FINANCING AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF CROATIA AND THE EUROPEAN COMMISSION CONCERNING THE NATIONAL PROGRAMME FOR CROATIA UNDER THE IPA – TRANSITION ASSISTANCE AND INSTITUTION BUILDING COMPONENT FOR 2012

(Decentralised Management)

FINANCING AGREEMENT

THE GOVERNMENT OF THE REPUBLIC OF CROATIA

and

THE EUROPEAN COMMISSION

hereafter jointly referred to as «the Parties» or individually as «the beneficiary country», in the case of the Government of the Republic of Croatia, or the Commission, in the case of the European Commission

Whereas

(a) On 1 August 2006, the Council of the European Union adopted Regulation (EC) No 1085/2006 establishing an instrument for pre-accession assistance (hereafter: the «IPA Framework Regulation»). With effect from 1 January 2007, this instrument constitutes the single legal basis for the provision of financial assistance to candidate countries and potential candidates in their efforts to enhance political, economic and institutional reforms with a view to their eventually becoming members of the European Union.

(b) On 12 June 2007, the Commission adopted Regulation (EC) No 718/2007 implementing the IPA Framework Regulation, detailing applicable management and control provisions (hereafter: the «IPA Implementing Regulation»).

(c) European Union assistance under the instrument for pre-accession assistance should continue to support the beneficiary countries in their efforts to strengthen democratic institutions and the rule of law, reform public administration, carry out economic reforms, respect human as well as minority rights, promote gender equality, support the development of a civil society and advance regional cooperation as well as reconciliation and reconstruction, and contribute to sustainable development and poverty reduction.

European Union assistance for candidate countries should additionally focus on the adoption and implementation of the full EU acquis, and in particular prepare them for the implementation of the European Union’s agricultural and cohesion policy.

(d) The Parties have concluded on 27 August 2007 a Framework Agreement setting out the general rules for cooperation and implementation of the European Union assistance under the Instrument for Pre-accession Assistance.

(e) The Commission adopted on 11 December 2012 the National Programme for Croatia under the IPA Transition Assistance and Institution Building Component for 2012 and 2013 (hereafter: «the programme»). This programme is to be implemented by means of decentralised management.

(f) It is necessary for the implementation of this programme that the Parties conclude a Financing Agreement for each annual budgetary allocation to lay down the conditions for the delivery of European Union assistance, the rules and procedures concerning disbursement related to such assistance and the terms on which the assistance will be managed.

HAVE AGREED ON THE FOLLOWING:

1 THE PROGRAMME

The Commission will contribute, by way of grant, to the financing of the following programme, which is set out in Annex A to this Agreement.

Programme number: IPA/2012/022-955

Title: National Programme for Croatia under the IPA Transition Assistance and Institution Building Component for 2012 and 2013

2 IMPLEMENTATION OF THE PROGRAMME

(1) Under this Financing Agreement, the part of this programme concerning the 2012 budgetary allocation shall be implemented by decentralised management, in the meaning of Article 53c of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities, as last modified by Regulation (EC) 1525/2007 of 17 December 2007 (hereafter: «the Financial Regulation»).

(2) The Programme shall be implemented in accordance with the provisions of the Framework Agreement on the rules for co-operation concerning EU Financial Assistance to Croatia and the implementation of the Assistance under the Instrument for Pre-accession Assistance (IPA), concluded between the Parties on 27 August 2007 (hereafter: »the Framework Agreement»), which is set out in Annex B to this Agreement.

3 NATIONAL STRUCTURES AND AUTHORITIES

(1) The structures and authorities with functions and responsibilities for the implementation of this Agreement are described in Annex B to this Agreement.

(2) Further responsibilities of the national authorizing officer and the national fund are set out in Annex C to this Agreement.

4 FUNDING

The funding for the implementation of this Agreement shall be as follows:

(a) The European Union contribution for the year 2012 is fixed at a maximum of €35,219,859 (thirty-five million two hundred and nineteen thousand eight hundred and fifty-nine), as detailed in point 2.3.1 and 3.1 of the Annex A to the programme. However, payments of the European Union contribution by the Commission will not be made if the minimum requirements referred to in Article 41 of the IPA Implementing Regulation are not met.

(b) The cost of the national structures and authorities indicated in Annex B shall be borne by the beneficiary country.

5 CONTRACTING DEADLINE

(1) The individual contracts and agreements which implement this Agreement shall be concluded no later than three years from the date of conclusion of this Agreement.

(2) Any funds for which no contract has been concluded before the contracting deadline shall be cancelled.

6 DEADLINE FOR THE EXECUTION OF CONTRACTS

(1) The contracts must be executed within a maximum of 2 years from the end date of contracting.

(2) The Commission may agree, upon request by the beneficiary country, to an appropriate extension of the deadline for the execution of contracts. Such request must be addressed to the Commission before the end of the deadline for the execution of contracts, and be duly justified by the beneficiary country.

7 DISBURSEMENT DEADLINE

(1) Disbursement of funds must be made no later than one year after the final date for the execution of contracts.

(2) The deadline for disbursement of funds may be extended with the agreement of the Commission before its end date in duly justified cases.

8 INTERPRETATION

(1) Subject to any express provision to the contrary in this Agreement, the terms used in this Agreement shall bear the same meaning as attributed to them in the IPA Framework Regulation and the IPA Implementing Regulation.

(2) Subject to any express provision to the contrary in this Agreement, references to this Agreement are references to such Agreement as amended, supplemented or replaced from time to time.

(3) Any references to Council or Commission Regulations are made to the version of those regulations as indicated. If required, modifications of these regulations shall be transposed into this Agreement by means of amendments.

(4) Headings in this Agreement have no legal significance and do not affect its interpretation.

9 PARTIAL INVALIDITY AND UNINTENTIONAL GAPS

(1) If a provision of this Agreement is or becomes invalid or if this Agreement contains unintentional gaps, this will not affect the validity of the other provisions of this Agreement. The Parties will replace any invalid provision by a valid provision which comes as close as possible to the purpose of and intent of the invalid provision.

(2) The Parties will fill any unintentional gap by a provision which best suits the purpose and intent of this Agreement, in compliance with the IPA Framework Regulation and the IPA Implementing Regulation.

10 REVIEW AND AMENDMENT

(1) The implementation of this Agreement will be subject to periodic reviews at times arranged between the Parties.

(2) Any amendment agreed to by the Parties will be in writing and will form part of this Agreement. Such amendment shall come into effect on the date determined by the Parties.

11 TERMINATION

(1) Without prejudice to paragraph 2, this Agreement shall terminate eight years after its signature. The termination of this Agreement shall not preclude the possibility for the Commission to make financial corrections in accordance with Articles 49 to 54 of the IPA Implementing Regulation.

(2) This Agreement may be terminated by either Party by giving written notice to the other Party. Such termination shall take effect six calendar months from the date of the written notice.

12 SETTLEMENT OF DIFFERENCES

(1) Differences arising out of the interpretation, operation and implementation of this Agreement, at any and all levels of participation, will be settled amicably through consultation between the Parties.

(2) In default of amicable settlement, either Party may refer the matter to arbitration in accordance with the Permanent Court of Arbitration Optional Rules for Arbitration Involving International Organisations and States in force at the date of this Agreement.

(3) The language to be used in the arbitration proceedings shall be English. The appointing authority shall be the Secretary General of the Permanent Court of Arbitration following a written request submitted by either Party. The Arbitrator’s decision shall be binding on all Parties and there shall be no appeal.

13 NOTICES

(1) Any communication in connection with this Agreement shall be made in writing and in the English language. Each communication must be signed and must be supplied as an original document or by fax.

(2) Any communication in connection with this Agreement must be sent to the following addresses:

For the Commission:

Office of Director Alexandra Cas Granje

European Commission

DG Enlargement / B

Rue de la Loi 170

1049 Brussels, Belgium

Fax: +32 2 297 9705

For the Beneficiary Country

Office of Matija Derk, Assistant Minister and National IPA Co-ordinator

Ministry of Regional Development and EU Funds

Trg kralja Petra Krešimira IV br. 1

10000 Zagreb, Croatia

14 NUMBER OF ORIGINALS

This Agreement is drawn up in duplicate in the English language

14 ANNEXES

The Annexes A, B and C shall form an integral part of this Agreement.

15 ENTRY INTO FORCE

This Agreement shall enter into force on the date on which the Recipient notifies the Commission that all internal procedures in the Republic of Croatia necessary for the entry into force of this Agreement have been fulfilled.

Zagreb, 9 May 2013

by Matija Derk

Assistant Minister and National IPA Co-ordinator

Ministry of Regional Development and EU Funds

Signed, for and on behalf of the

European Commission,

Bruxelles, 18 December 2012

by Alexandra Cas Granje

Director

NATIONAL PROGRAMME FOR CROATIA UNDER THE IPA TRANSITION ASSISTANCE AND INSTITUTION BUILDING COMPONENT FOR THE YEARS 2012 AND 2013

1 IDENTIFICATION[1][2]

2 THE PROGRAMME

2.1 Priorities selected under this programme

The programme’s strategic reference is the Multi-Annual Indicative Planning Document (MIPD) 2011-2013. Priorities selected for the MIPD 2011-2013 aim at supporting the strengthening of the rule of law, public administration reform, and preparation for the implementation of the EU cohesion and agriculture and rural development policies. To achieve these priorities, the Commission is focusing its assistance primarily on the following sectors: justice and home affairs and fundamental rights, public administration reform, environment and climate change, transports, private sector development, social development, agriculture and rural development.

The first two sectors, namely ‘justice and home affairs and fundamental rights’ and ‘public administration reform’, were identified in the Enlargement Strategy 2011-2012 and the 2011 Progress Report[3] as areas requiring a consolidation of reform efforts, also in light of lessons learned from previous enlargements and in line with the renewed consensus on enlargement, as agreed by the December 2006 European Council. They are key sectors eligible to receive support under the Transition Assistance and Institution-Building Component. Other sectors may be supported by acquis-related projects.

The accession negotiations with Croatia were closed in June 2011; the Treaty of Accession was signed on 9 December 2011. This was the result of Croatia meeting the closing benchmarks in the remaining areas over the past year, including in difficult chapters such as judiciary and fundamental rights and competition policy. Given Croatia’s advanced stage of membership preparations, the financing proposal focuses on the remaining assistance needs relevant for assuming membership obligations as well as strategic capacity-building efforts for the post-accession period. Therefore, EU assistance under this programme is increasingly moving from sheer adoption and concrete implementation of the acquis to more general administrative strengthening of post–accession priorities, with a particular focus on justice and home affairs and fundamental rights and public administration reform.

In the area of public administration reform, further efforts are needed in improving professionalism and ensuring the efficient implementation of the relevant legal framework in order to build a modern, reliable, transparent and citizen-oriented public service. As regards justice, home affairs and fundamental rights, Croatia achieved substantial results but needs to consolidate reforms. Judicial reform requires constant attention, especially concerning judicial efficiency and the practical implementation of new measures relating to independence, impartiality and accountability of the judiciary. The establishment of adequate administrative and judicial structures as well as the strengthening of administrative and judicial capacity to implement the acquis are important elements of the accession process.

In light of Croatia’s envisaged EU accession date of 1 July 2013, the programming for the National Programme 2012 and 2013 has been combined and is jointly presented in this Financing Proposal. The measures included in the programme have been prepared in parallel and are complementary in nature. This will also allow for an early implementation of the 2013 budgetary allocation[4]. Careful attention has been paid to sequencing, with a number of projects representing continuations of previous initiatives.

2.2 Sectors selected under this programme and donor coordination

The needs assessment for EU financial assistance under this financing proposal takes into account the «Programme of the Government of the Republic of Croatia for assumption and implementation of the acquis communautaire» and relevant national sectoral strategies. The strategy for EU financial assistance is to directly support Croatia’s pre-accession preparations for joining the EU, thus contributing, on a wider scale, to the «Europe 2020 – the European strategy for smart, sustainable and inclusive growth».

To achieve the priorities selected for support in the period 2011-2013, the Commission will focus its assistance on the following two sectors: (i) Public Administration Reform, and (ii) justice and home affairs and fundamental rights. Other sectors identified in the MIPD are, with well-defined exceptions, not the focus of this programme, but receive support from the other IPA Components as well as other donors.

Public administration reform

With regard to Public Administration Reform, the National Programme addresses the MIPD objectives of supporting the implementation of the human resources development strategy and increasing the capacity of public administration at central, regional, and local levels. It also addresses alignment and capacity issues in the field of customs and taxation.

Concretely, this financing proposal, will contribute to the development of an open, transparent and client-oriented public administration as part of the European Administrative Space by addressing the issue of citizen participation in public affairs. Special attention is given to the preparation for the structural and cohesion funds, through capacity building at the local and regional level. Public Administration will also be strengthened through flexible facilities aiming to further strengthening Croatia’s institutional capacity to ensure implementation of the acquis communautaire.

In order to ensure effective exchange of information between the EU Member States and with the Commission and to strengthen the administrative capacity, the programme also provides information and communication equipment to the Croatian Customs Administration. This will minimise remaining differences between the customs processes of Croatia and the EU Member States.

Justice and home affairs and fundamental rights

As regards justice and home affairs and fundamental rights, the National Programme focuses on the following MIPD objectives: strengthen judicial independence and efficiency; support the protection of fundamental rights, especially for minority groups and refugees; contribute to refugee return, and advance the implementation of the Integrated Border Management Action Plan and Schengen Action Plan. Complementary to this, the National Programme also includes measures to support Croatia’s efforts to fight organised crime; strengthen the capacity of law enforcement institutions, as well as the provision of support for de-mining measures.

The supported activities respond to capacity needs confirmed in the 2011 Progress Report and are embedded in national strategies and policies in this sector, namely the Croatian Strategy of the Reform of the Judiciary 2011-2015, the Investment Plan for Judicial Infrastructure for the period 2011-2019, the Anti-Corruption Strategy, as well as the Action Plan for the Improvement of the Prison System 2011-2014, and the Integrated Border Management Action Plan.

Concretely, the programme will further improve the efficiency of the court system through an optimised case tracking system of the State Attorney Office and USKOK, as well as increase administrative capacity of courts through upgrading the case management system. The use and functionality of the war crimes database will also be strengthened. Furthermore, the programme will improve the crime intelligence capacities and establish the pre-conditions for the automated exchange of dactyloscopic data under the Prüm decision. This aside, it includes a project to enhance the management of the prison system and invest in adequate rehabilitative facilities at the Turopolje Correctional Institute, where the need for physical investments were inter alia confirmed by an European Commission peer-review mission that took place at the end of 2011.

As mentioned in the 2011 Progress Report and the Enlargement Strategy 2011-2012, progress has been made in the field of external borders. However, attention needs to be directed at the timely implementation of the action plan. Support is therefore foreseen for the upgrading of border infrastructure in Tovarnik and Maljevac, which were identified as priority investments in Croatia’s Schengen Action Plan.

Concerning the protection of fundamental rights, especially minority groups and refugees, the programme includes support schemes for civil society organisations, promoting open governance and transparency in managing public and natural resources as well as ensuring enforcement and respect of human rights standards in Croatia. In parallel, the programme strengthens the capacity and advisory function of the Councils of National Minorities, and thus supports the implementation of the Constitutional Act on the Rights of National Minorities.

While not part of this financing proposal, Croatia envisages a transfer of a total of EUR 9.3 million from its 2012 and 2013 IPA Component I allocation to the Regional Housing Programme under the Sarajevo process, set up by the four participating countries and implemented as a multi-beneficiary programme. The funds will be transferred to Croatia’s part of the Regional Housing Programme.

Social development and supporting programmes

With an informal economy estimated significantly above EU average, the programme also includes a project to strengthen policy and capacity to reduce undeclared work. The rehabilitation of the Moise Palace on the island of Cres combines the restoration of an important cultural heritage site with providing education and employment opportunities for the local community. This is complemented by the regular allocation for Croatia’s participation in Union Programmes and Agencies.

Donor coordination

The Commission, together with the support of the EU Delegation in Zagreb, has organised consultations both on the MIPD 2011-2013 as well as on the National Programme for 2012 and 2013 with EU Member States’ embassies and local branches of International Financial Institutions (IFIs). Other donors, international finance institutions and relevant civil society organisations gave a generally positive response. Relevant comments have been taken into account. The assistance provided by IFIs and bilateral donors further reinforce the prospects for sustainability, for instance as regards the World Bank financed Justice Sector Support Programme.

2.3 Description

2.3.1 National Programme 2012 allocation

Sector 1: Public administration reform

The main objectives in this sector are to support the implementation of the human resources development strategy (2010-2013); to support the capacity of public administration at central, regional and local levels to manage decentralisation reforms; to support the improvement of the administrative capacity of the Ministry of Administration; and to support further alignment in the fields of public procurement, taxation, statistics, customs, budgetary reforms, and public internal financial control.

Indicators to assess the impact of EU support include, inter alia:

■ Enhanced co-ordination and administrative capacities of main stakeholders in the sector;

■ Trainings carried out and training materials produced and a sufficient number of civil servants trained;

■ Information/awareness-raising campaigns carried out.

The overall objective of the project is to contribute to the promotion and protection of human rights (minority rights), open, transparent and client-oriented public administration through citizens’ participation in public affairs as well as active participation of the public administration at the regional and local level in the EU Cohesion Policy. The beneficiary is the Ministry of Administration. Component I will be implemented by one service contract to support the efficient implementation of the Constitutional Act on the Rights of National Minorities and one supply contract to purchase and install required IT equipment. The tenders are foreseen to be launched in the 4th quarter 2012 and 1st quarter 2013 respectively. Component II will be implemented through one framework contract to strengthen the role of citizens in improving the quality of public administration services, to be launched in the 4th quarter of 2012. Component III will be implemented through a twinning contract, to establish a training system on structural and cohesion funds, to be launched in the 4th quarter 2012.

