financing agreement is established between the Commission and each third partner country of the joint operational programme concerned. The joint managing authority designated under each joint operational programme can countersign the financing agreement.

2. The joint operational programme adopted by the Commission constitutes the technical annex to the financing agreement.

3. Each financing agreement shall be concluded at the latest before the end of the year which follows the year of the Commission decision adopting the joint operational programme ("N+1 rule").

4. If the financing agreement is not concluded within the set time limit, the joint operational programme cannot start in its external component with the third partner country concerned.

When a programme includes several third partner countries, it can start with each third partner country concerned as soon as they have signed their own financing agreement.

5. If no third partner country signs a financing agreement within the set time limit, the joint operational programme becomes null and void in its external component and the modalities referred to in Article 43 paragraphs 3 and 4 are applicable.

Chapter III Structures of the joint operational programmes Management

SECTION 1: MONITORING COMMITTEE

Article 11 Composition of the monitoring committee

1. The monitoring committee includes a representative appointed by each participating country to take all the decisions concerning the joint operational programme within the competence of the committee. The members are designated as representatives of their countries on a functional basis and not on a personal basis. The committee also includes a president and a secretary. The secretary shall be chosen from the members of the joint managing authority.

2. In addition to the duly appointed representatives, the participating countries may decide, by mutual agreement, to include other participants in order to involve, as appropriate, national, regional or local authorities, economic and social partners, civil

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society and other relevant bodies, provided that each country has the same number of participants.

In duly justified cases, and taking into account the need to preserve an effective operation of the committee, the appointed representatives of the monitoring committee decide unanimously to grant to these other participants a general voting right or a right limited to certain decisions.

3. The Commission is invited to each meeting of the monitoring committee at the same time as the participants of the organisation and is informed of the results of works. It can take part in all or part of each meeting of the committee, at its own initiative, as an observer and without any decision making power.

Article 12 Functioning of the monitoring committee

1. The appointed members of the monitoring committee adopt unanimously the committee's rules of procedure.

2. The monitoring committee shall decide by consensus. It may however submit certain decisions to a vote in certain cases, particularly the final selection of projects and the grant amounts allocated to them.

3. The appointed representatives shall elect a chairperson. The committee may decide to entrust the chairperson to a representative of the joint managing authority or to another external person. The chairperson of the monitoring committee arbitrates and conducts the discussions. The chairperson keeps a voting right except in the case when the function of the chairperson has been entrusted to a representative of the joint managing authority or to another external person. In this case the chairperson does not have a voting right.

4. The monitoring committee meets as often as necessary and at least twice a year. It is convened by its chairperson on the joint managing authority's request or on duly justified request from one of its appointed members, or the Commission. It may also take decisions through written procedure at the initiative of its chairperson. In case of a disagreement, each member may request that the decision is analyzed during the plenary meeting.

5. Minutes, are drawn up after each meeting of the monitoring committee and are co-signed by the chairperson and the secretary. They are addressed to each member of the committee and to the Commission.

Article 13 Functions of the monitoring committee

The committee assumes in particular the following functions concerning the joint operational programme:

(a) it approves the work programme of the joint managing authority;

(b) it decides on the amounts and allocation of the resources of the programme for technical assistance and human resources;

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(c) at each of its meetings, it reviews the daily management decisions taken by the joint managing authority;

(d) it appoints the selection committees for the projects;

(e) it decides on the selection criteria for the projects and takes the final decision on projects and on the grant amounts which are allocated to them;

(f) at each of its meetings and on the basis of the documents submitted by the joint managing authority, it evaluates and monitors accomplished progress to achieve the objectives of the joint operational programme;

(g) it reviews all the reports submitted by the joint managing authority and takes the appropriate measures if necessary;

(h) it examines the contentious cases of recovery notified by the joint managing authority.

Should the monitoring committee, when taking decisions referred to in the first indent, point e), decide not to follow any or part of the recommendations of the selection committee, it must justify its decision in writing. This decision is then transmitted via the joint managing authority to the Commission for prior approval.

