Financial Regulation Applicable to the General Budget of the Union (2018) PDF

Financial Regulation applicable to the general budget of the Union July 2018 and a selection of legal texts relevant to the EU budget Budget Budget EUROPEAN COMMISSION Directorate-General for Budget Unit R1 – Communication...

Financial Regulation applicable to the general budget of the Union July 2018 and a selection of legal texts relevant to the EU budget Budget Budget EUROPEAN COMMISSION Directorate-General for Budget Unit R1 – Communication European Commission B-1049 Brussels Belgium  EUROPEAN COMMISSION Financial Regulation applicable to the general budget of the Union July 2018 2018 Directorate-General for Budget Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of the following information. Luxembourg: Publications Office of the European Union, 2018 © European Union, 2018 Reuse is authorised provided the source is acknowledged. The reuse policy of European Commission documents is regulated by Decision 2011/833/EU (OJ L 330, 14.12.2011, p. 39). Image(s) © Patrick Daxenbichler, 2017. Source: Fotolia.com. Print ISBN 978-92-79-76468-4 doi:10.2761/506169 KV-05-17-206-EN-C PDF ISBN 978-92-79-76463-9 doi:10.2761/816722 KV-05-17-206-EN-N EPUB ISBN 978-92-79-90221-5 doi:10.2761/890392 KV-05-17-206-EN-E  3 TABLE OF CONTENTS Table of contents PREFACE 17 1. FINANCIAL REGULATION 18 1.1. Reference 18 1.2. Recitals 19 1.3. Financial Regulation 49 TITLE I — SUBJECT MATTER, DEFINITIONS AND GENERAL PRINCIPLES 49 Article 1 Subject matter 49 Article 2 Definitions 49 Article 3 Compliance of secondary legislation with this Regulation 56 Article 4 Periods, dates and time limits 56 Article 5 Protection of personal data 57 TITLE II — BUDGET AND BUDGETARY PRINCIPLES 57 Article 6 Respect for budgetary principles 57 CHAPTER 1 Principles of unity and of budgetary accuracy 57 Article 7 Scope of the budget 57 Article 8 Specific rules on the principles of unity and budgetary accuracy58 CHAPTER 2 Principle of annuality 58 Article 9 Definition 58 Article 10 Budgetary accounting for revenue and appropriations 59 Article 11 Commitment of appropriations 59 Article 12 Cancellation and carry-over of appropriations 60 Article 13 Detailed provisions on cancellation and carry-over of appropriations62 Article 14 Decommitments 63 Article 15 Making appropriations corresponding to decommitments available again 63 Article 16 Rules applicable in the event of late adoption of the budget64 CHAPTER 3 Principle of equilibrium 65 Article 17 Definition and scope 65 Article 18 Balance from financial year 66 4 TABLE OF CONTENTS CHAPTER 4 Principle of unit of account 66 Article 19 Use of euro 66 CHAPTER 5 Principle of universality 67 Article 20 Scope 67 Article 21 Assigned revenue 67 Article 22 Structure to accommodate assigned revenue and provision of corresponding appropriations 69 Article 23 Contributions from Member States to research programmes70 Article 24 Assigned revenue resulting from the participation of EFTA States in certain Union programmes 70 Article 25 Donations 71 Article 26 Corporate sponsorship 71 Article 27 Rules on deductions and exchange rate adjustments 72 CHAPTER 6 Principle of specification 73 Article 28 General provisions 73 Article 29 Transfers by Union institutions other than the Commission 73 Article 30 Transfers by the Commission 74 Article 31 Transfer proposals submitted to the European Parliament and to the Council by Union institutions 76 Article 32 Transfers subject to special provisions 77 CHAPTER 7 Principle of sound financial management and performance 77 Article 33 Performance and principles of economy, efficiency and effectiveness 77 Article 34 Evaluations 78 Article 35 Compulsory financial statement 79 Article 36 Internal control of budget implementation 80 CHAPTER 8 Principle of transparency 81 Article 37 Publication of accounts and budgets 81 Article 38 Publication of information on recipients and other information82 TITLE III — ESTABLISHMENT AND STRUCTURE OF THE BUDGET 84 CHAPTER 1 Establishment of the budget 84 Article 39 Estimates of revenue and expenditure 84 Article 40 Estimated budget of the Union bodies referred to in Article 70 84 Article 41 Draft budget 84 Article 42 Letter of amendment to the draft budget 90  5 TABLE OF CONTENTS Article 43 Obligations of Member States as a result of the adoption of the budget 91 Article 44 Draft amending budgets 91 Article 45 Early transmission of estimates and draft budgets 92 CHAPTER 2 Structure and presentation of the budget 92 Article 46 Structure of the budget 92 Article 47 Budget nomenclature 92 Article 48 Negative revenue 93 Article 49 Provisions 94 Article 50 Negative reserve 94 Article 51 Emergency Aid Reserve 94 Article 52 Presentation of the budget 95 Article 53 Rules on the establishment plans for staff 97 CHAPTER 3 Budgetary discipline 97 Article 54 Compliance with the multiannual financial framework and Decision 2014/335/EU, Euratom 97 Article 55 Compliance of Union acts with the budget 98 TITLE IV — BUDGET IMPLEMENTATION 98 CHAPTER 1 General provisions 98 Article 56 Budget implementation in accordance with the principle of sound financial management 98 Article 57 Information on transfers of personal data for audit purposes98 Article 58 Basic act and exceptions 98 Article 59 Budget implementation by Union institutions other than the Commission 100 Article 60 Delegation of budget implementation powers 101 Article 61 Conflict of interests 102 CHAPTER 2 Methods of implementation 102 Article 62 Methods of budget implementation 102 Article 63 Shared management with Member States 104 CHAPTER 3 European offices and Union bodies 107 Section 1 European offices 107 Article 64 Scope of competences of European offices 107 Article 65 Appropriations regarding European offices 107 Article 66 Non-obligatory tasks 108 Article 67 Accounting records of European offices 109 6 TABLE OF CONTENTS Section 2 Agencies and Union bodies 110 Article 68 Applicability to the Euratom Supply Agency 110 Article 69 Executive agencies 110 Article 70 Bodies set up under the TFEU and the Euratom Treaty 110 Article 71 Public-private partnership bodies 111 CHAPTER 4 Financial actors 112 Section 1 Principle of segregation of duties 112 Article 72 Segregation of duties 112 Section 2 Authorising officer 112 Article 73 Authorising officer 112 Article 74 Powers and duties of the authorising officer 113 Article 75 Keeping of supporting documents by authorising officers 116 Article 76 Powers and duties of Heads of Union Delegations 116 Section 3 Accounting officer 118 Article 77 Powers and duties of the accounting officer 118 Article 78 Appointment and termination of duties of the accounting officer 118 Article 79 Powers which may be delegated by the accounting officer119 Article 80 Accounting rules 119 Article 81 Organisation of the accounts 120 Article 82 Keeping the accounts 120 Article 83 Content and keeping of budget accounts 122 Article 84 General accounts 123 Article 85 Bank accounts 123 Article 86 Treasury management 124 Article 87 The inventory of assets 124 Section 4 Imprest administrator 125 Article 88 Imprest accounts 125 Article 89 Creation and administration of imprest accounts 125 CHAPTER 5 Liability of financial actors 127 Section 1 General rules 127 Article 90 Withdrawal of delegation of powers to and suspension of duties of financial actors 127 Article 91 Liability of financial actors for illegal activity, fraud or corruption127 Section 2 Rules applicable to authorising officers responsible 128 Article 92 Rules applicable to authorising officers 128  7 TABLE OF CONTENTS Article 93 Treatment of financial irregularities on the part of a member of staff 129 Section 3 Rules applicable to accounting officers and imprest administrators 131 Article 94 Rules applicable to accounting officers 131 Article 95 Rules applicable to imprest administrators 131 CHAPTER 6 Revenue operations 132 Section 1 Making own resources available 132 Article 96 Own resources 132 Section 2 Estimate of amounts receivable 132 Article 97 Estimate of amounts receivable 132 Section 3 Establishment of amounts receivable 133 Article 98 Establishment of amounts receivable 133 Article 99 Default interest 135 Section 4 Authorisation of recovery 136 Article 100 Authorisation of recovery 136 Section 5 Recovery 136 Article 101 Rules on recovery 136 Article 102 Recovery by offsetting 138 Article 103 Recovery procedure failing voluntary payment 139 Article 104 Additional time for payment 140 Article 105 Limitation period 140 Article 106 National treatment for entitlements of the Union 141 Article 107 Fines, other penalties, sanctions and accrued interest imposed by Union institutions 141 Article 108 Recovery of fines, other penalties or sanctions imposed by Union institutions 142 Article 109 Compensatory interests 143 CHAPTER 7 Expenditure operations 143 Article 110 Financing decisions 143 Article 111 Expenditure operations 145 Article 112 Types of budgetary commitments 147 Article 113 Commitments for EAGF appropriations 148 Article 114 Time limits for commitments 149 Article 115 Types of payments 151 Article 116 Time limits for payments 152 8 TABLE OF CONTENTS CHAPTER 8 Internal auditor 153 Article 117 Appointment of the internal auditor 153 Article 118 Powers and duties of the internal auditor 154 Article 119 Work programme of the internal auditor 156 Article 120 Independence