The project aims to help fulfil Croatia obligations concerning Chapter 29 (Customs Union) and part of Chapter 16 (Taxation) related to the set-up of efficient and effective implementation of customs systems required to connect with the EU IT systems. It will in particular focus on implementing and managing all the elements of safety and security of ICT. The beneficiary is the Ministry of Finance. The project will be implemented through a supply contract, foreseen to be launched in the 2nd quarter 2013.

This facility aims to strengthen the capacities of the Croatian state and regional administration bodies in fulfilling their respective post-accession roles and functions, as well as reinforce the institutional capacity for the management of post accession EU funds. It will support needs in the following areas: justice and home affairs, public administration reform, capacity-building measures at state, regional and local level to manage post-accession funds, as well as fight against corruption and public procurement. It will be implemented through, indicatively, 10 twinning and twinning light contracts, as well as approximately 10 technical assistance contracts. This facility is used for projects which are too small to be justified as specific and separate interventions, amounting from EUR 50.000 to EUR 250.000 per contract, or above, if duly justified in case of more complex interventions. It is expected that all service tenders/calls for proposals for twinning grant agreements will be launched in the second semester of 2013. The beneficiary is the Ministry of Regional Development and EU Funds.

Sector 2: Justice and home affairs and fundamental rights

The main objectives in this sector are to strengthen judicial independence and efficiency; to support the protection of fundamental rights, especially for minority groups and refugees; to support the further alignment of migration, visa and asylum policies; to continue the implementation of Integrated Border Management (IBM) Action Plan and Schengen Action Plan; to support Croatia’s efforts to fight organised crime, corruption – including the prevention of corruption, money laundering and trafficking of human beings and drugs; to support de-mining measures with a view to enhance the economic development and the overall security environment, as well as to contribute to refugee return; and to support civil society in the framework of the Commission’s Civil Society Facility covering a wide range of sectors not limited to «justice and home affairs» and including support to CSOs at the regional and local levels.

Indicators to assess the impact of EU support include, inter alia:

■ Reduction in the length of court proceedings and reduction in the backlog of cases;

■ Improved court management systems;

■ Number of successful prosecutions and final convictions for cases of organised crime, corruption, money laundering and trafficking of human beings and narcotics;

■ Increased amounts of proceeds of crime recovered;

■ Strengthened capacity of law enforcement institutions, including improved inter-agency and international cooperation;

■ Strengthened IBM and prevention of illegal migration by creating effective systems for management of asylum, illegal migration and borders;

■ Improved environment for civil society and strengthened capacities of CSOs, more effective civic participation in policy processes at all levels.

The project aims at increasing the efficiency of the judiciary through capacity building of the State Attorney Office/USKOK as well as strengthening the functionality of the war crime database. The beneficiary is the Ministry of Justice. The project will be implemented through two technical assistance contracts, namely on upgrading the State Attorney Office’s case tracking system, business processes and interconnectivity, as well as the war crimes database. These are foreseen to be launched in the 4th quarter 2013. In addition, a supply contract is foreseen for purchasing and installing required IT equipment, anticipated for the 3rd quarter 2013.

The purpose of the project is to establish a reliable and efficient case management system at Croatian Courts, through optimising business processes as well as upgrading the integrated case management system. The beneficiary is the Ministry of Justice. To this end, a technical assistance contract aimed at this and a supply contract to purchase and install required IT equipment are expected to be launched in the 1st quarter 2014 and the 4th quarter 2013 respectively.

The project’s purpose is to set up a system of life-long learning for the prison administration in Croatia and to improve the infrastructure quality of the Prison Training Centre as well as the Turopolje Correctional Institute. The beneficiary is the Ministry of Justice. The project is implemented through a twinning contract to develop a lifelong learning system, adjust the organisational structure of the training centre, and enhance the system for treatment of juveniles (EUR 700,000), a works contract to improve the infrastructure and two technical assistance contracts to supervise the works as well as to develop a unified IT system. All tender procedures are foreseen to be launched in the 4th quarter 2013. In addition, a supply contract to improve the working environment is scheduled to be launched in the 1st quarter 2015.

The project aims to strengthen Croatia’s border police capacities and readiness to control the future EU external border by constructing and equipping the Police Station in Tovarnik and the Border Police Station in Maljevac. The beneficiary is the Ministry of Interior. The project will be implemented through two works contracts for their construction, two service contracts for the supervision of works, as well as a supply contract aimed at equipping both, the Police Station in Tovarnik and the Border Police Station in Maljevac. The works and service contracts are foreseen to be launched in the 1st quarter 2014. The supply contract’s launch is planned for the 3rd quarter 2014.

The project aims to increase citizen participation in public affairs and human rights protection with a special emphasis to be given to the protection of national minority rights, and the rights of the Roma minority in exercising human rights. The beneficiary is the Government Office for Cooperation with NGOs. The project will be implemented through three individual calls for proposals (EUR 2,100,000; EUR 3,150,000; and EUR 525,000) foreseen to be launched in the 2nd quarter 2013. The grant schemes will aim at the contribution of civil society organisations that is crucial for the consistent implementation of the overall legal framework aligned with the acquis, and for the long-term sustainability of the civil sector.

This project addresses the issues of national minority participation in public affairs and human rights protection through elected minority councils on the local and regional level. It also addresses the protection of Roma national minority rights on the local level, and contributes to the improvement of the housing conditions of Roma as the most vulnerable minority group, through cooperation between local stakeholders and the active participation of Roma themselves. The beneficiary is the Government Office for Human Rights and the Rights of National Minorities. The project will be implemented through a service contract to strengthen the capacity and work of national minority councils, and a second service contract to establish local partnerships to promote human rights for marginalised Roma communities and prepare tender documentation for housing support. In addition, one supply contract is foreseen to purchase and install required IT equipment. All tender procedures are foreseen to be launched in the 1st quarter 2014.

Sector 7 Social development

The project aims to develop a comprehensive targeted strategy to reduce undeclared work, by improving policies, measures, monitoring and enforcement, as well as strengthening administrative capacities and cooperation of relevant institutions. The beneficiary is the Ministry of Labour and Pension System. It will be implemented through a twinning contract (EUR 1,000,000) as well as a supply contract, indicatively foreseen for 1st quarter 2014.

Sector 9 Support and other activities

A Protocol to the Stabilisation and Association Agreement on a Framework Agreement on the general principles for Croatia’s participation in Union Programmes was signed in November 2004. The IPA programme can be used to meet a part of the costs for the participation in the programmes in accordance with Article 5 Paragraph 2 of the Framework Agreement. EUR 5,092,494 are allocated from IPA 2012 Component I to co-finance the participation of Croatia in the following indicative list of Union Programmes and Agencies: Fiscalis 2013, CUSTOMS 2013, Culture 2007-2013, Media 2007, Seventh Framework Programme for Research, Technological Development and Demonstration Activities, Europe for Citizens, PROGRESS, Competitiveness and Innovation Framework (CIP), Civil protection financial instrument, Second Programme of Community Action in the Field of Health 2008-2013, Marco Polo II, ISA (Interoperability Solutions for European Public Administrations), LifeLong Learning, Youth in Action and European Union Agency for Fundamental Rights (FRA). The participation of Croatia in Union programmes shall follow the specific terms and conditions set out for each such programme in the memorandum of understanding to be concluded by the European Commission and Croatia, in accordance with the agreements establishing the general principles for participation of Croatia in Union programmes. It shall include provisions on both the total amount of Croatia’s contribution and the amount funded by assistance under the IPA Regulation. The indicative list of Union Programmes and Agencies may be adapted to meet time constraints and availability of funds once the information concerning financial contribution to be paid by the Republic of Croatia in all Union Programmes and Agencies has been communicated.

2.3.2 National Programme 2013 allocation

Sector 1: Public Administration Reform

Overall objective of the project is further alignment of Croatian Tax Administration (CTA) with EU best practice through strengthening of IT and control functions. By developing the Single Tax Administration portal of the CTA all the IT systems will be technologically unified behind the same infrastructure, simplifying managing and maintenance of the system. The beneficiary is the Ministry of Finance. The project will be implemented through one technical assistance contract, to be launched in the 2nd quarter 2013.

This facility aims to strengthen the capacities of the Croatian state and regional administration bodies in fulfilling their respective post-accession roles and functions, as well as reinforce the institutional capacity for the management of post accession EU funds. It will support needs in the following areas: justice and home affairs, public administration reform, capacity-building measures at state, regional and local level to manage post-accession funds, as well as fight against corruption and public procurement. It will be implemented through, indicatively, 5 twinning and twinning light contracts, as well as approximately 5 technical assistance contracts. It is used for projects which are too small to be justified as specific and separate interventions, amounting from EUR 50.000 to EUR 250.000 per contract, or above, if duly justified in case of more complex interventions. It is expected that all service tenders/calls for proposals for twinning grant agreements will be launched in the second semester of 2014. The beneficiary is the Ministry of Regional Development and EU Funds.

Sector 2: Justice and home affairs and fundamental rights

The project aims at improving the crime intelligence capacities of the National Police Office for the Suppression of Corruption and Organised Crime and Police Directorates of the Ministry of Interior, as project beneficiary. It will increase the expertise of police officers in applying geographic information system and geo-profile technology (GIS), by providing a technical base and software for GIS as well as through a training programme and measures of quality control. The project is implemented through a twinning contract (EUR 750,000) and a supply contract, foreseen to be launched in the 1st quarter 2015 and 4th quarter 2015 respectively.

The purpose of the project is to establish pre-conditions and strengthen capacities for the automated exchange of DNA and dactyloscopic data in accordance with the Prüm Decision on cross-border police cooperation. For this purpose, a twinning contract (EUR 600,000) and a supply contract are foreseen to be launched in the 4th quarter 2014. The beneficiary is the Ministry of Interior.

The project aims at creating a safe environment and setting security pre-conditions for sustainable return and socio-economic development in war affected areas, by performing demining operations in Lika-Senj, Sisak-Moslavina and Zadar Counties. The project will be implemented through a direct grant agreement (EUR 4,212,000) with the Croatian Mine Action Centre (CROMAC), on the basis of article 168 (1)(c) of the Implementing Rules to the Financial Regulation, as according to the Croatian Law on Humanitarian Demining, only CROMAC is authorised to award humanitarian demining operations to demining companies as a result of public procurement procedures. The direct grant is foreseen to be signed in the 3rd quarter 2013.

Sector 7 Social development

The project combines the restoration and rehabilitation of the Moise Palace on the island of Cres, selected as a key priority under the »Ljubljana Process», with providing education and employment opportunities for the local community. For this purpose, a university research centre for humanities and social sciences and a regional centre for lifelong learning will be established in the premises of Moise Palace in the Town of Cres. The project will be implemented through a works contract, a service contract for the supervision of the reconstruction, as well as a supply contract. The first two are foreseen to be launched in the 4th quarter 2013; the latter is expected for the 2nd quarter 2015. The beneficiary is the Ministry of Culture.

2.4 Cross–cutting issues

Horizontal or cross cutting issues, such as equal opportunities, support to minorities and vulnerable groups, civil society dialogue, environmental protection, good governance and fight against corruption are an integral part of each project fiche where applicable. Ownership and motivation of stakeholders has been encouraged by balancing preconditions with positive incentives for good project performance.

The priorities are addressed at programme and project level through both, horizontal provisions as well as specific activities included in the National Programme 2012 and 2013, such as for example the civil society support schemes or the support for the implementation of the Constitutional Act on the Rights of National Minorities. All projects aim for a balanced gender approach and include measures to ensure equal opportunities as and where applicable.

2.5 Assumptions and pre–conditions

Agreement on the 2012 and 2013 IPA component I National Programme will depend on the Croatian Government confirming the availability of sufficient resources, including national co-financing, and adequate organisational structures in the decentralised implementation system authorities, in particular in the National IPA Coordinator (NIPAC) and Programme Authorising Officer (PAO) offices, to carry out programme monitoring effectively. The capacity of Senior Programme Officers to effectively oversee implementation will be checked by the PAO prior to the implementation of projects.

The PAO will verify that project level conditionalities are respected before contracts are concluded. The National Authorising Officer (NAO) and PAO are committed to maintain the procurement timetables of the projects and will take effective corrective measures in case of delays. The NIPAC shall inform the Commission on changes to project results while NAO shall inform the Commission on the use of funds after the completion of contracts and following the submission of the final report for the programme. Any infringement of the applicable rules may lead to a review of the eligibility of EU financing provided.

The PAO is responsible for implementing the procurement plan in accordance with its deadlines. The PAO will take into account the planning, preparation and control of tender documents and contracts, ex ante control by European Commission services including rejections, requesting and granting of derogations, the time required for translation and publication and other events which may affect the project preparation and procurement time line.

If for any particular project a step in the tendering and contracting process does not materialise before its deadline, the PAO will immediately inform the NAO, NIPAC and the Commission of the case and reason for delays. If delays are not justified by exceptional / unforeseen circumstances, which fall outside the competence of the Government, the Commission reserves the right to take remedial action such as reallocation to another project (only if time allows and in view of a project in conformity with priorities as established in the Accession Partnership, screening reports and subsequent negotiations per acquis chapter and meeting the criteria of adequate design, readiness for implementation as well as co-financing requirements) or cease the project without reallocation.

In order to support management and follow-up of the procurement process, the PAO will update the procurement plan by recording the events as they unfold. The updates will be circulated at least once a month to the NAO, NIPAC and the Commission in electronic form. Meetings to review the procurement plans will be organised as required.

2.6 Roadmap for the decentralisation of the management of EU funds without ex ante controls by the European Commission

Croatia was conferred management powers for the decentralised management of IPA Component I with ex ante controls by a Commission Decision of 28 October 2008. The Croatian authorities submitted in December 2009 a roadmap for the decentralisation of the management of IPA funds without ex ante controls by the Commission and have since provided regular implementation reports. In the second semester of 2011 in particular, rejection rates have improved noticeably. It is in this context as well as the scheduled date of EU accession, that Croatia envisages full decentralisation, indicatively planned for the 4th quarter 2012. For this, the positive development regarding the rejection rates needs to be sustained and Croatia needs to further increase its implementation capacity.

3 BUDGET

3.1 2012 Allocation National Programme: Indicative budget table (decentralised management)

Amounts net of VAT

^* public contribution (private contributions are not taken into account (Article 67(1) IPA IR) under decentralised management).

⁽¹⁾Expressed in % of the Total expenditure IB or INV (column (a) or (d)).

⁽²⁾Sector or Project rows only. Expressed in % of the grand total of column (h). It indicates the relative weight of the Sector or the (stand alone) Project with reference to the total IPA EU contribution of the entire FP.

3.2 2013 Allocation National Programme: Indicative budget table (decentralised management)

Amounts net of VAT

^* public contribution (private contributions are not taken into account (Article 67(1) IPA IR) under decentralised management).

⁽¹⁾Expressed in % of the Total expenditure IB or INV (column (a) or (d)).

⁽²⁾Sector or Project rows only. Expressed in % of the grand total of column (h). It indicates the relative weight of the Sector or the (stand alone) Project with reference to the total IPA EU contribution of the entire FP.

3.3 Principle of co-financing applying to the programme

The IPA EU contribution, which represents 72% of the total budget allocated in 2012 and 84.1% of the total budget allocated in 2013, has been calculated in relation to the eligible expenditure, which in the case of decentralised management is based on the public expenditure. Joint co-financing will be used as a rule.

Co-financing requirements deriving from the Council Regulation No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-Accession Assistance (IPA)5[5]and the Commission Regulation No 718/2007 of 12 June 2007 implementing Council Regulation No 1085/2006 of 17 July 2006 establishing an instrument for pre-accession assistance (IPA)6[6](hereinafter «IPA Implementing Regulation»), to which Croatia agreed with the signature of the IPA Framework Agreement on 27 August 2007, have been strictly applied at the level of each contract for each project7.[7]In the case of grants, the EU contributes with a maximum of 90 % of the eligible expenditure of the project and with a maximum of 95% of the eligible expenditure where twinning is proposed.

4 IMPLEMENTATION

4.1 Management modes and Implementation modalities

The programme shall be implemented by means of separate Financing Agreements for the two budgetary years 2012 and 2013 in decentralized management system, in accordance with article 53c of the Financial Regulation8[8]and the corresponding provisions of the Implementing Rules9[9]Croatia will continue to ensure that the conditions laid down in Art. 56 of the Financial Regulation are respected at all times.

The ex-ante control by the European Commission shall apply to the tendering of contracts, launch of call for proposals and the award of contracts and grants until the European Commission allows for decentralised management without ex-ante controls as referred in Article 18 of the IPA Implementing Regulation.

4.2 General rules for procurement and grant award procedures

Procurement shall follow the provisions of Part Two, Title IV of the Financial Regulation and Part Two, Title III, Chapter 3 of its Implementing Rules as well as the rules and procedures for service, supply and works contracts financed from the general budget of the European Communities for the purposes of cooperation with third countries adopted by the Commission on 24 May 2007 (C(2007)2034).

Grant award procedures shall follow the provisions of Part One, Title VI of the Financial Regulation and Part One, Title VI of its Implementing Rules.

The Commission shall also use the procedural guidelines and standard templates and models facilitating the application of the above rules provided for in the »Practical Guide to contract procedures for EU external actions» (»Practical Guide») as published on the Commission website at the date of the initiation of the procurement or grant award procedure. The essential selection and award criteria for the award of grants are laid down in the Practical Guide, namely (i) the quality of the action proposed in the application as regards its relevance to the set of objectives and priorities set out in the Calls for Proposals, (ii) its effectiveness and feasibility, (iii) sustainability, and (iv) budget cost-effectiveness. The detailed selection and award criteria will be laid down in the Calls for proposals – Guidelines for applicants.