SECTION 2: JOINT MANAGING AUTHORITY

Article 14 Organisation of the joint managing authority

1. The joint managing authority is, in general, a national, regional or local sector public-body. The joint managing authority may also be a body governed by private law with a public-service mission. This body has to provide adequate financial guarantees and comply with the conditions provided for in the Council Regulation (EC, Euratom) No 1605/20022, in particular its Article 54, and the Commission Regulation (EC, Euratom) No 2342/20023, in particular its articles 38, 39 and 41.

2. The participating countries delegate to the joint managing authority the implementation tasks of the joint operational programme which have been entrusted to them for the management of the programme. They are responsible for controlling, through the monitoring committee, that the funds are used in conformity with the rules and principles applicable to the management of the programme.

3. The operation of the joint managing authority is financed from the Community contribution for the technical assistance and from the contributions in kind as provided in article 19, paragraph 3.

2 OJ L 248, 16.9.2002, p.1. Regulation as last amended by Council Regulation No 1995/2006, OJ L 390,

30.12.2006, p.1 3 OJ L 357, 31.12.2002, p.1. Regulation as last amended by […]

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4. The accounts established by the joint managing authority are subject to an annual ex-post external audit carried out by an independent organisation as referred to in article 31.

5. The organisation of the joint managing authority is based on the best international practices as regards management and internal control and makes use of management and internal control systems adapted to the implementation of its tasks, in order to ensure the legality, the regularity and the sound financial management of its operations.

In particular, the operational management functions and the financial management functions are independently organised within the joint managing authority. The duties of authorising officer and accounting officer shall be separated duties and mutually incompatible.

6. The joint managing authority has an internal audit service which shall be independent from the services performing the duties of authorising officer, of accounting officer and of management.

7. The joint managing authority sets up procedures to ensure that expenses declared under the programme are justified and regular. Accountancy and follow up systems are also put in place as well as reliable computerised financial information tools.

8. The joint managing authority shall in particular respect the conditions and the payment deadlines included in the grants and contracts that it signs with third parties. It ensures, using appropriate verification procedures, that the funds paid under grants and contracts are only used for the purposes for which they were awarded.

A general system shall be used for the management of accounts and the administrative and financial monitoring of the grants and contracts (exchange of correspondence, follow-up letters or reminders, receipt of reports, etc.).

9. The joint managing authority shall notify without delay the Commission and the monitoring committee about any change in its procedures or organisation, or about any other circumstance which would be likely to affect the programme implementation.

10. The joint managing authority, as well as the various beneficiaries and partners of the contracts signed for the implementation of the projects, are subject to controls by the Commission, the European Court of Auditors and the European Anti-Fraud Office (OLAF).

Article 15 Functions of the joint managing authority

1. The joint managing authority is responsible for managing and implementing the joint operational programme, including the technical assistance, respecting the principle of sound financial management in accordance with the principles of economy, efficiency and effectiveness, and carries out necessary controls in accordance with the rules and procedures foreseen in the applicable legislation.

2. The various tasks of the joint managing authority include in particular:

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(a) the organisation and the secretariat of the meetings of the monitoring committee, including drawing-up the minutes of the meetings;

(b) the preparation of the detailed annual budgets of the programme and of the payment requests to the Commission;

(c) the drawing-up of the operational and financial annual reports and their transmission to the monitoring committee and to the Commission;

(d) the implementation by its internal audit service of a system of control for the internal circuits and for the correct application of procedures within the joint managing authority; annual internal audit reports must be transmitted to the monitoring committee and to the Commission;

(e) the launching, after approval by the monitoring committee, of the chairmanship calls for tenders and the calls for proposals for the selection of projects;

(f) the receipt of project applications and the organisation, the chairmanship and secretariat of selection committees, as well as the transmission to the monitoring committee and to the Commission of the reports which include the recommendations of the selection committees;

(g) following the selection of projects by the monitoring committee, the signature of the contracts for the various projects with the beneficiaries and the contractors;

(h) the operational follow-up and the financial management of the projects;

(i) the immediate notification of the monitoring committee of all cases of contentious recoveries;

(j) the preparation of possible environmental impact assessment studies;

(k) the implementation of the information and visibility plan in accordance with article 41.

Article 16 Joint technical secretariat

1. Each joint managing authority, after prior agreement of the monitoring committee, may be assisted in the daily management of the activities of the joint operational programme by a joint technical secretariat equipped with the necessary means.

The operation of the joint technical secretariat is financed from the budget of the technical assistance.