of the internal auditor 156 Article 121 Liability of the internal auditor 156 Article 122 Action before the Court of Justice of the European Union 157 Article 123 Internal audit progress committees 157 TITLE V — COMMON RULES 158 CHAPTER 1 Rules applicable to direct, indirect and shared management 158 Article 124 Scope 158 Article 125 Forms of Union contribution 158 Article 126 Cross-reliance on assessments 159 Article 127 Cross-reliance on audits 159 Article 128 Use of already available information 159 Article 129 Cooperation for protection of the financial interests of the Union 160 CHAPTER 2 Rules applicable to direct and indirect management 160 Section 1 Rules on procedures and management 160 Article 130 Financial framework partnerships 160 Article 131 Suspension, termination and reduction 162 Article 132 Record-keeping 163 Article 133 Adversarial procedure and means of redress 164 Article 134 Interest rate rebates and guarantee fee subsidies 164 Section 2 Early-detection and exclusion system 164 Article 135 Protection of the financial interests of the Union by means of detection of risks, exclusion and imposition of financial penalties 164 Article 136 Exclusion criteria and decisions on exclusions 166 Article 137 Declaration and evidence of absence of an exclusion situation172 Article 138 Financial penalties 174 Article 139 Duration of exclusion and limitation period 174 Article 140 Publication of exclusion and financial penalties 175 Article 141 Rejection from an award procedure 177 Article 142 The early-detection and exclusion system 177 Article 143 Panel 179  9 TABLE OF CONTENTS Article 144 Functioning of the database for the early-detection and exclusion system 181 Article 145 Exception applicable to the Joint Research Centre 182 Section 3 IT systems and e-government 182 Article 146 Electronic management of operations 182 Article 147 e-Government 182 Article 148 Electronic exchange systems 183 Article 149 Submission of application documents 183 CHAPTER 3 Rules applicable to direct management 185 Article 150 Evaluation committee 185 Article 151 Clarification and correction of application documents 186 Article 152 Guarantees 186 Article 153 Guarantee on pre-financing 187 TITLE VI — INDIRECT MANAGEMENT 187 Article 154 Indirect management 187 Article 155 Implementation of Union funds and budgetary guarantees189 Article 156 Indirect management with international organisations 192 Article 157 Indirect management with Member State organisations 193 Article 158 Indirect management with third countries 193 Article 159 Blending operations 194 TITLE VII — PROCUREMENT AND CONCESSIONS 194 CHAPTER 1 Common provisions 194 Article 160 Principles applicable to contracts and scope 194 Article 161 Annex on procurement and delegation of powers 195 Article 162 Mixed contracts and common procurement vocabulary 195 Article 163 Publicity measures 196 Article 164 Procurement procedures 196 Article 165 Interinstitutional procurement and joint procurement 198 Article 166 Preparation of a procurement procedure 199 Article 167 Award of contracts 199 Article 168 Submission, electronic communication and evaluation 200 Article 169 Contacts during the procurement procedure 201 Article 170 Award decision and information to candidates or tenderers201 Article 171 Cancellation of the procurement procedure 202 Article 172 Performance and modifications of the contract 202 10 TABLE OF CONTENTS Article 173 Performance guarantees and retention money guarantees204 CHAPTER 2 Provisions applicable to contracts awarded by Union institutions on their own account 204 Article 174 The contracting authority 204 Article 175 Thresholds applicable and standstill period 205 Article 176 Rules on access to procurement 205 Article 177 Procurement rules of the World Trade Organisation 205 CHAPTER 3 Provisions applicable for procurement in the field of external actions 206 Article 178 External action procurement 206 Article 179 Rules on access to procurement in the field of external actions 206 TITLE VIII — GRANTS 207 CHAPTER 1 Scope and form of grants 207 Article 180 Scope and form of grants 207 Article 181 Lump sums, unit costs and flat-rate financing 208 Article 182 Single lump sums 210 Article 183 Checks and controls on beneficiaries related to lump sums, unit costs and flat rates 210 Article 184 Periodic assessment of lump sums, unit costs or flat- rates211 Article 185 Usual cost accounting practices of the beneficiary 211 Article 186 Eligible costs 212 Article 187 Affiliated entities and sole beneficiary 214 CHAPTER 2 Principles 215 Article 188 General principles applicable to grants 215 Article 189 Transparency 215 Article 190 Co-financing 216 Article 191 Principle of non-cumulative award and prohibition of double funding 216 Article 192 No-profit principle 217 Article 193 Principle of non-retroactivity 218 CHAPTER 3 Grant award procedure and grant agreement 219 Article 194 Content and publication of calls for proposals 219 Article 195 Exceptions to calls for proposals 220 Article 196 Content of grant applications 220 Article 197 Eligibility criteria 222  11 TABLE OF CONTENTS Article 198 Selection criteria 223 Article 199 Award criteria 224 Article 200 Evaluation procedure 224 Article 201 Grant agreement 225 CHAPTER 4 Implementation of grants 226 Article 202 Amount of the grant and extension of audit findings 226 Article 203 Supporting documents for payment requests 227 Article 204 Financial support to third parties 228 Article 205 Implementation contracts 229 TITLE IX — PRIZES 229 Article 206 General rules 229 Article 207 Rules of contest, award and publication 230 TITLE X — FINANCIAL INSTRUMENTS, BUDGETARY GUARANTEES AND FINANCIAL ASSISTANCE 231 CHAPTER 1 Common provisions 231 Article 208 Scope and implementation 231 Article 209 Principles and conditions applicable to financial instruments and budgetary guarantees 232 Article 210 Financial liability of the Union 234 Article 211 Provisioning of financial liabilities 235 Article 212 Common provisioning fund 237 Article 213 Effective provisioning rate 238 Article 214 Annual reporting 239 CHAPTER 2 Specific provisions 240 Section 1 Financial instruments 240 Article 215 Rules and implementation 240 Article 216 Financial instruments directly implemented by the Commission241 Article 217 Treatment of contributions from funds implemented under shared management 241 Section 2 Budgetary guarantees 242 Article 218 Rules for budgetary guarantees 242 Article 219 Implementation of budgetary guarantees 242 Section 3 Financial assistance 243 Article 220 Rules and implementation 243 TITLE XI — CONTRIBUTIONS TO EUROPEAN POLITICAL PARTIES 244 Article 221 General provisions 244 12 TABLE OF CONTENTS Article 222 Principles 244 Article 223 Budgetary aspects 245 Article 224 Call for contributions 246 Article 225 Award procedure 246 Article 226 Form of contributions 247 Article 227 Guarantees 247 Article 228 Use of contributions 248 Article 229 Report on the use of the contributions 248 Article 230 Amount of the contribution 249 Article 231 Control and penalties 249 Article 232 Record keeping 250 Article 233 Selection of external audit bodies or experts 250 TITLE XII — OTHER BUDGET IMPLEMENTATION INSTRUMENTS 250 Article 234 Union trust funds for external actions 250 Article 235 Implementation of Union trust funds for external actions 252 Article 236 Use of budget support 253 Article 237 Remunerated external experts 254 Article 238 Non-remunerated experts 255 Article 239 Membership fees and other payments of subscriptions 255 Article 240 Expenditure on the members and staff of Union institutions255 TITLE XIII — ANNUAL ACCOUNTS AND OTHER FINANCIAL REPORTING 256 CHAPTER 1 Annual accounts 256 Section 1 Accounting framework 256 Article 241 Structure of the accounts 256 Article 242 Supporting documents 256 Article 243 Financial statements 256 Section 2 Budget implementation reports 257 Article 244 Budget implementation reports 257 Section 3 Annual accounts timetable 258 Article 245 Provisional accounts 258 Article 246 Approval of the final consolidated accounts 258 CHAPTER 2 Integrated financial and accountability reporting 260 Article 247 Integrated financial and accountability reporting 260 CHAPTER 3 Budgetary and other financial reporting 261 Article 248 Monthly reporting on budget implementation 261 Article 249 Annual report on budgetary and financial management 261  13 TABLE OF CONTENTS Article 250 Annual report on financial instruments, budgetary guarantees and financial assistance 261 Article 251 Status report on accounting issues 262 Article 252 Reporting on Union trust funds for external actions 262 Article 253 Publication of information on recipients 262 TITLE XIV — EXTERNAL AUDIT AND DISCHARGE 262 CHAPTER 1 External audit 262 Article 254 External audit by the Court of Auditors 262 Article 255 Rules and procedure on the audit 263 Article 256 Checks on securities and cash 263 Article 257 Court of Auditors’ right of access 264 Article 258 Annual report of the Court of Auditors 265 Article 259 Special reports of the Court of Auditors 265 CHAPTER 2 Discharge 266 Article 260 Timetable of the discharge procedure 266 Article 261 The discharge procedure 267 Article 262 Follow-up measures 267 Article 263 Specific provisions regarding the EEAS 268 TITLE XV — ADMINISTRATIVE APPROPRIATIONS 268 Article 264 General provisions 268 Article 265 Payments