4.3 Implementation Principles for Twinning Projects

Twinning projects shall be set up in the form of a grant agreement, whereby the selected Member State administrations agree to provide the requested public sector expertise against the reimbursement of the expenses thus incurred.

The contract may in particular provide for the long-term secondment of an official assigned to provide full-time advice to the administration of Croatia as resident twinning advisor.

The twinning grant agreement shall be established in accordance with relevant provisions of Part One, Title VI of the Financial Regulation and Part One, Title VI of its Implementing Rules.

The Commission shall also use the procedural guidelines and standard templates and models provided in the twinning manual which is available on the website of DG ELARG. The essential selection criteria are: (i) financial capacity to sustain its activity for the duration of the action, with the exception of natural persons receiving scholarships, public bodies and international organisations, and (ii) operational capacity consisting in professional competencies and qualifications required to complete the proposed action. The essential award criteria are: (i) the relevance of the proposal in relation to the objectives set out in the Twinning Project Fiche, (ii) the methodology of the activities developed in the proposal, and (iii) the overall sustainability of the proposal.

4.4 Environmental Impact Assessment and Nature Conservation

All investments shall be carried out in compliance with the relevant EU environmental legislation. All investment shall be carried out in compliance with relevant EU Environmental Legislation in particular the EIA10[10]and the Habitats11[11]Directives.

The procedures for environmental impact assessment as set down in the EIA Directive fully apply to all investment projects under IPA. If the EIA Directive has not yet been fully transposed, the procedures should be similar to the ones established in the above-mentioned Directive.

5 MONITORING AND EVALUATION

5.1 Monitoring

Programme implementation will be monitored through the IPA Monitoring Committee assisted by Transition Assistance and Institution Building Monitoring Committee.

They shall assess the effectiveness, quality and coherence of the implementation of this programme. They may make proposals to the European Commission and the national IPA co-ordinator, with a copy to the national authorising officer, for decisions on any corrective measures to ensure the achievements of programme objectives and enhance the efficiency of the assistance provided.

5.2 Evaluation

Programmes shall be subject to ex ante evaluations, as well as interim and/or, ex post evaluations in accordance with Articles 57 and 82 of IPA Implementing Regulation, with the aim of improving the quality, effectiveness and consistency of the assistance from EU funds and the strategy and implementation of the programmes.

After the conferral of management powers, the responsibility for carrying out interim evaluations shall lie with Croatia, without prejudice on the European Commission’s rights to perform any ad hoc interim evaluations of the programmes it deems necessary.

Ex post evaluation shall remain a prerogative of the European Commission even after the conferral of management powers to Croatia.

The results of evaluations shall be taken into account in the programming and implementation cycle. The Commission may also carry out strategic evaluations.

6 AUDIT, FINANCIAL CONTROL AND ANTI-FRAUD MEASURES; FINANCIAL ADJUSTMENTS, PREVENTIVE MEASURES AND FINANCIAL CORRECTIONS

6.1 Audit, Financial Control and Anti-fraud measures

The accounts and operations of all parties involved in the implementation of this programme, as well as all contracts and agreements implementing this programme, are subject to, on the one hand, the supervision and financial control by the Commission (including the European Anti-Fraud Office), which may carry out checks at its discretion, either by itself or through an outside auditor and, on the other hand, audits by the European Court of Auditors. This includes measures such as ex-ante verification of tendering and contracting carried out by the EU Delegation in Croatia.

In order to ensure the efficient protection of the financial interests of the European Union, the Commission (including the European Anti-Fraud Office) may conduct on-the-spot checks and inspections in accordance with the procedures foreseen in Council Regulation (EC, Euratom) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities.[12]

The controls and audits described above are applicable to all contractors, subcontractors and grant beneficiaries who have received EU funds.

6.2 Financial adjustments

The national authorising officer, who bears in the first instance the responsibility for investigating all irregularities, shall make the financial adjustments where irregularities or negligence are detected in connection with the implementation of this programme, by cancelling all or part of the EU assistance. The national authorising officer shall take into account the nature and gravity of the irregularities and the financial loss to the EU assistance.

In case of an irregularity, including negligence and fraud, the national authorising officer shall recover the EU assistance paid to Croatia in accordance with national recovery procedures.

6.3 Audit trail

The national authorising officer shall ensure that all the relevant information is available to ensure at all times a sufficiently detailed audit trail. This information shall include documentary evidence of the authorisation of payment applications, of the accounting and payment of such applications, and of the treatment of advances, guarantees and debts.

6.4 Preventive Measures

Croatia shall ensure investigation and effective treatment of suspected cases of fraud and irregularities and shall ensure the functioning of a control and reporting mechanism equivalent to that provided for in Commission Regulation 1828/200613.[13]All suspected or actual cases of fraud and irregularity as well as all measures related thereto taken must be reported to the European Commission services without delay. Should there be no suspected or actual cases of fraud or irregularity to report, Croatia shall inform the European Commission of this fact within two months following the end of each quarter.

Irregularity shall mean any infringement of a provision of applicable rules and contracts, resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the European Union by charging an unjustified item of expenditure to the general budget.

Fraud shall mean any intentional act or omission relating to: the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Union or budgets managed by, or on behalf of, the European Union; non disclosure of information in violation of a specific obligation with the same effect; the misapplication of such funds for purposes other than those for which they are originally granted.

Croatia shall take any appropriate measure to prevent and counter active and passive corruption practises at any stage of the procurement procedure or grant award procedure, as well as during the implementation of corresponding contracts.

Active corruption is defined as the deliberate action of whosoever promises or gives, directly or through an intermediary, an advantage of any kind whatsoever to an official for himself or for a third party for him to act or to refrain from acting in accordance with his duty or in the exercise of his functions in breach of his official duties in a way which damages or is likely to damage the European Union’s financial interests.

Passive corruption is defined as the deliberate action of an official, who, directly or through an intermediary, requests or receives advantages of any kind whatsoever, for himself or a third party, or accepts a promise of such advantage, to act or to refrain from acting in accordance with his duty or in the exercise of his functions in breach of his official duties in a way which damages or is likely to damage the European Union’s financial interests.

The authorities of Croatia, including the personnel responsible for the implementation of the programme, shall also undertake to take whatever precautions are necessary to avoid any risk of conflict of interest, and shall inform the European Commission immediately of any such conflict of interest or any situation likely to give rise to any such conflict.

6.5 Financial corrections

In order to ensure that the funds are used in accordance with the applicable rules, the European Commission shall apply clearance-of-accounts procedures or financial correction mechanisms in accordance with Article 53c (2) of the Financial Regulation and as detailed in the Framework Agreement concluded between the European Commission and Croatia.

A financial correction may arise following:

(i) identification of a specific irregularity, including fraud; or

(ii) identification of a weakness or deficiency in the management and control systems of Croatia;

If the European Commission finds that expenditure under this programme has been incurred in a way that has infringed applicable rules, it shall decide what amounts are to be excluded from EU financing.

The calculation and establishment of any such corrections, as well as the related recoveries, shall be made by the European Commission following the criteria and procedures provided for in the IPA Implementing Regulation.

7 NON SUBSTANTIAL REALLOCATION OF FUNDS

The authorising officer by delegation (AOD), or the authorising officer by sub-delegation (AOSD), in line with the delegation of powers conferred upon him/her by the AOD, in accordance with the principles of sound financial management, may undertake non substantial reallocations of funds without an amending financing decision being necessary. In this context, cumulative reallocations not exceeding 20% of the total amount allocated for the programme, subject to a limit of EUR 4 million, shall not be considered substantial, provided that they do not affect the nature and objectives of the programme. The IPA Committee shall be informed of the above reallocation of funds.

8 LIMITED CHANGES

Limited changes in the implementation of this programme affecting essential elements listed under Article 90 of the Implementing Rules to the Financial Regulation, which are of an indicative nature14,[14]may be undertaken by the authorising officer by delegation (AOD), or by the authorising officer by sub-delegation (AOSD), in line with the delegation of powers conferred upon him by the AOD, in accordance with the principles of sound financial management without an amending financing decision being necessary.

FRAMEWORK AGREEMENT BETWEEN THE EUROPEAN COMMISSION AND THE GOVERNMENT OF THE REPUBLIC OF CROATIA, DATED 27 AUGUST 2007

FRAMEWORK AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF CROATIA AND THE COMMISSION OF THE EUROPEAN COMMUNITIES ON THE RULES FOR CO-OPERATION CONCERNING EC-FINANCIAL ASSISTANCE TO THE REPUBLIC OF CROATIA IN THE FRAMEWORK OF THE IMPLEMENTATION OF THE ASSISTANCE UNDER THE INSTRUMENT FOR PRE-ACCESSION ASSISTANCE (IPA)

Annexes:

ANNEX A: Functions and common responsibilities of the structures, authorities and bodies in accordance with Article 8 of the Framework Agreement between the Commission and the Government of the Republic of Croatia of 27 August 2007

ANNEX B: Model Statement of Assurance of the national authorising officer in accordance with Article 17 of the Framework Agreement between the Commission and the Government of the Republic of Croatia of 27 August 2007

ANNEX C: Model Annual Audit Activity Report of the audit authority of the Republic of Croatia in accordance with Article 29(2)(b) of the IPA Implementing Regulation

ANNEX D: Model Annual Audit Opinion of the audit authority of the Republic of Croatia in accordance with Article 29(2)(b) of the IPA Implementing Regulation

ANNEX E: Model Audit Opinion of the audit authority of the Republic of Croatia on the final statement of expenditure for the closure of a programme or parts of a programme in accordance with Article 29(2)(b) of the IPA Implementing Regulation

The Commission of the European Communities, hereinafter referred to as «the Commission», acting for and on behalf of the European Community, hereinafter referred to as «the Community« on the one part, and

the Government of the Republic of Croatia, acting on behalf of the Republic of Croatia, hereinafter referred to as «the Beneficiary« and together, jointly referred to as «the Contracting Parties»

Whereas

(1) On 1 August 2006, the Council of the European Union adopted Regulation (EC) No 1085/2006 of 17 July 2006([15]) establishing an instrument for pre-accession assistance (hereinafter referred to as «IPA Framework Regulation»). With effect from the 1 January 2007, this new instrument constitutes the single legal basis for the provision of financial assistance to candidate countries and potential candidate countries in their efforts to enhance political, economic and institutional reforms with a view to become members of the European Union;

(2) On 12 June 2007, the Commission has adopted the regulation implementing the IPA Framework Regulation, detailing applicable management and control provisions;

(3) The new instrument for pre-accession assistance (IPA) replaces the five previously existing pre-accession instruments: Regulation (EEC) No 3906/1989 on economic aid to certain countries of Central and Eastern Europe, Regulation (EC) No 1267/1999 on the establishment of an instrument for structural policies for pre-accession, Regulation (EC) No 1268/1999 on the support for pre-accession measures for agriculture and rural development, Regulation (EC) No 2666/2000 on assistance for Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the Former Yugoslav Republic of Macedonia, repealing Regulation (EC) No 1628/96 and amending Regulations (EEC) No 3906/89 and (EEC) No 1360/90 and Decisions 97/256/EC and 1999/311/EC and Regulation (EC) No 2500/2001 on the financial assistance to Turkey;

(4) The Beneficiary is eligible under IPA as provided for in the IPA Framework Regulation and in Commission Regulation (EC) No 718/2007 of 12 June 2007([16]) implementing the IPA Framework Regulation (hereinafter referred to as «IPA Implementing Regulation»);

(5) The Beneficiary figures in Annex I of the IPA Framework Regulation, and should therefore have access to the 5 components established under IPA, i.e. the Transition Assistance and Institution Building Component, the Cross-Border Co-operation Component, the Regional Development Component, the Human Resources Development Component and the Rural Development Component;

(6) It is therefore necessary to set out the rules for co-operation concerning EC financial assistance with the Beneficiary under IPA;

HAVE AGREED AS FOLLOWS:

Section I

GENERAL PROVISIONS

Article 1

INTERPRETATION

(1) Subject to any express provision to the contrary in this Framework Agreement, the terms used in this Agreement shall bear the same meaning as attributed to them in the IPA Framework Regulation and the IPA Implementing Regulation.

(2) Subject to any express provision to the contrary in this Framework Agreement, references to this Agreement are references to such Agreement as amended, supplemented or replaced from time to time.

(3) Any references to Council or Commission Regulations are made to the version of those regulations as indicated. If required, modifications of theses regulations shall be transposed into this Framework Agreement by means of amendments.

(4) Headings in this Agreement have no legal significance and do not affect its interpretation.

Article 2

PARTIAL INVALIDITY AND UNINTENTIONAL GAPS

If a provision of this Agreement is or becomes invalid or if this Agreement contains unintentional gaps, this will not affect the validity of the other provisions of this Agreement. The Contracting Parties will replace any invalid provision by a valid provision which comes as close as possible to the purpose of and intent of the invalid provision. The Contracting Parties will fill any unintentional gap by a provision which best suits the purpose and intent of this Agreement in compliance with the IPA Framework Regulation and the IPA Implementing Regulation.

Article 3

PURPOSE

(1) In order to promote co-operation between the Contracting Parties and to assist the Beneficiary in its progressive alignment with the standards and policies of the European Union, including, where appropriate the acquis communautaire, with a view to membership, the Contracting Parties agree to implement activities in the various fields as specified in the two regulations mentioned above and as applicable to the Beneficiary.

(2) The assistance activities shall be financed and implemented within the legal, administrative and technical framework laid down in this Agreement and as further detailed in Sectoral Agreements and/or Financing Agreements, if any.

(3) The Beneficiary takes all necessary steps in order to ensure the proper execution of all assistance activities and to facilitate the implementation of the related programmes.

Article 4

GENERAL RULES ON FINANCIAL ASSISTANCE

(1) The following principles shall apply to financial assistance by the Community under IPA:

a) Assistance shall respect the principles of coherence, complementarity, co-ordination, partnership and concentration;

b) Assistance shall be coherent with EU policies and shall support alignment to the acquis communautaire;

c) Assistance shall comply with the budgetary principles laid down in Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002[17] on the Financial Regulation applicable to the general budget of the European Communities (hereinafter referred to as «Financial Regulation») and its Implementing Rules[18];

d) Assistance shall be consistent with the needs identified in the enlargement process and absorption capacities of the Beneficiary. It shall also take account of lessons learned;

e) The ownership of the programming and implementation of assistance by the Beneficiary shall be strongly encouraged and adequate visibility of EU intervention shall be ensured;

f) Operations shall be properly prepared, with clear and verifiable objectives, which are to be achieved within a given period; the results obtained should be assessed through clearly measurable and adequate indicators;

g) Any discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation shall be prevented during the various stages of the implementation of assistance;

h) The objectives of pre-accession assistance shall be pursued in the framework of sustainable development and the Community promotion of the goal of protecting and improving the environment.

(2) Assistance for the Beneficiary shall be based on the priorities identified in the existing documents, i.e. the European Partnership, the Accession partnership, the national programme for the adoption of the acquis communautaire, the reports and strategy paper contained in the annual enlargement package of the Commission, the Stabilisation and Association Agreement and the negotiation framework.

(3) All operations receiving assistance under IPA shall in principle require co-financing by the Beneficiary and the Community, unless otherwise agreed upon in a Sectoral Agreement or Financing Agreement.

(4) Where the execution of activities depends on financial commitments from the Beneficiary’s own resources or from other sources of funds, the funding of the Community shall become available at such time as the financial commitments of the Beneficiary and/or the other sources of funds themselves become available.

(5) The provision of Community financing under IPA shall be subject to the fulfilment by the Beneficiary’s obligations under this Framework Agreement and under Sectoral Agreements and Financing Agreements, if any.

Article 5

IMPLEMENTATION METHODS

(1) For the implementation of assistance under IPA in the Republic of Croatia, decentralised management, whereby the Commission confers the management of certain actions on the Beneficiary, while retaining overall final responsibility for general budget execution in accordance with Article 53c of the Financial Regulation and the relevant provisions of the EC Treaties, shall apply as a rule. Decentralised management shall cover at least tendering, contracting and payments by the national administration of the Beneficiary. Operations shall be implemented in accordance with the provisions laid down in Article 53c of the Financial Regulation and the ones referred to in this article.

(2) However, the Contracting Parties may agree to make use of

a) centralised management as defined in Article 53a of the Financial Regulation under the Transition Assistance and Institution Building Component, in particular for regional and horizontal programmes, and under the Cross-Border Co-operation Component. It may also be used for technical assistance under any of the IPA components. Operations shall be implemented in accordance with the provisions laid down in Articles 53 point (a), 53a and 54 to 57 of the Financial Regulation.

b) joint management as defined in Article 53d of the Financial Regulation for the Transition Assistance and Institution Building Component, in particular for regional and horizontal programmes, and for programmes involving international organisations. Operations shall be implemented in accordance with the provisions laid down in Articles 53 point (c) and 53d of the Financial Regulation.

c) shared management as defined in Article 53b of the Financial Regulation under the Cross-Border Co-operation Component, for cross-border programmes involving Member States of the European Union. Operations shall be implemented in accordance with the provisions laid down in Articles 53 point (b), 53b and Title II of Part two of the Financial Regulation. The following particular provision shall be taken into account in the implementation of cross-border programmes with Member States.

Where one or more Member States of the European Union and the Beneficiary participating in a cross-border programme are not yet ready for implementation of the whole programme under shared management, the part of the programme concerning the Member State(s) shall be implemented in accordance with Title II (Cross-Border Co-operation Component), Chapter III, Section 2 of the IPA Implementing Regulation (Articles 101 to 138) and the part of the programme concerning the Beneficiary shall be implemented in accordance with Title II, Chapter III, Section 3 of the IPA Implementing Regulation. (Articles 139 to 146 IPA Implementing Regulation, with the exception of Article 142. The provisions concerning the joint monitoring committee of Article 110 shall apply).