2. The joint technical secretariat might establish light antennae in participating countries with the only purpose to inform the potential beneficiaries in the countries concerned of the activities envisaged under the programme.

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Article 17 Principle of continuity

When an existing joint managing authority that has mechanisms in place already approved by the Commission for the management of current or previous programmes, is again designated for the management of a joint operational programme, it is not necessary to modify the existing organisation of this joint managing authority insofar as the mechanisms in force comply with the requirements of this Regulation.

Chapter IV Financial Management of the Joint Operational Programmes

SECTION 1: FINANCING

Article 18 Technical assistance financed by the Community contribution

The technical assistance budget eligible for the Community financing is limited to a maximum amount of 10% of the Community total contribution to the joint operational programme.

However, on a case by case basis and if justified by the level of expenses incurred during the previous years of implementation as well as the foreseeable and justified needs of the programme, an increase of the amounts of the technical assistance initially fixed for the programme may be envisaged.

Article 19 Co-financing sources

1. The co-financing shall come from the own resources of the countries or bodies participating in each joint operational programme.

2. Within each joint operational programme the participating countries are free to determine the source, the amount and the distribution of the co-financing according to the objectives, priorities and measures.

3. In-kind contributions from the joint managing authority may be considered as co-financing, subject to prior approval by the Commission. In this case they must be explicitly mentioned in the programme document.

Article 20 Co-financing rate

1. The co-financing represents at least 10% of the Community contribution to the joint operational programme, after deduction of the amount allocated to the technical assistance entirely financed by the Community contribution.

2. The co-financing is divided, if possible in a balanced way, throughout the whole duration of the programme in order to ensure that the minimum objective of 10% is achieved at the end of the programme.

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Article 21 Bank account of the joint operational programme and interests on pre-financing

1. A bank account in Euro, unique and specifically dedicated to the programme, is opened and managed by the service ensuring the duties of accounting officer within the joint managing authority. This account obligatorily operates under the double signature of the authorising officer and the accounting officer of the joint managing authority.

2. In case the bank account generates interests, the interests generated by the pre-financing payments are assigned to the joint operational programme and are declared to the Commission in the final report referred to in article 32.

Article 22 Accountancy of the joint operational programme

The accountancy of the joint operational programme is established by the service of the joint managing authority in charge of the financial transactions. This accountancy is independent and separate and exclusively deals with operations related to the joint operational programme, allowing for an analytic follow-up by objective, priority and measure.

The reconciliation operations of this accountancy with the balance of the bank account of the programme are presented by the joint managing authority to the monitoring committee and the Commission in annex to the annual report and to any request for additional pre-financing.

Article 23 Contract procedures

1. The contract procedures for procurement contracts and grants necessary for the implementation of the joint operational programme by the joint managing authority are those applicable to external actions as defined in articles 162 to 170 of the Council Regulation (EC, Euratom) No 1605/2002 and in articles 231 to 256 of the Commission Regulation (EC, Euratom) No 2342/2002.

The applicable procedures as well as related standard documents and templates of contracts are those included in the Practical Guide to contract procedures for EC external actions and its annexes in force at the time of the launching of the procurement procedures or calls for proposals.

2. The eligibility rules related to the participation in the calls for tenders and calls for proposals are those referred to in articles 14 and 21 of the Regulation (EC) N° 1638/2006.

3. These provisions are applicable to the entire geographical area of the programme, both on the territory of the Member States and on the territory of the third partner countries.

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SECTION 2: PAYMENTS

Article 24 Annual commitments by the Commission

In addition to the initial commitment accompanying the decision adopting the joint operational programme, the Commission makes the corresponding commitment at the latest by the 31st of March of the year concerned. The amount of this commitment is fixed in compliance with the financial table describing the provisional yearly allocations included in the joint operational programme, according to the progress of the programme and within the limits of available funds. The Commission shall inform the joint managing authority about the exact date on which the annual commitment has been made.

Article 25 Common rules for payments

1. Each payment of the Community contribution is made by the Commission subject to the availability of funds. The Commission automatically effects any payment to the joint managing authority from the oldest annual commitment until the entire amount of this commitment has been spent. After having spent the whole amount of the oldest annual commitment, the next annual commitment may be used.