made in advance 269 Article 266 Specific provisions regarding building projects 269 Article 267 Early information procedure and prior approval procedure271 TITLE XVI — INFORMATION REQUESTS AND DELEGATED ACTS 272 Article 268 Information requests by the European Parliament and by the Council 272 Article 269 Exercise of the delegation 272 1.4. Final and transitional provisions 274 Article 279 Transitional provisions 274 Article 280 Review 274 Article 281 Repeal 274 Article 282 Entry into force and application 275 Recital 244 276 Recital 245 276 Recital 246 276 14 TABLE OF CONTENTS 1.5. Annex I - Procurement 277 CHAPTER 1 Common provisions 277 Section 1 Framework contracts and publicity 277 Section 2 Procurement procedures 281 CHAPTER 2 Provisions applicable to contracts awarded by Union institutions on their own account 311 CHAPTER 3 Procurement in the field of external actions 314 1.6. Annex II - Correlation tables 318 1.6.1. Correlation table for the FR 318 1.6.2. Correlation table for the Rules of Application (RAP) 321 1.7. Index 328 1.8. Statements 330 2. SELECTION OF LEGAL TEXTS RELEVANT TO THE BUDGET OF THE EUROPEAN UNION 332 2.1. Treaty on European Union 333 Common foreign and security policy 333 2.2. Treaty on the Functioning of the European Union 334 Court of Auditors 334 Enforcement 335 Financial provisions 336 Enhanced cooperation 343 General and final provisions 343 2.3. Treaty establishing the European Atomic Energy Community 345 Institutional provisions 345 Financial provisions 345 General provisions 348  15 TABLE OF CONTENTS 2.4. Council Regulation (EU, EURATOM) No 1311/2013 of 2 December 2013laying down the multiannual financial framework for the years 2014-2020 349 CHAPTER 1 General provisions 351 CHAPTER 2 Special instruments 355 CHAPTER 3 Revision 358 ANNEX I Multiannual Financial Framework (EU-28) 361 2.5. Interinstitutional Agreement of 2 December2013 between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management 2013/C 373/01 362 PART I Multiannual Financial Framework and Special instruments 363 PART II Improvement of interinstitutional cooperation in budgetary matters 365 PART III Sound financial management of Union funds 370 ANNEX Interinstitutional cooperation during the budgetary procedure 373 Part A. Calendar of the budgetary procedure 373 Part B. Priorities for the budgetary procedure 373 Part C. Establishment of the draft budget and updating of estimates 373 Part D. Budgetary procedure before the conciliation procedure 374 Part E. Conciliation procedure 374 Part F. Amending budgets 377 Part G. Reste à liquider (RAL) 378  17 PREFACE Preface This publication contains the new Financial Regulation applicable to the general budget of the European Union and a selection of the most relevant basic legal texts on the management of EU funds. The Financial Regulation was adopted in July 2018 after a legislative procedure initiated by the Commission in 2016 following a public consultation. It entails a sig- nificant reform aimed at establishing simpler, more transparent and more flexible rules for EU funds. It also strengthens the fight against fraud and ensures that EU funds are not misused by shell companies or intermediaries established in tax havens. The Financial Regulation presented in this publication has addressed the main concerns expressed in the public consultation and has brought about impor- tant changes, including: a single rulebook for all financing mechanisms, with the number of financial rules reduced by half; simpler access to EU funding, with less bureaucratic procedures for funding applications and managing projects; a focus on results and EU added value; better leverage through innovative instruments and flexibility for EU funding, making it easier to combine funds from different EU programmes; better protection of EU funds, with more targeted controls and audits as well as increased transparency. The main body of the publication follows the structure of the Financial Regulation. The annexes provide a set of basic legal texts relevant to the EU budget. Published alongside the traditional paper version, the e-version will not only ena- ble enhanced search possibilities, but also keep track of future updates to the EU financial rules within a shorter time frame. The web version for tablet and mobile apps offers practitioners continuous access to this indispensable reference source. 18 1. FINANCIAL REGULATION 1. Financial regulation 1.1. Reference Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (1) OJ-L 193/30.07.2018, p.1 (1) Only the provisions of Regulation 2018/1046 replacing Regulation 966/2012 and Delegated Regulation 1268/2012 are included in this publication.  19 1.2. RECITALS 1.2. Recitals Whereas: (1) Following three years of implementation, further amendments should be made to the financial rules applicable to the general budget of the Union (the ‘budget’) in order to remove bottlenecks in implementation by increasing flexibility, to simplify delivery for the stakeholders and the services, to focus more on results, and to improve accessibility, transparency and accountabil- ity. Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council (1) should therefore be repealed and replaced by this Regulation. (2) In order to reduce the complexity of the financial rules applicable to the budget and to include the relevant rules in one single regulation, the Commis- sion should repeal Delegated Regulation (EU) No 1268/2012 (2). In the inter- est of clarity, the main rules from Delegated Regulation (EU) No 1268/2012 should be included in this Regulation, while other rules should be included in guidance for services. (3) The fundamental budgetary principles should be maintained. Existing der- ogations from those principles for specific areas such as research, external actions and structural funds should be reviewed and simplified as far as possible, taking into account their continuing relevance, their added value for the budget, and the burden they impose on stakeholders. (4) Rules on the carry-over of appropriations should be presented more clearly and a distinction should be made between automatic and non-automatic carry-overs. The Union institutions concerned should provide information to the European Parliament and to the Council on both automatic and non-au- tomatic carry-overs. (5) The carrying-over and use of external assigned revenue for the succeeding programme or action should be allowed with a view to using such funds effi- ciently. It should be possible to carry over internal assigned revenue only to the following financial year, except where this Regulation provides otherwise. (6) With regard to internal assigned revenue, the financing of new building projects with the revenue from lettings and the sale of buildings should be allowed. To that end, such revenue should be considered as internal assigned revenue which can be carried over until it is fully used. (1) Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 (OJ L 298, 26.10.2012, p. 1). ( ) Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of 2 Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union (OJ L 362, 31.12.2012, p. 1). 20 1. FINANCIAL REGULATION (7) Union institutions should be able to accept any donation made to the Union. (8) A provision should be introduced to allow for in-kind sponsorship by a legal person of an event or activity for promotional or corporate social responsibil- ity purposes. (9) The concept of performance as regards the budget should be clarified. Per- formance should be linked to the direct application of the principle of sound financial management. The principle of sound financial management should also be defined, and a link should be established between objectives set and performance indicators, results and economy, efficiency and effectiveness in the use of appropriations. For reasons of legal certainty, while avoiding con- flicts with existing performance frameworks of the different programmes, performance terminology, in particular output and results, should be defined. (10) In accordance with the Interinstitutional Agreement of 13 April 2016 on Bet- ter Law-Making (1), Union legislation should be of high quality and should focus on areas where it has the greatest added value for citizens and is as efficient and effective as possible in delivering the common policy objectives of the Union. Making existing and new spending programmes and activities entailing significant spending subject to evaluation can help achieve those objectives. (11) In accordance with the principle of transparency enshrined in Article 15 of the Treaty on the Functioning of the European Union (TFEU), Union institutions are to conduct their work as openly as possible. With regard to budget imple- mentation, the application of that principle implies that citizens should know where, and for what purpose, funds are spent by the Union. Such information fosters democratic debate, contributes to the participation of citizens in the Union’s decision-making process, reinforces institutional control and scrutiny over Union expenditure, and contributes to boosting its credibility. Commu- nication should be more targeted and should aim to increase the visibility of the Union contribution for citizens. Such objectives should be achieved by the publication, preferably using modern communication tools, of relevant infor- mation concerning all recipients of funds financed from the budget which takes into account those recipients’ legitimate interests of confidentiality and security and, as far as natural persons are concerned, their right to privacy and the protection of their personal data. Union institutions should therefore adopt a selective approach in the publication of information, in accordance with the principle of proportionality. Decisions to publish should be based on relevant criteria in order to provide meaningful information. (12) Without prejudice to the rules on the protection of personal data, the utmost transparency regarding information on recipients should be sought. The infor- mation on recipients of Union funds implemented under direct management (1) OJ L 123, 12.5.2016, p. 1.  