(3) If required by the related Financing Decision, the Commission and the Beneficiary shall conclude a Financing Agreement in accordance with Article 8 of the IPA Implementing Regulation on multi-annual or annual programmes. Financing Agreements may be concluded between the Commission and several beneficiary countries under IPA including the Beneficiary for assistance for multi-country programmes and horizontal initiatives.

(4) This Framework Agreement shall apply to all Financing Agreements concluded between the Contracting Parties for the financial assistance under IPA. Where they exist, Sectoral Agreements related to a given component shall apply to all Financing Agreements concluded under that component. Where there is no Financing Agreement, the rules included in this Framework Agreement apply together with Sectoral Agreements, if any.

Section II

MANAGEMENT STRUCTURES AND AUTHORITIES

Article 6

ESTABLISHMENT AND DESIGNATION OF STRUCTURES AND AUTHORITIES FOR DECENTRALISED MANAGEMENT

(1) The following structures and authorities must be designated by the Beneficiary in the event of decentralised management:

a) The competent accrediting officer (CAO);

b) The national IPA co-ordinator (NIPAC);

c) The strategic coordinator for the Regional Development Component and the Human Resources Development Component;

d) The national authorising officer (NAO);

e) The national fund (NF);

f) Operating structures per component or programme to deal with the management and implementation of assistance under the IPA Regulation;

g) The audit authority.

(2) Specific bodies may be established within the overall framework defined by the bodies and authorities described above within or outside the operating structures initially designated. The Beneficiary shall ensure that the final responsibility for the functions of operating structures shall remain with the operating structure initially designated. Such a restructuring shall be formalised in written agreements or governmental acts and shall be subject to accreditation by the national authorising officer and the conferral of management by the Commission.

(3) The Beneficiary shall ensure that appropriate segregation of duties applies to the bodies and authorities mentioned under paragraph 1 and 2 above in accordance with Article 56 of the Financial Regulation. Duties are segregated when different tasks related to a transaction are allocated to different staff, thereby helping to ensure that each separate task has been properly undertaken.

Article 7

ESTABLISHMENT AND DESIGNATION OF STRUCTURES AND AUTHORITIES FOR CENTRALISED OR JOINT MANAGEMENT

(1) In the event of centralised or joint management the national IPA co-ordinator shall act as the representative of the Beneficiary vis-à-vis the Commission. He shall ensure that a close link is maintained between the Commission and the Beneficiary with regard both to the general accession process and to EU pre-accession assistance under IPA.

(2) The national IPA co-ordinator shall also be responsible for co-ordinating the Beneficiary’s participation in the relevant cross-border programmes, both with Member States and with other Beneficiary countries, as well as in the trans-national, interregional or sea basins programmes under other Community instruments. He may delegate the tasks relating to this latter responsibility to a cross-border co-operation co-ordinator.

(3) In the case of the Cross-border Co-operation Component, operating structures shall be designated and put in place by the Beneficiary, in accordance with Article 139 of the IPA Implementing Regulation.

Article 8

FUNCTIONS AND COMMON RESPONSIBILITIES OF THE STRUCTURES, AUTHORITIES AND BODIES

(1) The bodies and authorities mentioned in Article 6 above shall be allocated the functions and common responsibilities as set out in ANNEX A to this Framework Agreement.

(2) Component-related specific allocations of functions and responsibilities may be set out in Sectoral Agreements or Financing Agreements. They must not be in contradiction to the basic approach chosen for the allocation of functions and common responsibilities as shown in ANNEX A.

(3) Where under decentralised management specific persons have been given responsibility for an activity in relation to the management, implementation and control of programmes, the Beneficiary shall enable such persons to exercise the duties associated with that responsibility including in cases where, there is no hierarchical link between them and the bodies participating in that activity. The Beneficiary shall, in particular, provide those persons with the authority to establish, through formal working arrangements between them and the bodies concerned:

a) an appropriate system for the exchange of information, including the power to require information and a right of access to documents and staff on the spot, if necessary;

b) the standards to be met;

c) the procedures to be followed.

Section III

ACCREDITATION AND CONFERRAL OF MANAGEMENT POWERS UNDER DECENTRALISED MANAGEMENT

Article 9

COMMON REQUIREMENTS

Management relating to a component, a programme or a measure can only be conferred on the Republic of Croatia, if and when the following requirements are fulfilled:

a) The Beneficiary meets the conditions set to Article 56 of the Financial Regulation, in particular as regards the management and control systems. The management and control systems set up in the Republic of Croatia shall provide for effective and efficient control in at least the areas set out in the Annex to the IPA Implementing Regulation and as listed under No 1 c) of ANNEX A to this Framework Agreement. The Contracting Parties may define further provisions in Sectoral Agreements or Financing Agreements.

b) The competent accrediting officer has given accreditation to the national authorising officer both

■ as the head of the national fund bearing overall responsibility for the financial management of EU funds in the Republic of Croatia and being responsible for the legality and regularity of the underlying transactions;

■ with regard to national authorising officer's capacity to fulfil the responsibilities for the effective functioning of management and control systems under IPA.

The accreditation of the national authorising officer shall also cover the national fund as described in Annex A, 5.

c) The national authorising officer has given accreditation to the relevant operating structures.

Article 10

PROCEDURE FOR ACCREDITATION OF THE NATIONAL AUTHORISING OFFICER AND THE NATIONAL FUND BY THE COMPETENT ACCREDITING OFFICER

(1) Accreditation of the national authorising officer in accordance with Article 11 of the IPA Implementing Regulation is subject to his fulfilment of the applicable requirements set out in Article 11 of the said regulation and as further defined in Annex A, 4. This accreditation shall be supported by an audit opinion drawn up by an external auditor functionally independent from all actors in the management and control system. The audit opinion shall be based on examinations conducted according to internationally accepted auditing standards.

(2) The competent accrediting officer shall notify the Commission of the accreditation of the national authorising officer, not later than the notification of the accreditation of the first operating structure. The competent accrediting officer shall provide all relevant supporting information required by the Commission.

(3) The competent accrediting officer shall immediately inform the Commission of any changes concerning the national authorising officer or the national fund. Where a change affects the national authorising officer or the national fund in relation to the applicable requirements as set out in Article 11 of the IPA Implementing Regulation, the competent accrediting officer shall send to the Commission an assessment of the consequences of such a change on the validity of the accreditation. Where such a change is significant, the competent accrediting officer shall also notify the Commission of his decision concerning the accreditation.

Article 11

PROCEDURE FOR ACCREDITATION OF OPERATING STRUCTURES BY THE NATIONAL AUTHORISING OFFICER

(1) Accreditation of an operating structure is subject to its fulfilment of the requirements set out in Article 11 of the IPA Implementing Regulation. This assurance shall be supported by an audit opinion drawn up by an external auditor functionally independent from all actors in the management and control system. The audit opinion shall be based on examinations conducted according to internationally accepted auditing standards.

(2) The national authorising officer shall notify the Commission of the accreditation of the operating structures and shall provide all relevant supporting information required by the Commission, including a description of the management and control systems.

Article 12

PROCEDURE FOR CONFERRAL OF MANAGEMENT POWERS BY THE COMMISSION

(1) The Commission shall confer management powers on the Beneficiary, only after the bodies and authorities referred to in Article 6 above have been designated and put in place and the conditions laid down in this article are fulfilled.

(2) Before the conferral of management powers, the Commission shall review the accreditations of the national authorising officer and the operating structures as laid down in Articles 10 and 11 above and examine the procedures and structures of any of the bodies or authorities concerned within the Republic of Croatia. This may include on-the-spot verifications by the services of the Commissions or subcontracted to an audit firm.

(3) The Commission may, in its decision to confer management powers, set further conditions, with a view to ensuring that the requirements referred to in Article 11 of the IPA Implementing Regulation are met. These further conditions must be fulfilled within a fixed period determined by the Commission for the conferral of management powers to remain effective.

(4) The Commission Decision on the conferral of management powers shall lay down the list of the ex ante controls, if any, to be performed by the Commission on the tendering of contracts, launch of calls for proposals and the award of contracts and grants. This list may vary with the component or the programme. The ex ante controls shall apply, depending on the component or programme, until the Commission allows for decentralised management without ex ante controls as referred to in Article 16 below.

Article 13

WITHDRAWAL OR SUSPENSION OF THE ACCREDITATION OF THE NATIONAL AUTHORISING OFFICER AND THE NATIONAL FUND

(1) After the conferral of management powers by the Commission, the competent accrediting officer shall be responsible for monitoring the continuing fulfilment of all the requirements for this accreditation to be maintained and shall inform the Commission of any significant change related thereto.

(2) If any of the applicable requirements set out in Article 11 of the IPA Implementing Regulation, are not, or are no longer, fulfilled, the competent accrediting officer shall either suspend or withdraw the accreditation of the national authorising officer, and shall immediately inform the Commission of his decision and of the reasons for his decision. The competent accrediting officer shall assure himself that those requirements are again fulfilled before restoring the accreditation. This assurance shall be supported by an audit opinion as specified in Article 10 (1) above.

(3) Where the accreditation of the national authorising officer is withdrawn or suspended by the competent accrediting officer, the following provisions shall apply:

■ The Commission shall cease to make transfers of funds to the Beneficiary during the period when the accreditation is not in force;

■ During the period when the accreditation is not in force, all the euro accounts or the euro accounts for the components concerned shall be blocked and no payment made by the National Fund from those euros accounts which are blocked shall be considered eligible for Community funding;

■ Without prejudice to any other financial corrections, the Commission may make financial corrections as laid down in Article 30 below against the Beneficiary in respect of its past non-compliance with the requirements for the conferral of management powers.

Article 14

WITHDRAWAL OR SUSPENSION OF THE ACCREDITATION OF THE OPERATING STRUCTURES

(1) After the conferral of management powers by the Commission, the national authorising officer shall be responsible for monitoring the continuing fulfilment of all the requirements for this accreditation to be maintained and shall inform the Commission and the competent accrediting officer of any significant change related thereto.

(2) If any of the requirements set out in Article 11 of the IPA Implementing Regulation are not, or are no longer, fulfilled, the national authorising officer shall either suspend or withdraw the accreditation of the operating structure concerned, and shall immediately inform the Commission and the competent accrediting officer of his decision and of the reasons for his decision.

The national authorising officer shall assure himself that those requirements are again fulfilled before restoring the accreditation concerned. This assurance shall be supported by an audit opinion as referred to in Article 11(1) above.

(3) Where the accreditation of an operating structure is withdrawn or suspended by the national authorising officer, the following provisions shall apply.

■ The Commission shall make no transfers to the Beneficiary of funds relating to programmes or operations implemented by the operating structure concerned while its accreditation is suspended or withdrawn;

■ Without prejudice to any other financial corrections, the Commission may make financial corrections as laid down in Article 30 below against the Beneficiary in respect of its past non-compliance with the requirements and conditions for the conferral of management powers;

■ No new legal commitments made by the operating structure concerned shall be considered eligible during the period when the accreditation is not in force;

■ The national authorising officer shall be responsible for taking any appropriate safeguard measures regarding payments made or contracts signed by the operating structure concerned.

Article 15

WITHDRAWAL OR SUSPENSION OF CONFERRAL OF MANAGEMENT POWERS

(1) The Commission shall monitor compliance with the requirements set out in Article 11 of the IPA Implementing Regulation.

(2) Irrespective of the decision by the competent accrediting officer to maintain, suspend or withdraw the accreditation of the national authorising officer, or of the decision by the national authorising officer to maintain, suspend or withdraw the accreditation of the operating structure, the Commission may withdraw or suspend the conferral of management powers at any time, in particular in the event that any of the requirements mentioned in Article 11 of the IPA Implementing Regulation are not, or no longer, fulfilled.

(3) Where the conferral of management powers is withdrawn or suspended by the Commission, the following provisions shall apply:

■ The Commission shall cease to make transfers of funds to the Beneficiary;

■ Without prejudice to any other financial corrections, the Commission may make financial corrections as laid down in Article 30 below against the Beneficiary in respect of its past non-compliance with the requirements for the conferral of management powers.

The Commission may lay down other consequences of such a suspension or withdrawal in a specific Commission Decision.

(4) The Commission Decision may lay down provisions concerning the suspension or withdrawal of the conferral of management powers in relation to specific bodies or authorities.

Article 16

DECENTRALISATION WITHOUT EX-ANTE CONTROL BY THE COMMISSION

(1) Decentralisation without ex-ante control by the Commission shall be the objective for the implementation of all IPA components where assistance is implemented on a decentralised basis in accordance with Article 5 above. The timing for attainment of this objective may vary depending on the IPA Component concerned.

(2) Before dispensing with the ex-ante controls laid down in the Commission Decision on conferral of management, the Commission shall satisfy itself of the effective functioning of the management and control system concerned in accordance with the relevant Community and national rules. In particular, the Commission shall monitor the implementation, by the Beneficiary, of the roadmap included in the Financing Agreement, which may refer to a phased waiver of different types of ex-ante controls. The Commission shall take due account of the results achieved by the Beneficiary in this context, in particular in the provision of assistance and in the negotiation process.

Article 17

STATEMENT OF ASSURANCE BY THE NATIONAL AUTHORISING OFFICER

(1) The national authorising officer shall make an annual management declaration covering

■ his overall responsibility, in his function as head of the national fund, for the financial management of EU funds in the Republic of Croatia and for the legality and regularity of the underlying transactions;

■ his responsibility for the effective functioning of management and control systems under IPA.

This management declaration shall take the form of a statement of assurance to be presented to the Commission by 28 February each year with a copy to the competent accrediting officer.

(2) The Statement of Assurance shall be based on the national authorising officer’s actual supervision of the management and control system throughout the financial year.

(3) The Statement of Assurance shall be drawn up according to the model attached in ANNEX B to this Framework Agreement.

(4) If the confirmations regarding the effective functioning of the management and control systems and the legality and regularity of underlying transactions required through the Statement of Assurance are not available, the national authorising officer shall inform the Commission, copy to the competent accrediting officer, of the reasons and potential consequences as well as of the actions being taken to remedy the situation and to protect the interests of the Community.

Article 18

ESTABLISHMENT OF REPORTS AND OPINIONS BY THE AUDIT AUTHORITY AND FOLLOW UP BY THE NATIONAL AUTHORISING OFFICER AND THE COMMISSION

(1) Subject to the detailed functions and responsibilities of the audit authority as set out ANNEX A to this Framework Agreement, the audit authority shall in particular establish the following reports and opinions:

a) An annual audit activity report according to the model in ANNEX C to this Framework Agreement;

b) An annual audit opinion on the management and control system according to the model in ANNEX D to this Framework Agreement;

c) An audit opinion on the final statement of expenditure for the closure of a programme or parts of a programme according to the model in ANNEX E to this Framework Agreement.

(2) Following receipt of the annual audit activity report and the annual audit opinion referred to in paragraph 1, the national authorising officer shall:

a) decide whether any improvements to the management and control systems are required, record the decisions in that respect and ensure the timely implementation of those improvements;

b) make any necessary adjustments to the payment applications to the Commission.

(3) The Commission may decide either to take follow-up action itself in response to the reports and opinions, for example by initiating a financial correction procedure, or to require the Beneficiary to take action, while informing the national authorising officer and the competent accrediting officer of its decision.

Section IV

GENERAL RULES FOR COMMUNITY FINANCIAL ASSISTANCE

Article 19

ELIGIBILITY OF EXPENDITURE

(1) In the event of decentralised management, notwithstanding accreditations by the competent accrediting officer and the national authorising officer, contracts and addenda signed, expenditure incurred and payments made by the national authorities shall not be eligible for funding under IPA prior to the conferral of management by the Commission on the concerned structures and authorities. The end date for the eligibility of expenditure shall be laid down in Financing Agreements, where necessary.

(2) By way of derogation from paragraph 1,

a) technical assistance to support the setting up of management and control systems may be eligible prior to the initial conferral of management, for expenditure incurred after 1 January 2007;

b) expenditure following the launch of calls for proposals or calls for tenders may also be eligible if the call is launched prior to the initial conferral of management, subject to this initial conferral of management being in place within the time limits defined in a reserve clause to be inserted in the operations or calls concerned, and subject to prior approval of the documents concerned by the Commission. The calls for proposal or calls for tender concerned may be cancelled or modified depending on the decision on conferral of management.

(3) Expenditure financed under IPA shall not be the subject of any other financing under the Community budget.

(4) In addition to paragraph 1 to 3 above, more detailed rules on eligibility of expenditure may be set out in Financing Agreements or Sectoral Agreements.

Article 20

PROPERTY OF INTEREST

Any interest earned on any of the component-specific euro accounts remains the property of the Beneficiary. Interest generated by the financing by the Community of a programme shall be posted exclusively to that programme, being regarded as a resource for the Beneficiary in the form of a national public contribution, and shall be declared to the Commission, at the time of the final closure of the programme.

Article 21

AUDIT TRAIL

The national authorising officer shall ensure that all the relevant information is available to ensure at all times a sufficiently detailed audit trail. This information shall include documentary evidence of the authorisation of payment applications, of the accounting and payment of such applications, and of the treatment of advances, guarantees and debts.

Article 22

AID INTENSITIES AND RATE OF COMMUNITY CONTRIBUTION

(1) The Community contribution shall be calculated in relation to the eligible expenditure, as defined in Part II of the IPA Implementing Regulation for each IPA component.

(2) Financing decisions adopting the annual or multi-annual programmes for each IPA component shall set the maximum indicative amount of the Community contribution and the subsequent maximum rate for each priority axis.

Section V

GENERAL RULES FOR IMPLEMENTATION

Article 23

RULES ON PROCUREMENT

(1) Assistance under all IPA components shall be managed in accordance with the rules for External Aid contained in the Financial Regulation. This shall not apply to assistance implemented under the transitional arrangements of Article 99 IPA Implementing Regulation regarding the Cross-Border Co-operation Component to that part of the programme that is implemented on Member States’ territory, unless otherwise decided by the participating Member State.