2. Payments are made in Euro to the bank account of the joint operational programme.

3. Payments shall take the form of pre-financing payments or of final payments.

Article 26 Pre-financing

1. Each year, once the joint managing authority has been notified the budgetary commitment, it may request that a maximum of 80% of the annual Community contribution to the budget of the ongoing financial year is transferred to the programme’s bank account as a pre-financing payment.

From the second year of the joint operational programme, the request for pre-financing is accompanied by the provisional annual financial report covering all the expenditure and revenue of the previous year, not yet certified by the annual external audit report, as well as by the provisional budget of the joint managing authority's commitments and payments for the following year.

After reviewing this report and after evaluating the actual financing needs of the programme and verifying the availability of funds, the Commission shall proceed with the payment of all or part of the requested pre-financing.

2. In the course of the year, the joint managing authority may ask for the transfer of all or part of the balance of the annual Community contribution, as an additional pre-financing.

The joint managing authority supports this request by an interim financial report justifying that the expenses that have been actually incurred or that are likely to be incurred during the year, exceed the amount of the previous pre-financing payments.

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This complementary transfer constitutes an additional pre-financing since it is not certified by an external audit report.

3. In the second semester of each year of the programme's implementation, the Commission clears the previous pre-financing payments based on the actual eligible expenses incurred, as certified by the annual external audit report referred to article 31.

Based on this clearance, the Commission may proceed with the necessary financial adjustments.

Article 27 Recovery

1. The joint managing authority is responsible for the recovery of any unjustified or ineligible expenditure and for the reimbursement to the Commission of the amounts recovered proportionally to its contribution to the programme.

When ineligible expenditure already covered by a payment is identified at the time of the receipt of a contract's final report or following a control or an audit, the joint managing authority establishes recovery orders vis-à-vis the beneficiaries or the contractors concerned.

2. When the recovery concerns a claim vis-à-vis a beneficiary or a contractor established in a Member State and the joint managing authority does not succeed to recover the debt within a period of one year following the issuing of the recovery order, the Member State where the beneficiary or the contractor concerned is established, reimburses the debt to the joint managing authority, before claiming against the beneficiary or the contractor.

3. When the recovery concerns a claim vis-à-vis a beneficiary or a contractor established in a third partner country and the joint managing authority does not succeed to recover the debt within a period of one year following the issuing of the recovery order, the joint managing authority refers the case to the Commission which, on the basis of a complete file, takes over the responsibility to recover the amounts due from the beneficiary or the contractor established in the partner country or directly from the national authorities of this country.

4. The file transferred to the Member State or to the Commission contains all the documents allowing for the recovery as well as the proofs of the steps taken and the regular reminders made by the joint managing authority to the beneficiary or the contractor to recover the amounts due.

5. The joint managing authority shall exercise due diligence within the deadline of one year after issuing the recovery order to ensure the reimbursement. In particular it ensures that the claim is certain, of a fix amount and due. Where the joint managing authority is planning to waive a recovery of an established amount receivable, it shall ensure that the waiver is in order and complies with the principle of sound financial management and proportionality. The waiver decision must be substantiated and submitted to the Commission and the monitoring committee for prior approval.

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6. When it appears that the joint managing authority has not, intentionally or by negligence, exercised all the diligence necessary to proceed with the recovery or when the file transferred to the Member State or the Commission is incomplete, the joint managing authority remains responsible for the recovery after the deadline of one year and the amounts due are declared ineligible for the Community financing.

7. Pursuant to with paragraphs 2 and 3, the contracts concluded by the joint managing authority in the framework of the programme contain a clause allowing the Commission or the Member State concerned to carry out the recovery vis-à-vis a beneficiary or a contractor, in case the claim remains open one year after the issuing of the recovery order by the joint managing authority.

SECTION 3: REPORTS

Article 28 Annual reports of the joint managing authority

1. Each year by 30 June at the latest, the joint managing authority submits to the Commission an annual report, approved by the monitoring committee and certified by the audit report referred to in article 31, on the implementation of the joint operational programme from 1 January till 31 December of the previous year. The first annual report is submitted by 30 June of the second year of the programme, at the latest.