21 1.2. RECITALS should be published on a dedicated website of Union institutions, such as the Financial Transparency System, and should include at least the name and the locality of the recipient, the amount legally committed and the purpose of the measure. That information should take into account relevant criteria such as the periodicity, the type and the importance of the measure. (13) It should be possible for the Commission to implement the budget indirectly through Member State organisations. For reasons of legal certainty, it is therefore appropriate to define a Member State organisation as an entity established in a Member State as a public-law body, or as a body governed by private law entrusted with a public-service mission and provided with ade- quate financial guarantees by that Member State. Financial backing provided to such private-law bodies by a Member State in accordance with existing requirements set out in Union law, in a form decided by that Member State and not necessarily requiring a bank guarantee, should be considered as ade- quate financial guarantees. (14) For prizes, grants and contracts awarded following the opening-up of a public procedure to competition, and in particular for contests, calls for proposals and calls for tenders, in order to respect the principles of the TFEU and in particular the principles of transparency, proportionality, equal treatment and non-discrimination, the name and locality of the recipients of Union funds should be published. Such publication should contribute to the control of the award procedures by the unsuccessful applicants in the competition. (15) Personal data referring to natural persons should not be publicly available for longer than the period during which the funds are being used by the recipient and should therefore be removed after two years. The same should apply to personal data referring to legal persons whose official name identifies one or more natural persons. (16) In most of the cases covered by this Regulation, the publication concerns legal persons. Where natural persons are concerned, the publication of per- sonal data should respect the principle of proportionality between the impor- tance of the amount granted and the need to control the best use of the funds. In such cases, the publication of the region on level 2 of the common classification of territorial units for statistics (NUTS) is consistent with the objective of publication of information on recipients and ensures equal treat- ment between Member States of different sizes while respecting the recip- ients’ right to private life and, in particular, the protection of their personal data. (17) For reasons of legal certainty and in accordance with the principle of propor- tionality, the situations in which publication should not take place should be specified. For example, information should not be published with regard to scholarships or other forms of direct support paid to natural persons most 22 1. FINANCIAL REGULATION in need, to certain contracts with a very low value or to financial support below a certain threshold provided through financial instruments, or in cases where disclosure risks threatening the rights and freedoms of the individuals concerned as protected by the Charter of Fundamental Rights of the Euro- pean Union or causing harm to the commercial interests of the recipients. For grants, however, there should be no special exemption from the obligation to publish information on the basis of a specific threshold, in order to maintain the current practice and to allow for transparency. (18) Where personal data of recipients is published for the purposes of trans- parency in relation to the use of Union funds and the control of award pro- cedures, those recipients should be informed of such publication, as well as of their rights and the procedures applicable for exercising those rights, in accordance with Regulations (EC) No 45/2001 (1) and (EU) 2016/679 (2) of the European Parliament and of the Council. (19) In order to ensure that the principle of equal treatment is respected for all recipients, the information related to natural persons should also be pub- lished, in line with the obligation for Member States to establish a large degree of transparency for contracts above the thresholds laid down in Direc- tive 2014/24/EU of the European Parliament and of the Council (3). (20) In the case of indirect and shared management, the persons, entities or des- ignated bodies implementing Union funds should make available informa- tion on recipients and final recipients. In the case of shared management, the information should be published in accordance with sector-specific rules. The Commission should make available information about a single website, including a reference to its address, where the information on recipients and final recipients can be found. (21) In the interest of increased readability and transparency of data on financial instruments implemented under direct and indirect management, it is appro- priate to merge all reporting requirements into one single working document to be attached to the draft budget. (22) In order to promote best practices in the implementation of the Euro- pean Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund, the European Agricultural Fund for Rural Development (EAFRD), and the European Maritime and Fisheries Fund (EMFF), as well as (1) Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (OJ L 8, 12.1.2001, p. 1). ( ) Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the 2 protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1). (3) Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 94, 28.3.2014, p. 65).  23 1.2. RECITALS the European Agricultural Guarantee Fund (EAGF), the Commission should, for information purposes, be able to make available to bodies responsible for management and control activities a non-binding methodological guide setting out its own control strategy and approach, including checklists, and examples of best practice. That guide should be updated whenever necessary. (23) It is appropriate to provide for the possibility for Union institutions to conclude service-level agreements with each other in order to facilitate the implemen- tation of their appropriations and also for the possibility to conclude such agreements between departments of Union institutions, Union bodies, Euro- pean offices, bodies or persons entrusted with implementation of specific actions in the common foreign and security policy (CFSP) pursuant to Title V of the Treaty on European Union (TEU) and the Office of the Secretary-Gen- eral of the Board of Governors of the European schools for the provision of services, supply of products or execution of works or of building contracts. (24) It is appropriate to lay down the procedure for setting up new European offices and to distinguish between obligatory and non-obligatory tasks of such offices. A possibility for Union institutions, Union bodies and other Euro- pean offices to delegate the powers of the authorising officer to the director of a European office should be introduced. European offices should also have the possibility to conclude service-level agreements for the provision of ser- vices, supply of products or execution of works or of building contracts. It is appropriate to set out specific rules for the drawing-up of accounting records, provisions authorising the accounting officer of the Commission to delegate some of his or her tasks to staff in those offices and operating procedures for bank accounts which the Commission should be able to open in the name of a European office. (25) In order to improve the cost-effectiveness of executive agencies and in light of the practical experience gained with other Union bodies, it should be pos- sible to entrust the accounting officer of the Commission with all or part of the tasks of the accounting officer of the executive agency concerned. (26) For reasons of legal certainty, it is necessary to clarify that directors of exec- utive agencies act as authorising officers by delegation when managing operational appropriations of programmes delegated to their agencies. To achieve the full effect of efficiency gains resulting from a global centrali- sation of certain support services, the possibility for executive agencies to implement administrative expenditure should be explicitly provided for. (27) It is necessary to establish rules on the powers and responsibilities of finan- cial actors, in particular authorising officers and accounting officers. (28) The