(2) Results of tender procedures shall be published according to the rules referred to in paragraph 1 above and as further specified in Article 24(3) below.

(3) The rules of participation and origin as laid down in Article 19 of the IPA Framework Regulation shall apply to all contract award procedures under IPA.

(4) All service, supplies and work contracts shall be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question, unless otherwise provided for in Sectoral or Financing Agreements.

Article 24

PUBLICITY AND VISIBILITY

(1) In the case of centralised and joint management, information on programmes and operations shall be provided by the Commission with the assistance of the national IPA co-ordinator as appropriate. In the case of decentralised management and in all cases for programmes or part of programmes under the cross-border co-operation component not implemented through shared management, the Beneficiary, in particular the national IPA co-ordinator, shall provide information on and publicise programmes and operations. In the case of shared management, the Member States and the Beneficiary shall provide information on and publicise programmes and operations. The information shall be addressed to the citizens and beneficiaries, with the aim of highlighting the role of the Community and ensuring transparency.

(2) In the case of decentralised management, the operating structures shall be responsible for organising the publication of the list of the final beneficiaries, the names of the operations and the amount of Community funding allocated to the operations by means of the award of grants in the following way:

a) The publication shall be made according to a standard presentation, in a dedicated and easily accessible place of the Beneficiary’s internet site. If such internet publication is impossible, the information shall be published by any other appropriate means, including the national official journal.

b) Publication shall take place during the fist half of the year following the closure of the budget year in respect of which the funds were attributed to the Beneficiary.

c) The Beneficiary shall communicate to the Commission the address of the place of publication. If the information is published otherwise, the Beneficiary shall give the Commission full details of the means used.

d) The operating structures shall ensure that the final beneficiary is informed that acceptance of funding is also an acceptance of their inclusion in this list of beneficiaries published. Any personal data included in this list shall nevertheless be processed in accordance with the requirements of Regulation (EC) No 45/2001 of the European Parliament and 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([19]), and with due observance of the requirements of security.

(3) In the case of decentralised management, the relevant bodies shall prepare a contract award notice, once the contract has been signed, and send it to the Commission for publication. The contract award notice may also be published by the beneficiary in the appropriate national publications.

(4) The Commission and the relevant national, regional or local authorities of the Beneficiary shall agree on a coherent set of activities to make available, and publicise, in the Republic of Croatia information about assistance under IPA. The procedures for implementing such activities shall be specified in the Sectoral or Financing Agreements.

(5) Implementation of the activities referred to in paragraph 4 shall be the responsibility of the final beneficiaries, and might be funded from the amount allocated to the relevant programmes or operations.

Article 25

GRANTING OF FACILITIES FOR THE IMPLEMENTATION OF PROGRAMMES AND EXECUTION OF CONTRACTS

(1) In order to ensure the effective implementation of programmes under IPA, the Beneficiary shall take all necessary measures to ensure:

a) that, in the case of service, supplies or works tender procedures, natural or legal persons eligible to participate in tender procedures pursuant to Article 23 above shall be entitled to temporary installation and residence where the importance of the contract so warrants. This right shall be acquired only after the invitation to tender has been launched and shall be enjoyed by the technical staff needed to carry out studies and other preparatory measures to the drawing up of tenders. This right shall expire one month after the decision of contract award;

b) that personnel taking part in Community financed activities and members of their immediate family are accorded no less favourable benefits, privileges and exemptions than those usually accorded to other international staff employed in the Republic of Croatia, under any other bilateral or multilateral agreement or arrangements for assistance and technical co-operation;

c) that personnel taking part in Community financed activities and members of their immediate family are allowed to enter the Republic of Croatia, to establish themselves in the Republic of Croatia, to work there and to leave the Republic of Croatia, as the nature of the underlying contract so justifies;

d) the granting of all permits necessary for the importation of goods, above all professional equipment, required for the execution of the underlying contract, subject to existing laws, rules and regulations of the Beneficiary;

e) that imports carried out under IPA will be exempted from customs duties, import duties and other fiscal charges;

f) the granting of all permits necessary for the re-export of the above goods, once the underlying contract has been fully executed;

g) the granting of authorisations for the import or acquisition of the foreign currency necessary for the implementation of the underlying contract and the application of national exchange control regulations in a non-discriminatory manner to contractors, regardless of their nationality or place of establishment;

h) the granting of all permits necessary to repatriate funds received in respect of the activity financed under IPA, in accordance with the foreign exchange control regulations in force in the Republic of Croatia.

(2) The Beneficiary shall ensure full co-operation of all relevant authorities. It will also ensure access to state-owned companies and other governmental institutions, which are involved or are necessary in the implementation of a programme or in the execution of the contract.

Article 26

RULES ON TAXES, CUSTOMS DUTIES AND OTHER FISCAL CHARGES

(1) Save where otherwise provided for in a Sectoral Agreement or a Financing Agreement, taxes, customs and import duties or other charges having equivalent effect are not eligible under IPA.

(2) The following detailed provisions shall apply:

a) Customs duties, import duties, taxes or fiscal charges having equivalent effect in the case of the import of goods under a Community financed contract are not eligible under IPA. The imports concerned shall be released from the point of entry into the Republic of Croatia for delivery to the contractor, as required by the provisions of the underlying contract and for immediate use as required for the normal implementation of the contract, without regard to any delays or disputes over the settlement of the above mentioned duties, taxes or charges;

b) Community financed contracts for services, supplies or works carried out by contractors registered in the Republic of Croatia or by external contractors shall not be subject in the Republic of Croatia to value added tax, documentary stamp or registration duties or fiscal charges having equivalent effect, whether such charges exist or are to be instituted. EC contractors registered in the Republic of Croatia shall be exempted from VAT for services rendered, goods supplied and/or works executed by them under EC contracts with the right of the contractors to offset or deduct input VAT paid in connection with the services rendered, the goods supplied and/or the works executed against any VAT collected by them for any of their other transactions. Should EC contractors not be able to make use of this possibility, they shall be entitled to obtain VAT refund for VAT paid in the Republic of Croatia directly from the tax authorities upon submission of a written request accompanied by the necessary documentation required under the national/local law for refund and by a certified copy of the underlying EC contract.

For the purposes of this Framework Agreement, the term «EC contractor« shall be construed as natural and legal persons, rendering services and/or supplying goods and/or executing works and/or executing a grant under an EC contract. The term «EC contractor« shall also cover pre-accession advisors, also known as resident twinning advisors, and experts included in a twinning covenant or contract. The term «EC contract« means any legally binding document through which an activity is financed under IPA and which is signed by the EC or the Beneficiary.

At least the same procedural privileges shall apply to such contractors as applicable to contractors under any other bilateral or multilateral agreement or arrangements for assistance and technical co-operation.

c) Profit and/or income arising from EC contracts shall be taxable in the Republic of Croatia in accordance with the national/local tax system. However, natural and legal persons, including expatriate staff, from the Member States of the European Union or other countries eligible under IPA, executing Community financed contracts shall be exempted from those taxes in the Republic of Croatia.

d) Personal and household effects imported for personal use by natural persons (and members of their immediate families), other than those recruited locally, engaged in carrying out tasks defined in technical co-operation contracts, shall be exempted from customs duties, import duties, taxes and other fiscal charges having equivalent effect, the said personal and household effects being re-exported or disposed of in the state, in accordance with the regulations in force in the Republic of Croatia after termination of the contract.

Article 27

SUPERVISION, CONTROL AND AUDIT BY THE COMMISSION AND THE EUROPEAN COURT OF AUDITORS

(1) All Financing Agreements as well as all resulting programmes and subsequent contracts shall be subject to supervision and financial control by the Commission including the European Anti-Fraud Office (OLAF) and audits by the European Court of Auditors. This includes the right of the Delegation of the Commission in the Republic of Croatia to carry out measures such as ex-ante verification of tendering and contracting carried out by the related operating structures, as long as ex-ante control has not been waived in accordance with Article 16 above. The duly authorised agents or representatives of the Commission and of OLAF shall have the right to carry out any technical and financial verification that the Commission or OLAF consider necessary to follow the implementation of a programme including visits of sites and premises at which Community financed activities are implemented. The Commission shall give the national authorities concerned advance notice of such missions.

(2) The Beneficiary shall supply all requested information and documents including any computerised data and take all suitable measures to facilitate the work of the persons instructed to carry out audits or inspections.

(3) The Beneficiary shall maintain records and accounts adequate to identify the services, supplies, works and grants financed under the related Financing Agreement in accordance with sound accounting procedures. The Beneficiary shall also ensure that the agents or representatives of the Commission including OLAF have the right to inspect all relevant documentation and accounts pertaining to items financed under the related Financing Agreement and assist the European Court of Auditors to carry out audits relating to the use of Community funds.

(4) In order to ensure the efficient protection of the financial interests of the Community, the Commission including OLAF may also conduct documentary and on-the-spot checks and inspections in accordance with the procedural provisions of Council Regulation (EC, Euratom) No 2185/1996 of 11 November 1996([20]). These checks and inspections shall be prepared and conducted in close collaboration with the competent authorities designated by the Beneficiary, which shall be notified in good time of the object, purpose and legal basis of the checks and inspections, so that they can provide all the requisite help. The Beneficiary shall identify a service which will assist at OLAF’s request in conducting investigations in accordance with Council Regulation (EC, Euratom) No 2185/1996. If the Beneficiary wishes, the on-the-spot checks and inspections may be carried out jointly with them. Where the participants in Community financed activities resist an on-the-spot check or inspection, the Beneficiary, acting in accordance with national rules, shall give Commission/OLAF inspectors such assistance as they need to allow them to discharge their duty in carrying out an on-the-spot check or inspection.

The Commission/OLAF shall report as soon as possible to the Beneficiary any fact or suspicion relating to an irregularity which has come to its notice in the course of the on-the-spot check or inspection. In any event, the Commission/OLAF shall be required to inform the above-mentioned authority of the result of such checks and inspections.

(5) The controls and audits described above are applicable to all contractors and sub-contractors who have received Community funds including all related information to be found in the documents of the national fund of the Beneficiary concerning the national contribution.

(6) Without prejudice to the responsibilities of the Commission and the European Court of Auditors, the accounts and operations of the National Fund and, where applicable, operating structures may be checked at the discretion of the Commission by the Commission itself or by an external auditor assigned by the Commission.

Article 28

PREVENTION OF IRREGULARITY AND FRAUD, MEASURES AGAINST CORRUPTION

(1) The Beneficiary shall ensure investigation and effective treatment of suspected cases of fraud and irregularities and shall ensure the functioning of a control and reporting mechanism equivalent to that foreseen in the Commission Regulation (EC) No 1828/2006 of 8 December 2006([21]). In the case of suspected fraud or irregularity, the Commission shall be informed without delay.

(2) Furthermore, the Beneficiary shall take any appropriate measure to prevent and counter any active or passive corruption practices at any stage of the procurement procedure or grant award procedure or during the implementation of corresponding contracts.

(3) The Beneficiary, including the personnel responsible for the implementation tasks of the Community financed activities, undertakes to take whatever precautions are necessary to avoid any risk of conflict of interests and shall inform the Commission immediately of any such conflict of interest or any situation likely to give rise to any such conflict.

(4) The following definitions shall apply:

a) Irregularity shall mean any infringement of a provision of applicable rules and contracts resulting from an act or an omission by an economic operator which has, or would have, the effect of prejudicing the general budget of the European Union by charging an unjustified item of expenditure to the general budget.

b) Fraud shall mean any intentional act or omission relating to: the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities; non disclosure of information in violation of a specific obligation with the same effect; the misapplication of such funds for purposes other than those for which they are originally granted.

c) Active corruption is defined as the deliberate action of whosoever promises or gives, directly or through an intermediary, an advantage of any kind whatsoever to an official for himself or for a third party for him to act or to refrain from acting in accordance with his duty or in the exercise of his functions in breach of his official duties in a way which damages or is likely to damage the financial interests of the European Communities.

d) Passive corruption is defined as the deliberate action of an official, who, directly or through an intermediary, requests or receives advantages of any kind whatsoever, for himself or a third party, or accepts a promise of such advantage, to act or to refrain from acting in accordance with his duty or in the exercise of his functions in breach of his official duties in a way which damages or is likely to damage the financial interests of the European Communities.

Article 29

RECOVERY OF FUNDS IN CASE OF IRREGULARITY OR FRAUD

(1) Any proven case of irregularity or fraud discovered at any time during the implementation of assistance under IPA or as the result of an audit will lead to the recovery of the funds by the Commission from the Beneficiary.

(2) The national authorising officer shall recover the Community contribution paid to the Beneficiary from those who committed the irregularity, fraud or corruption or benefited from it, in accordance with national recovery procedures. The fact that the national authorising officer does not succeed in recovering all or part of the funds shall not prevent the Commission from recovering the funds from the Beneficiary.

Article 30

FINANCIAL CORRECTIONS

(1) In the case of decentralised management, in order to ensure that the funds are used in accordance with the applicable rules, the Commission shall apply clearance-of-accounts procedures or financial correction mechanisms in accordance with Article 53b(4) and 53c(2) of the Financial Regulation and as detailed in Sectoral Agreements or Financing Agreements.

(2) A financial correction may arise following either:

■ identification of a specific irregularity, including fraud;

■ identification of a weakness or deficiency in the management and control systems of the Beneficiary;

(3) If the Commission finds that expenditure under the programmes covered by IPA has been incurred in a way that has infringed applicable rules, it shall decide what amounts are to be excluded from Community financing.

(4) The calculation and establishment of any such corrections, as well as the related recoveries, shall be made by the Commission, following the criteria and procedures provided for in Articles 32, 33 and 34 below. Provisions on financial corrections which have been set down in Sectoral Agreements or Financing Agreements shall apply in addition to this Framework Agreement.

Article 31

FINANCIAL ADJUSTMENTS

In the case of decentralised management the national authorising officer, who bears in the first instance the responsibility for investigating irregularities, shall make the financial adjustments where irregularities or negligence are detected in operations or operational programmes, by cancelling all or part of the Community contribution to the operations or the operational programmes concerned. The national authorising officer shall take into account the nature and gravity of the irregularities and the financial loss to the Community contribution.

Article 32

CRITERIA FOR FINANCIAL CORRECTIONS

(1) The Commission may make financial corrections, by cancelling all or part of the Community contribution to a programme, in the situations referred to in Article 30(2) above.

(2) Where individual cases of irregularity are identified, the Commission shall take into account the systemic nature of the irregularity to determine whether flat-rate corrections, punctual corrections or corrections based on an extrapolation of the findings should be applied. For the Rural Development Component, criteria for financial corrections are set out in Financing Agreements or Sectoral Agreements.

(3) When deciding the amount of a correction, the Commission shall take into account the nature and gravity of the irregularity and/or the extent and financial implications of the weaknesses or the deficiencies found in the management and control system in the programme concerned.

Article 33

PROCEDURE FOR FINANCIAL CORRECTIONS

(1) Before taking a decision on a financial correction, the Commission shall inform the national authorising officer of its provisional conclusions and request his comments within two months.

Where the Commission proposes a financial correction on the basis of extrapolation or at a flat rate, the Beneficiary shall be given the opportunity to establish the actual extent of the irregularity, through an examination of the documentation concerned. In agreement with the Commission, the Beneficiary may limit the scope of this examination to an appropriate proportion or sample of the documentation concerned. Except in duly justified cases, the time allowed for this examination shall not exceed a period of two months after the two-month period referred to in the first subparagraph.

(2) The Commission shall take account of any evidence supplied by the Beneficiary within the time limits mentioned in paragraph 1.

(3) The Commission shall endeavour to take a decision on the financial correction within six months after opening the procedure as set out in paragraph 1.

Article 34

REPAYMENT

(1) Any repayment to the general budget of the European Union shall be effected before the due date indicated in the recovery order drawn up in accordance with Article 72 of the Financial Regulation. The due date shall be the last day of the second month following the issuing of the order.

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

Article 35

RE-USE OF COMMUNITY CONTRIBUTION

(1) The resources from the Community contribution cancelled following financial corrections pursuant to Article 30 shall be paid to the Community Budget, including interest thereon.

(2) The contribution cancelled or recovered in accordance with Article 31 above may not be re-used for the operation or operations that were the subject of the recovery or the adjustment, nor, where the recovery or adjustment is made for a systemic irregularity, for existing operations within the whole or part of the priority axis in which the systemic irregularity occurred.

Article 36

MONITORING IN THE CASE OF DECENTRALISED MANAGEMENT, MONITORING COMMITTEES

(1) In the case of decentralised management, the Beneficiary shall, within six months after the entry into force of the first financing agreement, set up an IPA monitoring committee, in agreement with the Commission, to ensure coherence and coordination in the implementation of the IPA components.

(2) The IPA monitoring committee shall be assisted by sectoral monitoring committees set up under the IPA components. They shall be attached to programmes or components. They may include representatives of civil society, where appropriate. More detailed rules may be provided for in Financing Agreements or Sectoral Agreements.

(3) The IPA monitoring committee shall satisfy itself as to the overall effectiveness, quality and coherence of the implementation of all programmes and operations towards meeting the objectives set out in the multi-annual indicative planning documents and the financing agreements.

(a) The IPA monitoring committee may make proposals to the Commission, the national IPA co-ordinator and the national authorising officer for any actions to ensure the coherence and co-ordination between the programmes and operations implemented under the different components, as well as for any cross-component corrective measures needed to ensure the achievement of the global objectives of the assistance provided, and to enhance its overall efficiency. It may also make proposals to the relevant sectoral monitoring committee(s) for decisions on any corrective measures to ensure the achievements of programme objectives and enhance the efficiency of assistance provided under the programmes or IPA component(s) concerned;

(b) The IPA monitoring committee shall adopt its internal rules of procedure in compliance with a monitoring committee mandate established by the Commission, and within the institutional, legal and financial framework of the Republic of Croatia;

(c) Unless otherwise provided in the monitoring committee mandate set out by the Commission, the following provisions shall apply:

aa) The IPA monitoring committee shall include among its members representatives of the Commission, the national IPA co-ordinator, the national authorising officer, representatives of the operating structures, and the strategic co-ordinator.

bb) A representative of the Commission and the national IPA co-ordinator shall co-chair the IPA monitoring committee meetings;

cc) The IPA monitoring committee shall meet at least once a year. Intermediate meetings may also be convened on a thematic basis.