2. Each annual report contains:

(a) a technical part describing:

– the technical assistance activities carried out during the previous year;

– the progress achieved in the implementation of the programme and its priorities;

– the detailed list of the signed contracts as well as possible difficulties encountered;

– the measures undertaken to monitor, evaluate and audit projects, their results and actions undertaken to remedy the identified problems;

– the information and communication activities;

– the programme of the activities to implement during the following year.

(b) A financial part detailing, in Euro, for each priority:

– the amounts received by the joint managing authority from the Commission as the Community contribution and from the participating countries as co-financing, as well as any other possible revenue of the programme;

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– the payments and recoveries carried out by the joint managing authority for the technical assistance and for the projects, as well as the reconciliation with the bank account of the programme;

– the amount of eligible expenditure incurred by the projects as presented by the beneficiaries in their reports and requests for payment;

– the provisional budget (commitments and expenditure) of the joint managing authority for the following year.

(c) a declaration signed by the representative of the joint managing authority assuring that the management and control systems set up by the programme in the course of the previous year, continue to comply with the model approved by the Commission and that they have operated in a way giving a reasonable assurance as to the correctness of the financial report as well as the legality and regularity of the corresponding underlying transactions.

Article 29 Annual report of the internal audit service

1. The internal audit service of the joint managing authority implements annually a programme for the control of the internal circuits and the correct application of procedures within the joint managing authority. It draws up an annual report and transmits it to the representative of the joint managing authority.

2. The joint managing authority transmits the report referred to in paragraph 1 to the Commission and to the monitoring committee as an annex to its annual report referred to in article 28.

Article 30 Annual report on the implementation of the projects' audit plan

1. Each year the joint managing authority draws up a report on the implementation, during the previous year, of the programme of projects' audit plan referred to in article 37. This report describes in detail the methodology used by the joint managing authority for selecting a representative sample of projects, as well as the controls carried out, the recommendations made and the conclusions drawn by the joint managing authority in relation to the financial management of the projects concerned.

2. The joint managing authority transmits the report referred to in paragraph 1 to the Commission and to the monitoring committee as an annex to the annual report referred to in article 28.

Article 31 External audit report

1. Independently from the external audits undertaken by the administration of the country in which the joint managing authority is established, the joint managing authority uses an independent public body or contracts an independent approved auditor who is a member of an internationally recognised supervisory body for statutory auditing to carry out each year an ex-post verification of the expenditure

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and revenue presented by the joint managing authority in its annual financial report, in accordance with the standards and ethics of the International Federation of Accountants (IFAC).

2. The scope of the external audit covers the joint managing authority's direct expenditure occurred in the framework of the technical assistance and of its project management (payments to projects). The external audit report certifies the statement of expenditure and revenue presented by the joint managing authority in its annual financial report, and in particular that the claimed expenditure have occurred and are accurate and eligible.

3. The joint managing authority shall transmit the external audit report to the Commission and to the monitoring committee as an annex to the annual report referred to in Article 28.

Article 32 Final report

The final report on the implementation of the joint operational programme shall contain mutatis mutandis the same elements as the annual reports, including their annexes, for the entire duration of the programme. It is submitted by 30 June 2016 at the latest.

SECTION 3: ELIGIBLE EXPENDITURE OF THE JOINT OPERATIONAL PROGRAMME

Article 33 Eligible costs at the level of the joint operational programme

1. In order to be eligible for Community financing, the expenditure of the joint operational programme shall be incurred during the period of execution of the programme, as defined in article 42.

2. To be considered as eligible for the implementation of the joint operational programme by the joint managing authority as technical assistance, costs must:

(a) be necessary for carrying out the programme in compliance with the criteria defined by the programme and by the monitoring committee and comply with the principles of sound financial management, in particular value for money and cost-effectiveness;

(b) be recorded in the accounts of the programme, be identifiable, verifiable and backed by original supporting documents;

(c) have been incurred following the use of the applicable procurement rules.