European Parliament, the Council, the Court of Auditors and the account- ing officer of the Commission should be informed of the appointment or 24 1. FINANCIAL REGULATION termination of the duties of an authorising officer by delegation, internal auditor and accounting officer within two weeks of such appointment or termination. (29) Authorising officers should be fully responsible for all revenue and expend- iture operations executed under their authority, and for internal control sys- tems, and should be held accountable for their actions, including, where necessary, through disciplinary proceedings. (30) The tasks, responsibilities and principles of the procedures to be observed by the authorising officers should also be laid down. Authorising officers by delegation should ensure that the authorising officers by subdelegation and their staff receive information and training concerning the control standards and the respective methods and techniques and that measures are taken in order to ensure the functioning of the control system. The authorising officer by delegation should report to his or her Union institution on the performance of the duties in the form of an annual report. That report should include the required financial and management information to support that officer’s declaration of assurance on the performance of his or her duties, including the information on the overall performance of the operations carried out. The supporting documents relating to the operations carried out should be kept for at least five years. The various forms of negotiated procedure for the award of public contracts should be the subject of a special report from the authorising officer by delegation to the Union institution concerned and of a report from that Union institution to the European Parliament and to the Council, since those procedures represent derogations from the usual award procedures. (31) The double role of Heads of Union delegations, and of their deputies in their absence, as authorising officers by subdelegation for the European Exter- nal Action Service (EEAS) and, as regards operational appropriations, for the Commission should be taken into account. (32) The delegation of powers of budget implementation by the Commission con- cerning the operational appropriations of its own section of the budget to the deputy Heads of Union delegations should be restricted to situations where the performance of those tasks by the deputy Heads of Union delegations is strictly necessary in order to ensure business continuity during the absence of Heads of Union delegations. The deputy Heads of Union delegations should not be allowed to exercise those powers on a systematic basis or for reasons of internal work division. (33) The accounting officer should be responsible for the proper implementation of payments, the collection of revenue and the recovery of amounts receiv- able. The accounting officer should manage the treasury, bank accounts and third-party files, keep the accounts and be responsible for drawing up the  25 1.2. RECITALS financial statements of Union institutions. The accounting officer of the Com- mission should be the only person who is entitled to lay down the accounting rules and the harmonised charts of accounts, while the accounting officers of all other Union institutions should lay down accounting procedures applicable in their institutions. (34) The arrangements for the appointment and termination of the duties of the accounting officer should also be established. (35) The accounting officer should set up procedures to ensure that the accounts opened for the requirements of treasury management and imprest accounts are not in debit. (36) The conditions for the use of imprest accounts, a system of management which constitutes an exception to normal budgetary procedures and only concerns limited amounts, should be laid down, and the tasks and respon- sibilities of the imprest administrators, as well as those of the authorising officer and the accounting officer in connection with the control of imprest accounts, should be set out. The Court of Auditors should be informed of any appointment of an imprest administrator. For reasons of efficiency, imprest accounts should be set up in Union delegations for appropriations from both the sections of the budget relating to the Commission and to the EEAS. It is also appropriate to allow, under specific conditions, for the use of imprest accounts in the Union delegation for payments of limited amounts by budg- etary procedures. As regards the appointment of imprest administrators, it should be possible to select them also from personnel employed by the Com- mission in the field of crisis-management aid and humanitarian aid opera- tions whenever there is no available Commission staff covered by the Staff Regulations of Officials of the European Union and the Conditions of Employ- ment of Other Servants of the Union, laid down in Council Regulation (EEC, Euratom, ECSC) No 259/68 (1) (‘Staff Regulations’). (37) In order to take into account the situation in the field of crisis-management aid and humanitarian aid operations whenever there are no Commission staff covered by the Staff Regulations available and the technical difficulties to have all legal commitments signed by the authorising officer responsible, it should be allowed for the personnel employed by the Commission in that field to enter into legal commitments of a very low value up to EUR 2 500 which are linked to the payments executed from imprest accounts, and for Heads of Union delegations or their deputies to enter into legal commitments on the instruction of the authorising officer responsible of the Commission. (38) Once the tasks and responsibilities of financial actors have been defined, it is only possible to hold them liable under the conditions laid down in the Staff Regulations. Specialised financial irregularities panels have been set (1) OJ L 56, 4.3.1968, p. 1. 26 1. FINANCIAL REGULATION up in Union institutions pursuant to Regulation (EU, Euratom) No 966/2012. However, due to the limited number of cases submitted to them and for reasons of efficiency, it is appropriate to transfer their functions to an inter- institutional panel established pursuant to this Regulation (‘the panel’). The panel should be set up to assess requests and issue recommendations on the need to take decisions on exclusion and imposition of financial penal- ties referred to it by the Commission or other Union institutions and bodies, without prejudice to their administrative autonomy in respect of members of their staff. That transfer also aims to avoid duplication and to mitigate the risks of contradictory recommendations or opinions, in cases where both an economic operator and a member of staff of a Union institution or body are involved. It is necessary to maintain the procedure by which it is possible for an authorising officer to seek confirmation of an instruction which that officer considers to be irregular or contrary to the principle of sound financial management, and thus be released from any liability. The composition of the panel should be modified when it fulfils this role. The panel should have no investigative powers. (39) As regards revenue, it is necessary to address negative adjustments of own resources covered by Council Regulation (EU, Euratom) No 609/2014 (1). Except in the case of own resources, it is necessary to maintain the existing tasks and controls falling within the responsibility of the authorising officers at the different stages of the procedure: establishment of the estimate of amounts receivable, issuing of recovery orders, dispatch of the debit note informing the debtor that the amount receivable has been established and the decision, where necessary, to waive an entitlement subject to criteria guaranteeing compliance with sound financial management in order to ensure an efficient collection of revenue. (40) The authorising officer should be able to waive totally or partially the recov- ery of an established amount receivable when the debtor has entered into any of the insolvency proceedings as defined in Regulation (EU) 2015/848 of the European Parliament and of the Council (2), in particular in cases of judicial arrangements, compositions and analogous proceedings. (41) Specific provisions on procedures for the adjustment or the reduction to zero of an estimate of the amount receivable should be laid down. (42) It is necessary to clarify the timing of the entry in the budget of amounts received by way of fines, other penalties and sanctions, and of any accrued interest or other income generated by them. (1) Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements (OJ L 168, 7.6.2014, p. 39). (2) Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (OJ L 141, 5.6.2015, p. 19).  