Article 37

MONITORING IN THE CASE OF CENTRALISED AND JOINT MANAGEMENT

In the case of centralised and joint management, the Commission may undertake any actions it deems necessary to monitor the programmes concerned. In the case of joint management, these actions may be carried out jointly with the international organisation(s) concerned.

Article 38

ANNUAL AND FINAL REPORTS ON IMPLEMENTATION

(1) The operating structures shall draw up a sectoral annual report and a sectoral final report on the implementation of the programmes for which they are responsible, in compliance with the procedures defined for each IPA component in Part II of the IPA Implementing Regulation.

The sectoral annual reports on implementation shall cover the financial year. The sectoral final reports on implementation shall cover the whole period of implementation and may include the last sectoral annual report.

(2) The reports referred to in paragraph 1 shall be sent to the national IPA co-ordinator, the national authorising officer and to the Commission, after examination by the sectoral monitoring committees.

(3) On the basis of the reports referred to in paragraph 1, the national IPA co-ordinator shall send to the Commission and the national authorising officer, after examination by the IPA monitoring committee, annual and final reports on the implementation of assistance under the IPA Regulation.

(4) The annual report on implementation referred to in paragraph 3, which shall be sent by 31 August each year and for the first time in 2008, shall synthesise the different sectoral annual reports issued under the different components and shall include information about:

a) progress made in implementing Community assistance, in relation to the priorities set up in the multi-annual indicative planning document and the different programmes;

b) financial implementation of Community assistance.

(5) The final report on the implementation as referred to in paragraph 3 shall cover the whole period of implementation and may include the latest annual report mentioned in paragraph 4.

Article 39

CLOSURE OF PROGRAMMES UNDER DECENTRALISED MANAGEMENT

(1) After an application for final payment has been received by the Commission from the Beneficiary, a programme is considered closed as soon as one of the following occurs:

■ payment of the final balance due by the Commission;

■ issuance of a recovery order by the Commission;

■ de-commitment of appropriations by the Commission.

(2) The closure of a programme does not prejudice the right of the Commission to undertake a financial correction at a later stage.

(3) The closure of a programme does not affect the obligations of the Beneficiary to continue to retain related documents.

(4) In addition to paragraph 1 to 3 above, more detailed rules on the closure of programmes may be set out in Financing Agreements or Sectoral Agreements.

Article 40

CLOSURE OF PROGRAMMES UNDER CENTRALISED AND JOINT MANAGEMENT

(1) A programme is closed when all the contracts and grants funded by this programme have been closed.

(2) After a final payment application has been received, a contract or grant is considered closed as soon as one of the following occurs:

■ payment of the final amount due by the Commission;

■ issuance of a recovery order by the Commission following receipt of the final payment application;

■ de-commitment of appropriations by the Commission.

(3) The closure of a contract or grant does not prejudice the right of the Commission to undertake a financial correction at a later stage.

(4) In addition to paragraph 1 to 3 above, more detailed rules on the closure of programmes may be set out in Financing Agreements or Sectoral Agreements.

Section VI

FINAL PROVISIONS

Article 41

CONSULTATION

(1) Any question relating to the execution or interpretation of this Framework Agreement shall be the subject of consultation between the Contracting Parties leading, where necessary, to an amendment of this Framework Agreement.

(2) Where there is a failure to carry out an obligation set out in this Framework Agreement which has not been the subject of remedial measures taken in due time, the Commission may suspend the financing of activities under IPA after consultation with the Beneficiary.

(3) The Beneficiary may renounce in whole or in part the implementation of activities under IPA. The Contracting Parties shall set out the details of the said renunciation in an exchange of letters.

Article 42

SETTLEMENT OF DIFFERENCES, ARBITRATION

(1) Differences arising out of the interpretation, operation and implementation of this Framework Agreement, at any and all levels of participation, will be settled amicably through consultation as provided for under Article 41.

(2) In default of amicable settlement, either Contracting Party may refer the matter to arbitration in accordance with the Permanent Court of Arbitration Optional Rules for Arbitration Involving International Organisations and States in force at the date of this Framework Agreement.

(3) The language to be used in the arbitral proceedings shall be English. The appointing authority shall be the Secretary-General of the Permanent Court of Arbitration following a written request submitted by either Contracting Party. The Arbitrator’s decision shall be binding on all Parties and there shall be no appeal.

Article 43

DISPUTES WITH THIRD PARTIES

(1) Without prejudice to the jurisdiction of the court designated in a contract as the competent court for disputes arising out of that contract between the parties to it, the European Community shall enjoy in the territory of the Republic of Croatia immunity from suit and legal process with respect to any dispute between the European Community and/or the Beneficiary and a third party, or between third parties, which directly or indirectly relates to the provision of Community Assistance to the Beneficiary under this Framework Agreement, except in so far as in any particular case the European Community has expressly waived its immunity.

(2) The Beneficiary shall in any legal or administrative proceedings before a court, tribunal or administrative instance in the Republic of Croatia defend this immunity and take a position which takes duly account of the interests of the European Community. Where necessary, the Beneficiary and the European Commission shall proceed with consultations on the position to take.

Article 44

NOTICES

(1) Any communication in connection with this Framework Agreement shall be made in writing and in the English language. Each communication must be signed and must be supplied as an original document or by fax.

(2) Any communication in connection with this Framework Agreement must be sent to the following addresses:

Article 45

ANNEXES

The Annexes shall be deemed an integral part of this Framework Agreement.

Article 46

ENTRY INTO FORCE

This Framework Agreement shall enter into force on the date on which the Contracting Parties inform each other in writing of its approval in accordance with the existing internal legislation or procedure of each of the Parties.

Article 47

AMENDMENT

Any amendment agreed to by the Contracting Parties will be in writing and will form part of this Agreement. Such amendment shall come into effect on the date determined by the Contracting Parties.

Article 48

TERMINATION

(1) This Framework Agreement shall continue to be in force for an indefinite period unless terminated by written notification by one of the Contracting Parties.

(2) On termination of this Framework Agreement, any assistance still in the course of execution shall be carried out to its completion in accordance with this Framework Agreement and any Sectoral Agreement and Financing Agreement.

Article 49

LANGUAGE

This Framework Agreement is drawn up in two originals in the English language.

ANNEX A

Allocation of functions and common responsibilities to the structures, authorities and bodies in accordance with Article 8 of the Framework Agreement between the Commission and the Beneficiary of 27 August 2007

Preliminary remark:

This list shows the main functions and common responsibilities of the structures, authorities and bodies concerned. It is not to be considered exhaustive. It supplements the core part of this Framework Agreement.

1) The Competent Accrediting Officer (CAO):

a) The CAO shall be appointed by the Beneficiary. He shall be a high-ranking official in the government or the state administration of the Republic of Croatia.

b) The CAO shall be responsible for issuing, monitoring and suspending or withdrawing the accreditation of the national authorising officer (NAO) both

■ as the head of the national fund bearing overall responsibility for the financial management of EU funds in the Republic of Croatia and being responsible for the legality and regularity of the underlying transactions;

■ with regard to the NAO's capacity to fulfil the responsibilities for the effective functioning of management and control systems under IPA.

The accreditation of the NAO shall also cover the national fund (NF).

The CAO shall notify the Commission of the accreditation of the NAO and shall inform the Commission of any changes regarding the accreditation of the NAO. This includes the provision of all relevant supporting information required by the Commission.

c) Prior to accrediting the NAO, the CAO shall satisfy himself that the applicable requirements set out in Article 11 of the IPA Implementing Rules are fulfilled. This includes the verification of the compliance of the management and control system set up by the Beneficiary for effective controls in at least the areas set out in the Annex to the IPA Implementing Regulation (accreditation criteria). This annex provides for the following overall requirements:

■ Control environment (establishment and management of the organisation and the staff) comprising ethics and integrity policies, irregularity management and reporting, staff planning, recruitment, training and appraisal including sensitive post management, sensitive functions and conflicts of interest, establishment of legal bases for bodies and individuals, formal establishment of accountability, responsibility, delegated responsibility and any necessary related authority for all tasks and positions throughout the organisation);

■ Planning and risk management comprising risk identification, assessment and management, objective setting and allocation of resources against objectives, planning of the implementation process;

■ Control activities (implementation of interventions) comprising verification procedures, procedures for supervision by accountable management of tasks delegated to subordinates, including annual statements of assurance from subordinate actors, rules for each type of procurement and calls for proposals, procedures including checklists for each step of procurement and calls for proposals, rules and procedures on publicity, payment procedures, procedures for monitoring the delivery of co-financing, budgetary procedures to ensure the availability of funds, procedures for continuity of operations, accounting procedures, reconciliation procedures, reporting of exceptions, amongst others exceptions to normal procedures approved at appropriate level, unapproved exceptions and control failures whenever identified, security procedures, archiving procedures, segregation of duties and reporting of internal control weaknesses;

■ Monitoring activities (supervision of interventions), comprising internal audit with handling of audit reports and recommendations, evaluations;

■ Communication (ensuring all actors receive information necessary to fulfil their role) comprising the regular coordination meetings between different bodies to exchange information on all aspects of planning and implementation and the regular reporting at all appropriate levels on efficiency and effectiveness of internal control.

2) The National IPA Coordinator (NIPAC):

a) The NIPAC shall be appointed by the Beneficiary. He shall be a high-ranking official in the government or the state administration of the Beneficiary.

b) He shall ensure the overall coordination of assistance under IPA.

c) The NIPAC shall ensure partnership between the Commission and the Beneficiary and close link between the general accession process and the use of pre-accession assistance under IPA. He shall bear the overall responsibility for

■ the coherence and coordination of the programmes provided under IPA;

■ the annual programming for the Transition Assistance and Institution Building Component at national level;

■ the co-ordination of the participation of the Beneficiary in the relevant cross-border programmes both with Member States and with other Beneficiary countries, as well as the transnational, interregional or sea basins programmes under other Community instruments. The NIPAC may delegate the tasks relating to this co-ordination to a cross-border co-operation co-ordinator.

d) The NIPAC shall draw up and, after examination by the IPA monitoring committee, submit to the Commission the IPA annual and final reports on implementation as defined in Article 38 of this Framework Agreement and in Article 61(3) of the IPA Implementing Regulation. He shall send a copy of these reports to the NAO.

3) The Strategic Co-ordinator:

a) A strategic co-ordinator shall be appointed by the Beneficiary to ensure the co-ordination of the Regional Development Component and Human Resources Development Component under the responsibility of the national IPA co-ordinator. The strategic co-ordinator shall be an entity within the state administration of the Beneficiary with no direct involvement in the implementation of components concerned.

b) The strategic co-ordinator shall in particular:

■ co-ordinate assistance granted under the Regional Development Component and the Human Resources Development Component;

■ draft the strategic coherence framework as defined in Article 154 of the IPA Implementing Regulation;

■ ensure co-ordination between sectoral strategies and programmes.

4) The National Authorising Officer (NAO):

The NAO shall be appointed by the Beneficiary. He shall be a high-ranking official in the government or the state administration of the Beneficiary.

The NAO shall fulfil the following functions and assume the following responsibilities:

a) As the head of the national fund, bearing overall responsibility for the financial management of EU funds in the Republic of Croatia and being responsible for the legality and regularity of the underlying transactions. The NAO shall in particular fulfil the following tasks as regards these responsibilities:

■ providing assurance about the regularity and legality of underlying transactions;

■ drawing up and submitting to the Commission certified statements of expenditure and payment applications; he shall bear overall responsibility for the accuracy of the payment application and for the transfer of funds to the operating structures and/or final beneficiaries;

■ verifying the existence and correctness of the co-financing elements;

■ ensuring the identification and immediate communication of any irregularity;

■ making the financial adjustments required in connection with irregularities detected, in accordance with Article 50 of the IPA Implementing Regulation;

■ being the contact point for financial information sent between the Commission and the Beneficiary.

b) being responsible for the effective functioning of management and control systems under IPA. The NAO shall in particular fulfil the following tasks as regards these responsibilities:

■ being responsible for issuing, monitoring and suspending or withdrawing the accreditation of the operating structures;

■ ensuring the existence and effective functioning of systems of management of assistance under IPA;

■ ensuring that the system of internal control concerning the management of funds is effective and efficient;

■ reporting on the management and control system;

■ ensuring that a proper reporting and information system is functioning;

■ following-up the findings of audit reports from the audit authority, in accordance with Article 18 of this Framework Agreement and Article 30(1) of the IPA Implementing Regulation;

■ immediately notifying the Commission, with a copy of the notification to the CAO, any significant change concerning the management and control systems.

As corollary to the responsibilities under a) and b) above, the NAO shall establish an Annual Statement of Assurance as defined in Article 17 of this Framework Agreement and following ANNEX B to this Agreement, which shall include:

a) a confirmation of the effective functioning of the management and control systems;

b) a confirmation regarding the legality and regularity of the underlying transactions;

c) information concerning any changes in systems and controls, and elements of supporting accounting information.

If the confirmations regarding the effective functioning of the management and control systems and the legality and regularity of underlying transactions (a) and b) above) are not available, the NAO shall inform the Commission, copy to the CAO, of the reasons and potential consequences as well as of the actions being taken to remedy the situation and to protect the interests of the Community.

5) The National Fund (NF):

a) The NF shall be a body located in a State level Ministry of the Beneficiary and shall have central budgetary competence and act as central treasury entity.

b) The NF shall be in charge of tasks of financial management of assistance under IPA, under the responsibility of the NAO.

c) The NF shall in particular be in charge of organising the bank accounts, requesting funds from the Commission, authorising the transfer of funds from the Commission to the operating structures or to the final beneficiaries and the financial reporting to the Commission.

6) The Operating Structures:

a) An operating structure shall be established for each IPA component or programme to deal with the management and implementation of assistance under IPA. The operating structure shall be a body or a collection of bodies within the administration of the Beneficiary.

b) The operating structure shall be responsible for managing and implementing the IPA programme or programmes concerned in accordance with the principle of sound financial management. For those purposes, the operating structure shall carry a number of functions that include:

■ drafting the annual or multi-annual programmes;

■ monitoring programme implementation and guiding the work of the sectoral monitoring committee as defined in Article 36(2) of this Framework Agreement and in Article 59 of the IPA Implementing Regulation, notably by providing the documents necessary for monitoring the quality of implementation of the programmes;

■ drawing up the sectoral annual and final implementation reports defined in Article 38(1) and (2) of this Framework Agreement and in Article 61(1) of the IPA Implementing Regulation and, after their examination by the sectoral monitoring committee, submitting them to the Commission the NIPAC and the NAO;

■ ensuring that operations are selected for funding and approved in accordance with the criteria and mechanisms applicable to the programmes, and that they comply with the relevant Community and national rules;

■ setting up procedures to ensure the retention of all documents regarding expenditure and audits required to ensure an adequate audit trail;

■ arranging for tendering procedures, grant award procedures, the ensuing contracting, and making payments to, and recovery from, the final Beneficiary;

■ ensuring that all bodies involved in the implementation of operations maintain a separate accounting system or a separate accounting codification;

■ ensuring that the NF and the NAO receive all necessary information on the procedures and verifications carried out in relation to expenditure;

■ setting up, maintaining and updating the reporting and information system;

■ carrying out verifications to ensure that the expenditure declared has actually been incurred in accordance with the applicable rules, the products or services have been delivered in accordance with the approval decision, and the payment requests by the final Beneficiary are correct: These verifications shall cover administrative, financial, technical and physical aspects of operations, as appropriate;

■ ensuring internal audit of its different constituting bodies;

■ ensuring irregularity reporting;

■ ensuring compliance with the information and publicity requirements.

c) The heads of the bodies constituting the operating structure shall be clearly designated and shall be responsible for the tasks assigned to their respective bodies, in accordance with Article 8(3) of this Framework Agreement and with Article 11(3) of the IPA Implementing Regulation.

7) The Audit Authority:

a) The audit authority shall be designated by the Beneficiary and shall be functionally independent from all actors in the management and control system and comply with internationally accepted audit standards.

b) The audit authority shall be responsible for the verification of the effective and sound functioning of the management and control systems.

c) The audit authority, under the responsibility of its head, shall in particular fulfil the following functions and assume the following responsibilities:

■ During the course of each year, establishing and fulfilling an annual audit work plan which encompasses audits aimed at verifying:

– the effective functioning of the management and control systems;

– the reliability of accounting information provided to the Commission.

The audit work shall include audits of an appropriate sample of operations or transactions, and an examination of procedures.

The annual audit work plan shall be submitted to the NAO and the Commission before the start of the year in question.

■ submitting reports and opinions as follows:

– an annual audit activity report following the model in ANNEX C to this Framework Agreement and setting out the resources used by the audit authority, and a summary of any weaknesses found in the management and control system or in transaction findings from the audits carried out in accordance with the annual audit work plan during the previous 12 month period, ending on 30 September of the year concerned. The annual audit activity report shall be addressed to the Commission, the NAO and the CAO by 31 December each year. The first such report shall cover the period 1 January 2007 – 30 November 2007.

– an annual audit opinion following the model set out in ANNEX D to this Framework Agreement as to whether the management and control systems function effectively and conform to the requirements of this Framework Agreement and the IPA Implementing Regulation and/or any other agreements between the Commission and the Beneficiary. This opinion shall be addressed to the Commission, the NAO and the CAO. It shall cover the same period and have the same deadline as the annual audit activity report.