3. Subject to paragraphs 1 and 2, shall be eligible:

(a) the cost of staff assigned to the programme, corresponding to actual salaries plus social security charges and other remuneration-related costs. Salaries and costs must not exceed those normally borne by the structures hosting the joint

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managing authority or the joint technical secretariat, unless it is justified by showing that it is essential to carry out the joint operational programme;

(b) the travel and subsistence costs for staff and other persons taking part in the joint operational programme, provided they do not exceed those normally borne by the authorities nominated for the management of the programme. Any flat-rate reimbursement of the subsistence costs must not exceed the rates of the scales published by the European Commission at the time of the adoption of the joint operational programme;

(c) the purchase or rental costs for equipment and supplies (new or used) specifically for the purposes of the joint managing authority or the joint technical secretariat for the implementation of the joint operational programme and costs of services, provided they correspond to market rates;

(d) the costs of consumables;

(e) the subcontracting expenditure;

(f) the costs deriving directly from the requirements of this Regulation and of the programme (for example, information and visibility actions, evaluations, external audits, translations etc.) including financial service costs (in particular the cost of bank transfers);

Article 34 Non eligible costs at the joint operational programme level

The following costs of the joint operational programme implementation by the joint managing authority through the technical assistance shall not be considered eligible:

(a) debts and provisions for losses or debts;

(b) interest owed;

(c) items already financed in another framework;

(d) purchases of land or buildings;

(e) currency exchange losses;

(f) taxes, including VAT, unless the joint managing authority cannot reclaim and the applicable regulations authorise coverage of taxes;

(g) credits to third parties;

(h) fines.

Article 35 Contributions in kind at the joint operational programme level

Possible in-kind contributions made by the partner countries, or, where applicable, any other source, must be listed separately in the budget of the joint operational programme and are not eligible.

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They may not be considered as part of the minimum 10% co-financing requirement for the partner countries referred to in article 20.

The cost of staff assigned by the partner countries to the technical assistance of the programme is considered as a contribution in kind and consequently cannot be considered as co-financing in the programme budget.

Article 36 Eligible costs at the projects' level

1. The expenditure of each project have to be incurred during the period of execution of each relevant contract.

2. Eligible costs, non-eligible costs and the possibility of in-kind contributions at the projects' level are defined in the contracts signed with the beneficiaries or contractors.

SECTION 5: CONTROL

Article 37 Annual programme of audit of projects

1. As from the end of the first year of the joint operational programme, the joint managing authority draws up each year an audit plan of the projects that it finances.

2. The controls referred to in paragraph 1 are conducted by examining the documents or by means of on-the-spot checks for a sample of projects selected by the joint managing authority based on a random statistical sampling method taking account of internationally recognized audit standards, in particular having regard to risk factors related to the projects' value, type of operations, type of beneficiary or other relevant elements. The sample shall be sufficiently representative to guarantee an acceptable level of assurance in relation to the direct controls carried out by the joint managing authority on the materiality, accuracy and eligibility of expenditure claimed by the projects.

Article 38 Community control

The Commission, the OLAF, the European Court of Auditors and any external auditor authorised by these institutions may verify, by examining the documents or by means of on-the-spot checks, the use of the Community funds by the joint managing authority and the different beneficiaries and partners of the projects.

These checks may take the form of a full audit on the basis of the supporting documents for the accounts, accounting documents and any other document relevant to the financing of the joint operational programme (including, for the joint managing authority, all documents related to the selection procedures and to contracts) and of the project.

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Chapter V Projects financed by the joint operational programmes

Article 39 Bodies participating in the project of the joint operational programmes

Projects shall be submitted by applicants representing, as lead partners, partnerships consisting of at least one partner from a Member State participating in the programme and at least one partner from a third partner country participating in the programme.

Article 40 Nature of projects

The nature of these projects may be of three kinds:

(a) integrated projects, where each partner carries out a part of the activities of the joint project on its respective side of the border;

(b) symmetrical projects, where similar activities are carried out in parallel in Member States on the one hand and in third partner countries on the other hand;

(c) projects implemented mainly or entirely in a Member State or a third partner country but for the benefit of all or part of the partners of the joint operational programme.

Article 41 Information and visibility of the joint operational programme

1. The joint managing authority is responsible for the implementation of the information and visibility actions of the joint operational programme. In particular, the joint managing authority shall take all necessary steps to ensure the visibility of the Community financing or co-financing in relation to its own activities and to the activities of the projects financed under the programme. Such measures shall comply with the relevant rules on the visibility of external actions laid down and published by the Commission.