27 1.2. RECITALS (43) Due to the recent developments on the financial markets and the interest rate applied by the European Central Bank (ECB) to its principal refinancing operations, it is necessary to review the provisions concerning the interest rate for fines or other penalties and to provide for rules in the case of a neg- ative interest rate. (44) To reflect the specific nature of amounts receivable consisting in fines or other penalties imposed by Union institutions under the TFEU or the Treaty establishing the European Atomic Energy Community (the Euratom Treaty), it is necessary to introduce specific provisions on the interest rates appli- cable to amounts due but not yet paid, in the event that such amounts are increased by the Court of Justice of the European Union. (45) The rules on recovery should be both clarified and strengthened. In particular, it should be specified that the accounting officer is to recover amounts by offsetting them also against amounts owed to the debtor by an executive agency when it implements the budget. (46) In order to guarantee legal certainty and transparency, rules regarding the deadlines within which a debit note is to be sent should be laid down. (47) In order to secure the management of assets whilst also aiming at yielding a positive return, it is necessary to have amounts relating to fines, other penalties or sanctions imposed under the TFEU or the Euratom Treaty, such as competition fines which are being contested, provisionally collected and invested in financial assets, and to determine the assignment of the return on them. Since the Commission is not the only Union institution which is enti- tled to impose fines, other penalties or sanctions, it is necessary to lay down provisions concerning such fines, other penalties or sanctions imposed by other Union institutions and to lay down rules for their recovery which should be equivalent to those applicable to the Commission. (48) In order to ensure that the Commission has all the necessary information for the adoption of financing decisions, it is necessary to lay down the minimum requirements for the contents of financing decisions on grants, procurement, Union trust funds for external actions (‘Union trust funds’), prizes, financial instruments, blending facilities or platforms and budgetary guarantees. At the same time, in order to give a longer-term perspective to the potential recipients, it is necessary to allow for financing decisions to be adopted for more than one financial year while specifying that the implementation is subject to the availability of budget appropriations for the respective finan- cial years. Furthermore, it is necessary to reduce the number of the elements required for the financing decision. In line with the aim of simplification, the financing decision should at the same time constitute an annual or multian- nual work programme. Since contributions to the Union bodies referred to in 28 1. FINANCIAL REGULATION Articles 70 and 71 are already established in the budget, there should be no requirement to adopt a specific financing decision in that respect. (49) As regards expenditure, the relationship between financing decisions, global budgetary commitments and individual budgetary commitments as well as the concepts of budgetary and legal commitment should be clarified in order to establish a clear framework for the different stages of budget implementation. (50) In order to take into account in particular the number of legal commit- ments entered into by Union delegations and Union representations and the exchange-rate fluctuations experienced by them, provisional budgetary com- mitments should be possible also in cases where the final payee and the amount are known. (51) As regards the typology of payments which it is possible for authorising officers to make, clarification of the various types of payments should be provided, in accordance with the principle of sound financial management. The rules for clearing of pre-financing payments should further be clarified, in particular for situations where no interim clearing is possible. To that effect, appropriate provisions should be included in legal commitments entered into. (52) This Regulation should stipulate that payments are to be made within spec- ified time limits and that, in the event of failure to respect such time limits, creditors will be entitled to default interests to be charged to the budget, except in the case of Member States, the European Investment Bank (EIB) and the European Investment Fund (EIF). (53) It is appropriate to integrate the provisions concerning validation and author- isation of expenditure in one article and to introduce a definition of ‘decom- mitments’. Since the transactions are carried out in computerised systems, the signing of a ‘passed for payment’ voucher in order to express the val- idation decision should be replaced by an electronically secured signature, except in a limited number of cases. It is also necessary to clarify that the validation of expenditure applies to all eligible costs, including, as is the case for the clearing of pre-financing, costs which are not associated with a pay- ment request. (54) In order to reduce complexity, streamline existing rules and improve the read- ability of this Regulation, rules common to more than one budget imple- mentation instrument should be established. For those reasons, certain provisions should be regrouped, the wording and scope of other provisions should be aligned and unnecessary repetitions and cross-referencing should be removed. (55) Each Union institution should establish an internal audit progress committee tasked with ensuring the independence of the internal auditor, monitoring the quality of the internal audit work and ensuring that internal and external  29 1.2. RECITALS audit recommendations are properly taken into account and followed up by its services. The composition of that internal audit progress committee should be decided by each Union institution, taking into account its organisa- tional autonomy and the importance of independent expert advice. (56) More emphasis should be put on performance and results of projects financed from the budget. It is thus appropriate to define an additional form of financing not linked to costs of the relevant operations in addition to the forms of Union contribution already well established (reimbursement of the eligible costs actually incurred, unit cost, lump sums and flat-rate financing). The additional form of financing should be based on the fulfilment of certain conditions ex ante or on the achievement of results measured by reference to previously set milestones or through performance indicators. (57) Where the Commission carries out assessments of the operational and finan- cial capacity of recipients of Union funds or of their systems and procedures, it should be able to rely on the assessments already conducted by itself, other entities or donors such as national agencies and international organ- isations, in order to avoid duplicating assessments of the same recipients. The possibility for cross-reliance on assessments conducted by other enti- ties should be used where such assessments were made in compliance with conditions equivalent to those set out in this Regulation for the applicable method of implementation. Therefore, in order to foster cross-reliance on assessments among donors, the Commission should promote the recognition of internationally accepted standards or international best practices. (58) It is also important to avoid situations in which recipients of Union funds are audited several times by different entities on the use of those funds. It should therefore be possible to rely on audits already carried out by independent auditors provided that there is sufficient evidence of their competence and independence and provided that the audit work is based on internationally accepted audit standards providing reasonable assurance, and that they have been conducted on the financial statements and reports setting out the use of the Union contribution. Such audits should then form the basis of the overall assurance on the use of Union funds. To that end, it is important to ensure that the report of the independent auditor and the related audit documentation is made available on request to the European Parliament, the Commission, the Court of Auditors and the audit authorities of Member States. (59) For the purpose of relying on assessments and audits and in order to reduce the administrative burden on persons and entities receiving Union funds, it is important to ensure that any information already available at Union institu- tions, managing authorities or other bodies and entities implementing Union funds, is reused to avoid multiple requests to recipients or beneficiaries. 