– an opinion on any final statement of expenditure submitted to the Commission by the NAO, for the closure of any programme or of any part thereof. Where appropriate, the final statement of expenditure may include payment applications in the form of accounts submitted annually. This opinion shall address the validity of the final payment application, the accuracy of the financial information, and, where appropriate, be supported by a final audit activity report. It shall follow the model provided in ANNEX E to this Framework Agreement. It shall be sent to the Commission and to the CAO at the same time as the relevant final statement of expenditure submitted by the NAO, or at least within three months of the submission of that final statement of expenditure.

■ Further specific requirements for the annual audit work plan and/or the reports and opinions mentioned under the previous bullet point may be set out in the Sectoral Agreements or Financing Agreements.

■ With regard to the methodology for the audit work, reports and audit opinions, the audit authority must comply with international standards on auditing in particular as regards the areas of risk assessment, audit materiality and sampling. That methodology may be complemented by any further guidance and definitions from the Commission, notably in relation to an appropriate general approach to sampling, confidence levels and materiality.

ANNEX B

to the Framework Agreement between the Commission and the Government of the Republic of Croatia

Statement of Assurance[22] of the National Authorising Officer of the Republic of Croatia[23]

I, (name, first name, official title or function), National Authorising Officer of the Republic of Croatia herewith present to the Commission the [statement of expenditure] [accounts and statement of expenditure][24] of the Instrument for Pre-accession (IPA) for the Republic of Croatia for the financial year 01/01/20xx to 31/12/20xx.

I declare that I have put in place, and supervised the operation of, a management and internal control system relating to the IPA component [1 to 5] (Annual Management Declaration).

I confirm, based on my own judgment and on the information at my disposal, including, inter alia, the results of the work of the internal audit, that:

■ The expenditure declared [and the accounts submitted]3 to the Commission during the financial year 01/01/20xx to 31/12/20xx give3[s], to the best of my knowledge, a true, complete and accurate view of the expenditure and receipts related to the IPA component [1 to 5] for the financial year mentioned above;

■ The management and control system has functioned effectively to provide reasonable assurance on the legality and regularity of the underlying transactions including, inter alia, the adherence to the principles of sound financial management;

■ The management and control system in operation for component [1 to 5] was not [significantly][25] changed as compared to the description provided at the moment of submitting the application for conferral of management (taking into account of changes notified to the Commission in previous years);

■ All relevant contractual agreements which could have a material effect on the expenditure declared [and the accounts submitted]3 during the reference period in the event of non-compliance have been complied with. There have been no incidences of non-compliance with Community rules that could have a material effect on the expenditure declared [and the accounts submitted]3 in the event of non-compliance.

I confirm that, where necessary, I have taken appropriate actions in respect of the reports and opinions from the audit authority issued to date in accordance with Article 29 of the IPA Implementing Rules.

[This assurance is, however, subject to the following reservations <also describe remedial actions>:

■ ...

■ ... ].

Furthermore, I confirm that I am not aware of any undisclosed matter which could be damaging to the financial interest of the Community.

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the National Authorising Officer)

ANNEX C

to the Framework Agreement between the Commission and the Government of the Republic of Croatia

Annual Audit Activity Report[26] of the Audit Authority of the Republic of Croatia [27]

addressed to

– the European Commission, Directorate–General...

– the Competent Accrediting Officer (CAO) of the Republic of Croatia and

– [copy to][28] the National Authorising Officer (NAO) of the Republic of Croatia

1. INTRODUCTION

→ Identify the component/programme of IPA covered by the report

→ Indicate the bodies that have been involved in preparing the report, including the Audit Authority itself

→ Describe the steps taken for the preparation of the report

→ Indicate the scope of the audits (including the expenditure declared to the Commission for the year concerned in respect of the relevant operations)

→ Indicate the period which is covered by this annual audit activity report (previous 12 months ending on 30/09/20xx)

2. SUMMARY OF FINDINGS

→ Describe the nature and extent of findings arisen from both systems and substantive testing. (Categorise these findings by reference to their level of importance – «major», «intermediate» and «minor». The list of these findings is shown in the annex to this report). Indicate those errors, which are considered systemic in nature and assess the probability of a possible subsequent qualification linked to the errors. Describe and quantify any irregularities encountered.

3. CHANGES IN MANAGEMENT AND CONTROL SYSTEMS

→ Indicate any significant changes in the management and control systems as compared to the description provided for at the moment of submitting the application for conferral of management (decentralised management) and since the last annual audit activity report.

→ Confirm whether or not the changes referred to have been communicated by the NAO in accordance with Annex A 4) b) of the Framework Agreement.

4. CHANGES TO THE ANNUAL AUDIT WORK PLAN

→ Indicate any changes that have been made to the annual audit work plan or are proposed, giving explanations and reasons.

→ Given the changes listed above, describe the audit approach adopted in response. Outline the implications of the changes and deviations, including an indication of the basis for selection of any additional audits in the context of the revised annual audit work plan.

5. SYSTEMS AUDITS

→ Indicate the bodies that have carried out systems testing for the purpose of this report, including the Audit Authority itself.

→ Attach a summary list of the audits carried out; indicate the materiality and confidence levels applied (%), where appropriate, and the date on which the audit report was forwarded to the Commission.

→ Describe the basis for selection of the audits in the context of the annual audit work plan.

→ Describe the principal findings and the conclusions drawn from the audit work for the management and control systems, including the adequacy of the audit trail and compliance with Community requirements and policies.

→ Indicate any financial impact of findings.

→ Provide information on the follow-up of the audit findings and in particular any corrective and preventive measures applied or recommended.

6. AUDITS OF SAMPLE OF OPERATIONS

→ Indicate the bodies that have carried out substantive testing for the purpose of this report, including the Audit Authority itself.

→ Attach a summary list indicating the number of audits carried out, the materiality and confidence levels applied (%), where appropriate, and the amount of expenditure checked, broken down by components, programme priority axis and/or measure if relevant, distinguishing between risk-based and statistical sampling, where appropriate. Provide the percentage of expenditure checked in relation to total eligible expenditure declared to the Commission (both for the period in question and cumulatively).

→ Describe the basis for selection of the operations inspected.

→ Describe the principal results of the substantive testing, indicating in particular, the overall rate of financial errors in proportion to the total expenditure audited resulting from the sample.

→ Provide information on the follow-up of errors the application of any financial adjustments and/or any remedial action plan.

→ Indicate any resulting financial corrections.

7. CO-ORDINATION BETWEEN AUDIT BODIES AND SUPERVISORY WORK OF THE AUDIT AUTHORITY

→ Describe the procedure for co-ordination between different national audit bodies and the audit authority itself (if applicable).

→ Describe the procedure for supervision applied by the audit authority to other audit bodies (if applicable).

8. FOLLOW-UP OF PREVIOUS YEARS’ AUDIT ACTIVITY

→ Provide information, where appropriate, on the follow-up to audit recommendations and results of audits of operations from earlier years.

9. RESOURCES USED BY THE AUDIT AUTHORITY

→ Describe the resources used in order to establish this Annual Audit Activity Report

ANNEX

Annual audit work plan for the reference year (previous 12 months ending on 30/09/20xx)

[List of findings according to point 2 above]

[List of changes according to point 4 above]

[Summary list according to point 5 above following the model enclosed]

[Summary list according to point 6 above following the model enclosed]

ANNEX D

to the Framework Agreement between the Commission and the Government of the Republic of Croatia[29]

Annual Audit Opinion of the Audit Authority of the Republic of Croatia[30] on the management and control systems

addressed to

– the European Commission, Directorate-General......,

– the Competent Accrediting Officer (CAO) of the Republic of Croatia and

– [copy to][31] the National Authorising Officer (NAO) of the Republic of Croatia

Introduction:

I, (name, first name, official title or function), Head of the Audit Authority of the Republic of Croatia, (name of Audit Authority designated), have examined the functioning of the management and control systems for the operations under component [1 to 5] of the Instrument for pre-accession (IPA) during the previous 12-month period ended on (date), as presented in the description sent to the Commission on (date) at the moment of submitting the application for conferral of management (taking into account of changes notified to the Commission in previous years on (date) together with the changes identified in the annual audit activity report accompanying this opinion).

The objective of this examination is to issue an opinion on the conformity of the management and control systems with the Framework Agreement and/or any other agreements between the Commission and the Government of the Republic of Croatia in the framework of IPA and as to whether these management and control systems – designed to contribute to the production of reliable [statements of expenditure] [accounts and statements of expenditure][32] presented to the Commission and therefore to help to ensure, inter alia, the legality and regularity of the transactions underlying those statements – were operated effectively.

Respective responsibilities of the NAO and the auditors:

The NAO is responsible, inter alia, for the preparation and fair presentation of the Statement of Assurance in accordance with Article 25 of the IPA Implementing Regulation (IPA IR). This responsibility includes the expression of a representation as regards the truth, completeness and accuracy of the expenditure declared [and the accounts submitted]3 to the Commission, as well as whether the effective functioning of the management and control systems under IPA provides reasonable assurance as to the legality and regularity of transactions underlying the Statement.

The NAO should base his/her assessment upon all information at his/her disposal. This includes the work of the internal audit service.

My responsibility in this report – in accordance with Article 29(2)(b) 2nd indent of the IPA IR – is to express an opinion on the effective functioning of the management and control systems established for the operations under the IPA component [1 to 5] during the previous 12-month period ended on (date) in all material respects.

Our audits are organised with this objective in mind (together with the objective of also providing opinions on expenditure declared [and annual accounts of Component 5][33] and final statements of claim). We organise an overall audit work plan to fulfil all our responsibilities under Article 29 IPA IR. We did not plan and perform our audits with a view to be able to express an overall opinion on the reliability of the NAO’s Statement of Assurance as such. However, we do state our conclusions whether the results of the audit work that we have carried out give rise to any significant doubts in respect of the Statement of Assurance. In particular we have assessed whether our audit findings are consistent with the presence or absence of reservations by the NAO to the Statement of Assurance. We conducted our audits in accordance with international auditing standards. Those standards require, inter alia, that we comply with ethical requirements, and that we plan and perform the audits to obtain reasonable assurance on which to base our opinion.

I believe that the work carried out provides a sound basis for our opinion.

Scope of the examination:

The audit assignments were carried out in accordance with the annual audit work plan in respect of this component during the 12-month period in question and reported in the annual audit activity report covering the period until... (date).

Our system-based audit included an examination, on a test basis, of the design and operation of the management and control systems put in place by the beneficiary to effectively manage those risks which threaten the production of reliable [statements of expenditure] [accounts and statements of expenditure]3 presented to the Commission.

Indicate any limitations on the scope of the examination:

→ Explain any limitations

Auditors’ Opinion:

[Option 1 – Unqualified opinion

Based on the examination referred to above, it is my opinion that for the period 1 October 20xx until 30 September 20xx+1) the management and control systems established for the component [1 to 5] to contribute to the production of reliable [statements of expenditure] [accounts and statements of expenditure]3 presented to the Commission and, therefore, to help to ensure, inter alia, the legality and regularity of the transactions underlying those statements, functioned effectively and, concerning its design and operation, complied in all material respects with all applicable requirements of the IPA Framework Agreement and/or any other agreements between the Commission and the Government of the Republic of Croatia in the framework of IPA. Without expressing an opinion on the overall reliability of the Statement of Assurance I conclude that the Statement of Assurance issued by the NAO did not contain any representations that would be materially inconsistent with our audit findings and which would therefore provide any reason to doubt that the Statement of Assurance has been correctly drawn up in accordance with the applicable legislation.

The audits were conducted between DD/MM/20YY and DD/MM/20YY. A report on my findings is delivered at the same date as the date of this opinion.

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the Head of the Audit Authority designated)]

[Option 2 – Qualified opinion[34]

Based on the examination referred to above, it is my opinion that for the period 1 October 20xx until 30 September 20xx+1) the management and control systems established for the component [1 to 5] to contribute to the production of reliable [statements of expenditure] [accounts and statements of expenditure]3 presented to the Commission and, therefore, to help to ensure, inter alia, the legality and regularity of the transactions underlying those statements, functioned effectively and, concerning its design and operation, complied in all material respects with all applicable requirements of the IPA Framework Agreement and/or any other agreements between the Commission and Government of the Republic of Croatia in the framework of IPA except in the following respects:

→ State and explain the qualifications (whether due to disagreement with the NAO or scope limitation); in particular, indicate the bodies concerned

→ Indicate whether the qualifications are of a recurring/systemic nature or one-off

As a consequence, [the Republic of Croatia] [the... authority] [any other actor(s)] has failed to comply with the requirements of the IPA Framework Agreement and/or any other agreements between the Commission and the Government of the Republic of Croatia in the framework of IPA.

I estimate the impact of the qualification(s) to be... EUR [%] of the total expenditure declared, corresponding to... EUR [%] of the public contribution. The Community contribution affected is thus..... Without expressing an opinion on the overall reliability of the Statement of Assurance as a whole, I conclude that the Statement of Assurance issued by the NAO contained representation(s) that is/are materially inconsistent with our audit findings and which therefore provide(s) some reason to doubt that the Statement of Assurance has been correctly drawn up in accordance with the applicable legislation in this respect. This/These reservation(s) and inconsistency(ies) is/are:

The audits were conducted between DD/MM/20YY and DD/MM/20YY. A report on my findings is delivered at the same date as the date of this opinion.

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the Head of the Audit Authority designated)]

[Option 3 – Adverse opinion

Based on the examination referred to above, it is my opinion that for the period 1 October 20xx until 30 September 20xx+1) the management and control systems established for the IPA component [1 to 5] to contribute to the production of reliable [statements of expenditure] [accounts and statements of expenditure]3 presented to the Commission and, therefore, to help to ensure, inter alia, the legality and regularity of the transactions underlying those statements, did not function effectively and, concerning its design and operation, failed to comply, in significant respects, with applicable requirements of the IPA Framework Agreement and/or any other agreements between the Commission and the Government of the Republic of Croatia in the framework of IPA.

This adverse opinion is based on the following observation(s):

→ Describe the circumstances giving rise to the reservations – together with its significant compliance implications with Community rules – and name in particular the bodies affected, if applicable.

Because of the effects of the matters described in the preceding paragraph [Republic of Croatia] [the... authority] [any other actor(s)] has failed to comply with the requirements of the IPA Framework Agreement and/or any other agreements between the Commission and (country) in the framework of IPA.

The audits were conducted between DD/MM/20YY and DD/MM/20YY. A report on my findings is delivered at the same date as the date of this opinion.

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the Head of the Audit Authority designated)]

[Option 4 – Disclaimer of opinion

Because of the significance of the matter discussed in the preceding paragraph, I do not express an opinion on the effectiveness of the management and control systems under the IPA component [1 to 5] for the period 1 October 20xx until 30 September 20xx+1 and its conformity with the IPA Framework Agreement and/or any other agreements between the Commission and the Government of the Republic of Croatia in the framework of IPA. Without expressing an opinion on the overall reliability of the Statement of Assurance as a whole, I conclude that the Statement of Assurance issued by the NAO contained representation(s) that is/are materially inconsistent with our audit findings and which therefore provide(s) some reason to doubt that the Statement of Assurance has been correctly drawn up in accordance with the applicable legislation in this respect. This/These reservation(s) and inconsistency(ies) is/are:

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the Head of the Audit Authority designated)]

ANNEX E

to the Framework Agreement between the Commission and the Government of the Republic of Croatia[35]

Audit Opinion of the Audit Authority of the Republic of Croatia[36] on the final statement of expenditure of the [programme with reference:...]

[on the accounts and statement of expenditure of component 5][37]

[part... of the programme with reference:...]

[as supported by the final Audit Activity Report][38]

addressed to

– the European Commission, Directorate-General......,

– the Competent Accrediting Officer (CAO) of the Republic of Croatia

1. Introduction

I, (name, first name, official title or function), Head of the Audit Authority of the Republic of Croatia, (name of Audit Authority designated), have examined the results of the audit work carried out on the programme (indicate programme – title, component, period, reference (CCI) number) by or under the responsibility of the Audit Authority in accordance with the audit work plan [and have carried out additional work as I judged necessary].

2. Respective responsibilities of the National Authorising Officer (NAO) and the auditors

In accordance with Article 25 of the IPA Implementing Regulation (IPA IR) the preparation and fair presentation of the expenditure statements submitted to the Commission, as well as ensuring the legality and regularity of the transactions underlying those statements, rest with the NAO.

[This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of annual accounts that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances] 3.

My responsibility in this report – in accordance with Article 29(2)(b) 3rd indent of the IPA IR – is to express an opinion [on the reliability of the final statement of expenditure] [on the reliability of statement of expenditure and annual accounts]3 [and the validity of the final payment application] submitted by the NAO. I conducted the audits in accordance with international auditing standards.

Those standards require that I plan and perform the audits in order to obtain reasonable assurance about whether the statement of expenditure [and the annual accounts]3 [and the payment application for the final balance of the Community contribution to the programme] is [are] free of material misstatement [and the effectiveness of internal control procedures]3.

We organise an overall audit work plan to fulfil all our responsibilities under Article 29 of the IPA IR. The audits included [examination, on a test basis, of evidence supporting the amounts and disclosures in the final statement of expenditure and the payment application for the final balance of the Community contribution to the programme] [examination, on a test basis, of evidence supporting the information in the annual accounts, an examination of procedures and of an appropriate sample of transactions to obtain audit evidence about the amounts and disclosures in the statement of expenditure and the annual accounts]3. [The audits covered compliance of payments with Community rules only as regards the capability of the accredited administrative structures to ensure that such compliance has been checked before payment is made][39].

I believe that my audits provide a reasonable basis for my opinion.

3. Scope of the examination

I have conducted my examination in accordance with Article 29(2)(b) IPA IR.