2. The antennae of the joint technical secretariat, which might be established in participating countries, shall be responsible for the publicising activities of the joint operational programme and for providing information to the potentially interested bodies, excluding any other responsibility.

Chapter VI Closure of the joint operational programme

Article 42 Duration of the joint operational programmes

1. The period of execution of each joint operational programme shall start at the earliest on the 1 January 2007 and end at 31December 2016 at the latest.

2. This period of execution comprises the following phases:

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(a) an implementation phase of the joint operational programme of a maximum duration of seven years ending at 31 December 2013 at the latest. No procedure of call for tenders or of call for proposals may be launched and no contract may be signed after this date, with the exception of audit and evaluation contracts;

(b) an implementation phase of the projects financed by the joint operational programme starting at the same time as the implementation phase of the programme and ending at 31 December 2014 at the latest. All activities of projects financed by the programme must end by that date at the latest;

(c) a financial closure phase of the joint operational programme including the financial closure of all contracts signed in the framework of the programme, the ex-post evaluation of the programme, the submission of the final report and the final payment or the final recovery by the Commission. This phase ends at 31 December 2016 at the latest.

Article 43 Possible earlier termination of the programme

1. In cases referred to in article 9 paragraph 10 indents c) and d) of the Regulation (EC) N° 1638/2006 or in other duly justified cases, the Commission may decide, at the request of the monitoring committee or at its own initiative after consultation of the monitoring committee, to terminate the joint operational programme before the expiry date of the period of execution.

2. In this case the joint managing authority refers this request to the Commission and transmits the final report within three months following the Commission decision. After clearing the previous pre-financing payments, the Commission makes the final payment or, where appropriate, issues the final recovery order vis-à-vis the joint managing authority. The Commission also de-commits the remaining final balance of commitments.

3. When the termination of the programme is due to the non-signature of the financing agreements by the third partner countries within the required deadlines, the budgetary commitments related to the European Neighbourhood and Partnership Instrument allocations dedicated to the cross-border cooperation from heading 1B of the financial perspectives (Inter-institutional agreement 2006/C 139/01) remain available for their normal lifetime but can only cover activities which take place exclusively in the Member States concerned. The European Neighbourhood and Partnership Instrument allocations dedicated to the cross-border cooperation from heading 4 of the financial perspectives (Inter-institutional agreement 2006/C 139/01) are de-committed.

4. In the case of non-signature of the financing agreement by the third partner countries or the decision of the Commission to terminate the joint operational programme before the normal expiry date of the programme, the following procedure applies:

(a) for the European Neighbourhood and Partnership Instrument allocations dedicated to the cross-border cooperation from heading 1B of the financial perspectives (Inter-institutional agreement 2006/C 139/01), the amounts envisaged for the future annual commitments of the joint operational

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programme concerned are used within the framework of the European Regional development Fund (ERDF) according to the procedures referred to in article 9 paragraph 10 of the Regulation (EC) N° 1638/2006;

(b) for the European Neighbourhood and Partnership Instrument allocations dedicated to the cross-border cooperation from heading 4 of the financial perspectives (Inter-institutional agreement 2006/C 139/01), the amounts envisaged for the future annual commitments of the joint operational programme concerned are used to finance other programmes or projects eligible under the Regulation (EC) N° 1638/2006.

Article 44 Keeping of documents

The joint managing authority as well as the different beneficiaries and partners of projects shall, during a period of seven years from the date of payment of the balance to the programme or to each project, keep all documents related to a joint operational programme or project, in particular the reports and supporting documents as well as accounts, accounting documents and any other document relevant to the financing of the joint operational programme (including, for the joint managing authority, all documents related to the selection and to contracts) and of the project.

Article 45 Closure of the programme

1. A joint operational programme is considered closed after the following operations have occurred:

(a) closure of all the contracts signed in the framework of the programme;

(b) payment or reimbursement of the final balance;

(c) de-commitment of remaining appropriations by the Commission.

2. The closure of the operational programme does not prejudice the Commission's right to undertake, at a later stage, financial corrections vis-à-vis the joint managing authority or the project beneficiaries if the final amount of the programme or of the projects have to be revised as a result of the controls carried out after the closure date.

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Chapter VII Final provisions

Article 46 Entry into force

This Regulation shall enter into force on the 7th day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, […]

For the Commission […] Member of the Commission