30 1. FINANCIAL REGULATION (60) In order to provide for a long-term cooperation mechanism with recipients, the possibility of signing financial framework partnership agreements should be provided for. Financial framework partnerships should be implemented through grants or through contribution agreements with persons and entities implementing Union funds. For that purpose, the minimum content of such contribution agreements should be specified. Financial framework partner- ships should not unduly restrict access to Union funding. (61) The conditions and procedures for suspending, terminating or reducing a Union contribution should be harmonised across the different budget implementation instruments such as grants, procurement, indirect manage- ment, prizes, etc. The grounds for such suspension, termination or reduction should be defined. (62) This Regulation should establish standard periods for which documents relating to Union contributions should be kept by recipients so as to avoid divergent or disproportionate contractual requirements while still providing the Commission, the Court of Auditors and the European Anti-Fraud Office (OLAF) with sufficient time to obtain access to such data and documents and perform the ex post checks and audits. In addition, any person or entity receiving Union funds should be obliged to cooperate in the protection of the financial interests of the Union. (63) In order to provide adequate information to participants and recipients and to ensure that they have the possibility to exercise their right of defence, partic- ipants and recipients should be allowed to submit their observations before adoption of any measure adversely affecting their rights and they should be informed of the means of redress available to them for challenging such a measure. (64) In order to protect the financial interests of the Union, a single early-detec- tion and exclusion system should be set up by the Commission. (65) The early-detection and exclusion system should apply to participants, recip- ients, entities on whose capacity the candidate or tenderer intends to rely, subcontractors of a contractor, any person or entity receiving Union funds where the budget is implemented under indirect management, any person or entity receiving Union funds under financial instruments implemented under direct management, participants or recipients on which entities implement- ing the budget under shared management have provided information, and sponsors. (66) It should be clarified that, where a decision to register a person or entity in the early-detection and exclusion system database is taken on the basis of an exclusion situation relating to a natural or legal person that is a member of the administrative, management or supervisory body of that person or entity, or that has powers of representation, decision or control with regard to  31 1.2. RECITALS that person or entity, or to a natural or legal person that assumes unlimited liability for the debts of that person or entity or to a natural person who is essential for the award or for the implementation of the legal commitment, the information registered in the database is to include the information con- cerning those persons. (67) The decision on the exclusion of a person or entity from participation in award procedures or the imposition of a financial penalty on a person or entity and the decision on the publication of the related information should be taken by the authorising officers responsible, in light of their autonomy in admin- istrative matters. In the absence of a final judgment or final administrative decision and in cases related to a serious breach of contract, the authorising officers responsible should take their decision on the basis of a preliminary classification in law, having regard to the recommendation of the panel. The panel should also assess the duration of an exclusion in cases where the duration has not been set by the final judgment or the final administrative decision. (68) The role of the panel should be to ensure the coherent operation of the exclusion system. The panel should be composed of a standing chair, two representatives of the Commission and a representative of the requesting authorising officer. (69) The preliminary classification in law does not prejudge the final assessment of the conduct of the person or entity concerned by the competent authorities of Member States under national law. The recommendation of the panel, as well as the decision of the authorising officer responsible, should therefore be reviewed following the notification of such a final assessment. (70) A person or entity should be excluded by the authorising officer responsible where it has been established by a final judgment or a final administrative decision that the person or entity is guilty of grave professional misconduct, of non-compliance, whether intentional or not, with the obligations relating to the payment of social security contributions or taxes, of the creation of an entity in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations, of fraud affecting the budget, of corruption, of conduct related to a criminal organisation, of money laundering or terrorist financing, of terrorist offences or offences linked to terrorist activities, of child labour or other offences concerning trafficking in human beings or of the commitment of an irregularity. A person or entity should also be excluded in the event of a serious breach of a legal commitment or of bankruptcy. (71) When taking a decision on the exclusion of a person or entity, or the impo- sition of a financial penalty on a person or entity, and on the publication of the related information, the authorising officer responsible should ensure compliance with the principle of proportionality, in particular by taking into 32 1. FINANCIAL REGULATION account the seriousness of the situation, its budgetary impact, the time which has elapsed since the relevant conduct, the duration of the conduct and its recurrence, whether the conduct was intentional or the degree of negligence shown and the degree of collaboration of the person or entity with the rele- vant competent authority and the contribution of that person or entity to the investigation. (72) The authorising officer responsible should also be able to exclude a person or entity where a natural or legal person assuming unlimited liability for the debts of the economic operator is bankrupt or in a similar situation of insol- vency or where that natural or legal person fails to comply with its obliga- tions to pay social security contributions or taxes, where such situations have an impact on the financial situation of that economic operator. (73) A person or entity should not be subject to a decision on exclusion when it has taken remedial measures, thus demonstrating its reliability. That possibility should not apply in cases of the most severe criminal activities. (74) In light of the principle of proportionality, a distinction should be made between cases where it is possible to impose a financial penalty as an alter- native to exclusion, on the one hand, and cases where the gravity of the conduct of the recipient concerned in respect of attempting to unduly obtain Union funds justifies the imposition of a financial penalty in addition to the exclusion so as to ensure a deterrent effect, on the other. The maximum amount of the financial penalty which can be imposed by the contracting authority should also be defined. (75) A financial penalty should only be imposed on a recipient and not on a par- ticipant given that the amount of the financial penalty to be imposed is cal- culated on the basis of the value of the legal commitment at stake. (76) The possibility to take decisions on exclusion or to impose financial penalties is independent from the possibility to apply contractual penalties, such as liquidated damages. (77) The duration of an exclusion should be limited in time, as is the case under Directive 2014/24/EU, and should be in accordance with the principle of proportionality. (78) It is necessary to determine the commencement date and the duration of the limitation period for taking decisions on exclusion or imposing financial penalties. (79) It is important to be able to reinforce the deterrent effect achieved by the exclusion and the financial penalty. In that regard, the deterrent effect should be reinforced by the possibility to publish the information related to the exclusion and/or to the financial penalty in a manner that satisfies the data-protection requirements set out in Regulations (EC) No 45/2001 and  33 1.2. RECITALS (EU) No 2016/679. Such publication should contribute to ensuring that the same conduct is not repeated. For reasons of legal certainty and in accord- ance with the principle of proportionality it should be specified in which situ- ations a publication should not take place. In its assessment, the authorising officer responsible should have regard to any recommendation of the panel. As far as natural persons are concerned, personal data should only be pub- lished in exceptional circumstances justified by the seriousness of the con- duct or its impact on the financial interests of the Union. (80) Information related to an exclusion or to a financial penalty should only be published in certain cases such as grave professional misconduct, fraud, a significant deficiency in complying with the main obligations of a legal commitment financed by the budget, or an irregularity, or where an entity is created in a different jurisdiction with the intent to circumvent fiscal, social or any other legal obligations. (81) The criteria for exclusion should be clearly separated from the criteria leading to a possible rejection from an award procedure. (82) The information on the early detection of risks and on decisions on exclusion and the imposition of financial penalties on a person or entity should be centralised. For that purpose, related information should be stored in a data- base set up and operated by the Commission as the owner of the centralised system. That system should operate in compliance with the right to privacy and the protection of personal data. (83) While the setting-up and the operation of the early-detection and exclusion system should be the responsibility of the Commission, other Union insti- tutions and bodies, as well as all persons and entities implementing Union funds under direct, shared and indirect management, should participate in that system by transmitting relevant information to the Commission. The authorising officer responsible and the panel should guarantee the right of defence of the person or entity. The same right should be given to a person or entity, in the context of an early detection, where an act envisaged by an authorising officer could adversely affect the rights of the person or entity concerned. In cases of fraud, corruption or any other illegal activity affecting the financial interests of the Union which are not yet subject to a final judg- ment, it should be possible for the authorising officer responsible to defer the notification of the person or entity and for the panel to defer the right of the person or entity to submit its observations. Such deferral should only be justified where there are compelling legitimate grounds to preserve the confidentiality of the investigation or of national judicial proceedings. (84) The Court of Justice of the European Union should be given unlimited juris- diction with regard to decisions on exclusion and financial penalties imposed pursuant to this Regulation, in accordance with Article 261 TFEU. 34 1. FINANCIAL REGULATION (85) In order to facilitate the protection of the financial interests of the Union across all methods of budget implementation, it should be possible for the persons and entities involved in budget implementation under shared and indirect management to take into account, as appropriate, exclusions decided upon by the authorising officers at Union level. (86) This Regulation should foster the objective of e-government, in particular the use of electronic data in the exchange of information between Union institu- tions and third parties. (87) Progress towards the electronic exchange of information and the electronic submission of documents, including e-procurement, where appropriate, which constitute a major simplification measure, should be accompanied by clear conditions for the acceptance of the systems to be used, so as to establish a legally sound environment while preserving flexibility in the management of Union funds for the participants, recipients and the authorising officers as provided for in this Regulation. (88) Rules on the composition and tasks of the committee in charge of evaluating application documents in procurement procedures, grant award procedures and in contests for prizes should be laid down. It should be possible for the committee to include external experts where that possibility is provided for in the basic act. (89) In line with the principle of good administration, the authorising officer should request clarifications or missing documents while respecting the principle of equality of treatment and without substantially changing the application documents. The authorising officer should have the possibility to decide not to do so only in duly justified cases. In addition, the authorising officer should be able to correct an obvious clerical error or request the participant to cor- rect it. (90) Sound financial management should require that the Commission protects itself by requesting guarantees at the time of paying pre-financing. The requirement for contractors and beneficiaries to lodge guarantees should not be automatic, but should be based on a risk analysis. Where, in the course of implementation, the authorising officer discovers that a guarantor is not or is no longer authorised to issue guarantees in accordance with the applicable national law, the authorising officer should be able to require replacement of the guarantee. (91) The different sets of rules for direct and indirect management, in particular as regards the concept of ‘budget implementation tasks’, have created con- fusion and entailed risks of errors of qualification both for the Commission and for its partners and should thus be simplified and harmonised. (92) The provisions on the ex ante pillar assessment of persons and entities implementing Union funds under indirect management should be revised to  35 1.2. RECITALS enable the Commission to rely as much as possible on the systems, rules and procedures of those persons and entities which have been deemed equiva- lent to the ones used by the Commission. In addition, it is important to clarify that, where the assessment reveals areas in which the procedures in place are not sufficient to protect the financial interests of the Union, the Commis- sion should be able to sign contribution agreements while taking appropriate supervisory measures. It is also important to clarify in which cases it is possi- ble for the Commission to decide not to require an ex ante pillar assessment in order to sign contribution agreements. (93) Remuneration of persons and entities implementing the budget should, where relevant and possible, be performance-based. (94) The Commission enters into partnerships with third countries by means of financing agreements. It is important to clarify the content of such financing agreements, in particular for those parts of an action that are implemented by the third country under indirect management. (95) It is important to recognise the specific nature of blending facilities or plat- forms where the Commission blends its contribution with that of finance institutions and to clarify the application of the provisions on financial instru- ments and budgetary guarantees. (96) Procurement rules and principles applicable to public contracts awarded by Union institutions on their own account should be based on the rules set out in Directive 2014/23/EU of the European Parliament and of the Council (1) and Directive 2014/24/EU. (97) In the case of mixed contracts, the methodology of the contracting authori- ties for determining the applicable rules should be clarified. (98) The ex ante and ex post publicity measures necessary to launch a procure- ment procedure should be clarified for contracts equal to or greater than the thresholds set out in Directive 2014/24/EU, for contracts below those thresh- olds and for contracts falling outside the scope of that Directive. (99) This Regulation should include an exhaustive list of all the procurement pro- cedures available to Union institutions regardless of the thresholds. (100) In the interests of administrative simplification and in order to encourage the participation of small and medium-sized enterprises (SMEs), negotiated procedures for middle-value contracts should be provided for. (101) As is the case in Directive 2014/24/EU, this Regulation should allow for mar- ket consultation prior to the launch of a procurement procedure. In order to ensure that an innovation partnership is used only when the desired works, (1) Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concessions contracts (OJ L 94, 28.3.2014, p. 1). 36 1. FINANCIAL REGULATION supplies and services do not exist on the market or as a near-to-market development activity, an obligation to carry out such preliminary market con- sultation before using an innovation partnership should be laid down in this Regulation. (102) The contribution of contracting authorities to the protection of the environ- ment and the promotion of sustainable development, while ensuring that they obtain the best value for money for their contracts, in particular through requiring specific labels or through the use of appropriate award methods, should be clarified. (103) In order to ensure that, when executing contracts, economic operators com- ply with the applicable environmental, social and labour law obligations established by Union law, national law, collective agreements or the inter- national social and environmental conventions listed in Annex X to Directive 2014/24/EU, such obligations should be part of the minimum requirements defined by the contracting authority and should be integrated in the contracts signed by the contracting authority. (104) It is appropriate that different cases usually referred to as situations of con- flict of interests be identified and treated distinctly. The notion of a ‘conflict of interests’ should be solely used for cases where a person or entity with responsibilities for budget implementation, audit or control, or an official or an agent of a Union institution or national authorities at any level, is in such a situation. Attempts to unduly influence an award procedure or obtain confidential information should be treated as grave professional misconduct which can lead to the rejection from the award procedure and/or exclusion from Union funds. In addition, economic operators might be in a situation where they should not be selected to implement a contract because of a pro- fessional conflicting interest. For instance, a company should not evaluate a project in which it has participated or an auditor should not be in a position to audit accounts it has previously certified. (105) In accordance with Directive 2014/24/EU, it should be possible to verify whether an economic operator is excluded, to apply selection and award cri- teria, as well as to verify compliance with the procurement documents in any order. As a result, it should be possible to reject tenders on the basis of award criteria without a prior check of the corresponding tenderer with regard to exclusion or selection cri