[40] 5

The scope was further limited by the following factors:

(a)...

(b)...

(c)..., etc.

(Indicate any limitation on the scope of the examination, for example any systemic problems, weaknesses in the management and control system, lack of supporting documentation, cases under legal proceedings, etc., and estimate the amounts of expenditure and the Community contribution affected. If the Audit Authority does not consider that the limitations have an impact on the final expenditure declared, this should be stated.)

4. Errors and irregularities

[The error rates and cases of irregularity found in the audit work are not such as to preclude an unqualified opinion given the satisfactory way they have been dealt with by the NAO and the trend in the level of their occurrence over time.]

Or

[The rate of errors and irregularities found in the audit work and the way, they have been dealt with by the NAO, are such as to preclude an unqualified opinion. A list of these cases is provided in the final audit activity report together with an indication of their possible systemic character and the scale of the problem.]

5. Auditors’ opinion on the final statement of expenditure

[Option 1 – Unqualified opinion

(If there have been no limitations on the scope of the examination, and the error rates and cases of irregularity and the way they have been dealt with by the NAO do not preclude an unqualified opinion)

[Based on the examination referred to above covering the audit work carried out in accordance with Article 29(2)(b) IPA IR [and the additional work I have performed], it is my opinion that the accounts submitted to the Commission for the operations under the IPA component [1 to 5] for the period from (date) to (date) (in particular, the statement of expenditure) are presented fairly, in all material respects <, including those pertaining to the legality and regularity of the underlying transactions>[41] [and the internal control procedures have operated satisfactorily]3.]

Or

[Based on the examination referred to above covering the audit work carried out in accordance with Article 29(2)(b) IPA IR [and the additional work I have performed], it is my opinion that the final statement of expenditure presents fairly, in all material respects – >7 – the expenditure paid under the operational programme with reference:... of the IPA component [1 to 5] for the period from (date) to (date), and that the application for payment of the final balance of the Community contribution to this programme is valid.]

My audits were conducted between DD/MM/20YY and DD/MM/20YY.

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the Head of the Audit Authority designated)]

[Option 2 – Qualified opinion

(If there have been limitations on the scope of the examination and/or the error rates and cases of irregularity and the way they have been dealt with by the NAO calls for a qualified opinion but do not justify an unfavourable opinion for all the expenditure concerned)

[Based on the examination referred to above covering the audit work carried out in accordance with Article 29(2)(b) IPA IR [and the additional work I have performed], it is my opinion that the accounts submitted to the Commission for the operations under the IPA component [1 to 5] for the period from (date) to (date) are presented fairly in all material respects – <including those pertaining to the legality and regularity of the underlying transactions>7 [and the internal control procedures have operated satisfactorily]3 – except in the following respects:

(a)...

(b)...

(c)..., etc.

(state the qualifications, in particular the bodies concerned, and explain, e.g. whether they are of a recurring/systemic nature or one-off)

I estimate the impact of the qualification(s) to be [EUR] [%]... of the total expenditure declared, [corresponding to [EUR] [%] of the public contribution]. The Community contribution affected is thus....].

Or

[Based on the examination referred to above covering the audit work carried out in accordance with Article 29(2)(b) IPA IR [and the additional work I have performed], it is my opinion that the final statement of expenditure presents fairly, in all material respects -<including those pertaining to the legality and regularity of the underlying transactions>7 the expenditure paid under the operational programme with reference:... of the IPA component [1 to 5] for the period from (date) to (date), and that the application for payment of the final balance of the Community contribution to this programme is valid except with regard to the matters referred to at point 3 above and/or to the observations at point 4 regarding the error rates and cases of irregularity and the way they have been dealt with by the NAO.

I estimate the impact of the qualification(s) to be [EUR] [%]... of the total expenditure declared, [corresponding to [EUR] [%] of the public contribution]. The Community contribution affected is thus....].

My audits were conducted between DD/MM/20YY and DD/MM/20YY.

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the Head of the Audit Authority designated)]

[Option 3 – Adverse opinion

(If the nature and extent of the errors and of the cases of irregularities and the way they have been dealt with by the NAO are so pervasive that a qualification is deemed inadequate to disclose the misleading nature of the final statement of expenditure as a whole)

[Based on the examination referred to above covering the audit work carried out in accordance with Article 29(2)(b) IPA IR [and the additional work I have performed], and in particular in view of the nature and extent of the errors and of cases of irregularities and the fact that they have not been dealt with satisfactorily by the NAO as disclosed under point 4, it is my opinion that that the accounts submitted to the Commission for the operations under the IPA component [1 to 5] for the period from (date) to (date) are not presented fairly, in all material respects [and the internal control procedures have not operated satisfactorily]3.]

OR

[Based on the examination referred to above covering the audit work carried out in accordance with Article 29(2)(b) IPA IR [and the additional work I have performed], it is my opinion that the final statement of expenditure does not present fairly, in all material respects – <including those pertaining to the legality and regularity of the underlying transactions>7 the expenditure paid under the operational programme with reference:... of the IPA component [1 to 5] for the period from (date) to (date), and that the application for payment of the final balance of the Community contribution to this programme is not valid.]

My audits were conducted between DD/MM/20YY and DD/MM/20YY.

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the Head of the Audit Authority designated)]

[Option 4 – Disclaimer of opinion

(If there have been major limitations on the scope of the examination such that no conclusion can be reached on the reliability of the final statement of expenditure without considerable further work)

[Based on the examination referred to above covering the audit work carried out in accordance with Article 29(2)(b) IPA IR [and the additional work I have performed], and in particular in view of the matters referred to at point 3, I am unable to express an opinion.

(Place and date of issue

__________________________________________________

Signature

Name and official title or function of the Head of the Audit Authority designated)]

– [copy to: National Authorising Officer (NAO) of the Republic of Croatia] 6

FURTHER CONDITIONS FOR THE DELIVERY OF EUROPEAN UNION ASSISTANCE

1 DEPUTISING

(1) The beneficiary country shall ensure that a system of deputising is in place to ensure the continuity of the functions assigned to the national authorising officer.

(2) Without prejudice of the aforementioned, the national authorising officer shall remain finally responsible for all the responsibilities vested in him in this Agreement and other agreements.

2 FURTHER RESPONSIBILITIES OF THE NAO

In addition to the functions and responsibilities laid down in Annex B to this Agreement, the national authorizing officer shall:

(a) conclude the relevant agreements with each of the implementing agencies, which must be endorsed by the Commission;

(b) ensure the flow of national and other co-financing resources;

(c) ensure that the financing reporting system Perseus[42] is regularly updated and reporting procedures properly respected by the national fund and the implementing agencies;

(d) participate in the IPA monitoring committee;

(e) participate in the Transition Assistance and Institution Building Monitoring Committee (the TAIB committee).

3 PAYMENTS

(1) Payments by the Commission of the European Union contribution shall be made within the limits of the funds available.

(2) They shall take the form of: pre-financing, interim payments and payments of the final balance.

(3) By 28 February each year, the national authorising officer shall send to the Commission a forecast of its likely payments applications for the financial year concerned and for the subsequent financial years.

(4) The exchange of information concerning financial transactions between the Commission and the national authorising officer shall, where appropriate, be made by electronic means, using procedures agreed upon between them.

(5) The combined total of pre-financing and interim payments shall not exceed 95% of the European Union contribution.

(6) When the ceiling referred to in paragraph 5 above is reached, the national authorising officer shall only submit a new certified statement of expenditure and information about the amounts received when he/she requests the payment of the final balance.

(7) Amounts set out in the programmes submitted by the national authorising officer, in certified statements of expenditure, in payment applications and in expenditure mentioned in the implementation reports, shall be denominated in euro. The national authorising officer shall convert the amounts of expenditure incurred in national currency into euro using the monthly accounting rate of the euro established by the Commission for the month during which the expenditure was registered in the accounts of the operating structure concerned.

(8) Payments by the Commission to the national fund shall be made to the euro account. One euro account shall be opened for each of the IPA programmes concerned, and shall be used exclusively for transactions relating to that programme.

(9) The national authorising officer shall ensure that the final beneficiaries receive the total amount of the public contribution in due time and in full. No specific charge or other charge with equivalent effect shall be levied which would reduce these amounts for the final beneficiaries.

(10) The expenditure may be covered by European Union financing only if it has been incurred and paid by the final beneficiary. Expenditure paid by final beneficiaries shall be substantiated by receipted invoices or accounting documents of equivalent probative value or other relevant documents, where, according to the programme, assistance is not a function of expenditure. Expenditure must have been certified by the national authorising officer.

4 ACCEPTABILITY OF PAYMENT APPLICATIONS

(1) Without prejudice of establishing additional requirement if the circumstances so require, the Commission shall not approve a payment application until the following minimum requirements have been fulfilled:

(a) In the case of pre-financing by the Commission:

– the national authorising officer has notified to the Commission the opening of the euro account concerned;

– the accreditation delivered by the competent accrediting officer and the national authorising officer are in force and the conferral of management by the Commission remains valid;

– the relevant financing agreement has entered into force.

(b) In the case of each interim payment made by the Commission:

– the national authorising officer has sent to the Commission a payment application and a statement of expenditure relating to the payment in question;

– the ceilings for European Union assistance under each priority axis, as laid down in the Commission financing decision, have been respected;

– the operating structure have sent the Commission the sectoral annual implementation reports, as referred to in Article 61(1) of Regulation (EC) 718/2007, including the most recent one;

– the audit authority has sent the Commission, in accordance with the first and second indent of Article 29(2)(b) of Regulation (EC) 718/2007 the most recent annual audit activity report and opinion on the conformity of the management and control systems in place with the requirements of Regulation (EC) 718/ 2007 and those of any agreement between the Commission and the beneficiary country;

– the accreditations delivered by the competent accrediting officer and the national authorising officer are in force, and the conferral of management by the Commission remains valid.

If one or more of the conditions mentioned in this paragraph are not met, the beneficiary country and the national authorising officer shall, when so requested by the Commission and within the time limit fixed by the Commission, take the necessary steps to remedy the situation.

(c) In the case of payment by the Commission of the final balance, in accordance with the deadline set down in Article 166 of Regulation (EC, Euratom) 1605/2002 as last modified by Regulation (EC, Euratom) No 1525/2007 of 17 December 2007:

– the national authorising officer has sent the Commission a final payment application and a final statement of expenditure;

– the operating structure have sent to the Commission the sectoral final reports for the programme concerned, as required by Article 61(1) of Regulation (EC) No 718/2007;

– the audit authority has sent the Commission, in accordance with the third indent of Article 29(2)(b) of Regulation EC No 718/2007, an opinion on any final statement of expenditure, supported by a final activity report;

– the accreditation delivered by the competent accrediting officer and the national authorising officer are in force and the conferral of management by the Commission remains valid.

Failure to meet any of the conditions mentioned in this paragraph shall immediately result in the de-commitment of the final balance.

(2) All or part of the payments may be suspended by the Commission where:

(a) there is a serious deficiency in the management and control system of the programme which affects the reliability of the procedure for certification of payments and for which corrective measures have not been taken; or

(b) expenditure in a certified statement of expenditure is linked to a serious irregularity which has not been corrected;

(c) clarifications are needed regarding the information contained in the declaration of expenditure.

(3) The beneficiary country shall be given the opportunity to present its observations within a period of two months before the Commission decides on a suspension in accordance with paragraph 2.

(4) The Commission shall end suspension of all or part of the payments where the beneficiary country has taken the necessary measures to remedy the deficiency. If those measures have not been taken by the beneficiary country, the Commission may decide to cancel all or part of the European Union contribution to the programme.

5 PRE-FINANCING

(1) Pre-financing shall in principle represent 50% of the European Union contribution to the programme concerned and it may be paid in yearly instalments. That rate may be raised if the national authorising officer demonstrates that the resulting amount will not cover the pre-financing of the contracts and grants signed at national level. Payments for the participation in European Union programmes and agencies may amount to 100% of the European Union contribution relating to this participation.

(2) The amount to be pre-financed shall be calculated as the sum of the estimate of the amount to be contracted by year, and the actual amount for which contractual obligations have been entered into in the previous years. With the exception of that concerning participation in European Union programmes and agencies, pre-financing shall only be paid once the first tender or call for proposals is launched.

(3) The total amount paid as pre-financing shall be reimbursed to the Commission if no payment application for the programme concerned is sent within 15 months of the date on which the Commission pays the first pre-financing amount. The European Union contribution to the programme concerned shall not be affected by such reimbursement.

(4) The total pre-financing amount shall be cleared at the latest when the programme is closed. Throughout the lifetime of the programme, the national authorising officer shall use the pre-financing payment only to pay the European Union contribution to expenditure in compliance with Regulation (EC) 718/2007.

6 INTERIM PAYMENTS

(1) If it appears that the rules applicable have not been complied with or that European Union funds have been improperly used, the Commission may reduce interim payments to the beneficiary country, or temporarily suspend them, in accordance with the provisions of Article 46 of Regulation (EC) 718/2007. It shall inform the beneficiary country accordingly.

(2) The suspension or reduction of interim payments shall comply with the principle of proportionality and shall be without prejudice to the decisions of conformity and clearance-of-account decisions and financial corrections.

7 REALLOCATION OF FUNDS

(1) The national authorizing officer may request a reallocation of funds within the same programme following a recommendation from the IPA monitoring Committee.

(2) The reallocation requested shall be submitted to the Commission for approval.

(3) If the reallocation does not comprise substantial changes to the nature of the original programme and, as regards the financial element, it does not exceed 20% of the total amount allocated to the programme in question, subject to the limit of €4 million, the committee which gave an opinion on the original programme shall be informed.

8 STAFF, LOCATION AND OPERATIONAL COSTS OF THE NATIONAL FUND AND THE OTHER BODIES AND AUTHORITIES

(1) The beneficiary country shall ensure that at its own cost the availability of the necessary human resources for the timely and correct execution of the tasks entrusted to the bodies and authorities designated under Article 21 of the IPA Implementing Regulation.

(2) The beneficiary country shall provide at its own costs the necessary premises, office furniture and other facilities for the aforementioned bodies and authorities.

(3) The operational costs of those bodies and authorities shall be borne by the beneficiary country, with the exception of the cost referred to in Article 94(1)(f) of the IPA Implementing Regulation.

9 BANK ACCOUNTS

(1) The National Fund shall for each programme open up a separate euro bank account in the Central Bank or in a Government guaranteed bank account. The account shall, in principle, be interest-generating.

(2) Any interest earned on any of the component-specific euro accounts remains the property of the beneficiary country. Interest generated by the financing by the European Union of a programme shall be posted exclusively to that programme, being regarded as a resource for the beneficiary country in the form of a national public contribution, and shall be declared to the Commission whenever a payment application is submitted to the Commission.

(3) The bank account shall be operated on the basis of a double signature system, requiring the signatures of the national authorizing officer and a senior accounting officer.

(4) The national fund shall communicate to the Commission all relevant information on the accounts at the national fund as well as on all other accounts in the implementing agencies and others to which IPA funds have been transferred. Relevant information encompasses the name and address of the bank, the account number, the names of the account holders, the interest rates and any other information that the Commission deems appropriate.

10 ACCOUNTING AND AUDITS

(1) The national fund shall operate an accounting system covering all contractual and other financial operations pertaining to all IPA financed programmes.

(2) The accounts and operations of all relevant operating structures/implementing agencies and authorities may be checked at regular intervals by an outside auditor contracted by the Commission without prejudice to the responsibilities of the Commission and the European Court of Auditors as referred to in the Framework Agreement.

(3) All documents related to a given programme shall be retained by the beneficiary country for at least three years after the closure of the programme. This period shall be interrupted either in case of legal proceedings or at the duly motivated request of the Commission.

(4) By way of derogation from paragraph 3 above, written records of the entire procurement, grant award and contracting procedure shall be retained by the operating structure for a period of at least seven years from the payment of the balance of the contract.

11 REPORTING

(1) The operating structure shall send the Commission, the national IPA co-ordinator and the national authorising officer a sectoral annual report by 30 June each year.

(2) A sectoral final report shall be submitted to the Commission, the national IPA co ordinator and the national authorising officer at the latest 6 months after the closure of the programme. The sectoral final report shall cover the whole period of implementation and include the last sectoral annual report.

(3) Sectoral reports shall be examined by the TAIB committee prior to their transmission to the Commission, the national IPA co-ordinator and the national authorising officer. These sectoral reports shall be made in conformity with the financing reporting system Perseus.

(4) Sectoral reports shall include the following information:

(a) quantitative and qualitative elements about the progress made in implementing the programme, priority axes or operations, in relation to specific, verifiable targets;

(b) detailed information about the financial implementation of the programme;

(c) information on the steps taken by the operating structure or the TAIB committee to ensure the quality and effectiveness of implementation, in particular:

(i) the monitoring and evaluation measures, including data collection arrangements,

(ii) a summary of any significant problems encountered in implementing the programme and any subsequent measures taken,

(iii) the use made of technical assistance.

(5) information on the activities to provide information on and publicise the programme, in accordance with Article 62 of the IPA Implementing Regulation.

12 MONITORING

(1) In addition to the setting up of an IPA monitoring committee as described in the Framework Agreement, the national IPA co-ordinator shall establish a sectoral monitoring committee, the Transition Assistance and Institution Building Monitoring Committee, or 'TAIB committee, within six months after the entry into force of this Financing Agreement.

(2) The TAIB committee shall meet at least twice a year, at the initiative of the beneficiary country or the Commission. It shall draw up its rules of procedure, in compliance with a sectoral monitoring committee mandate set out by the Commission, and within the institutional, legal and financial framework of the beneficiary country concerned. It shall adopt these rules of procedure in agreement with the national IPA co-ordinator, the national authorising officer and the IPA monitoring committee.

(3) The TAIB committee shall be chaired by the national IPA co-ordinator. Its Members shall include the national authorising officer, the programme authorising officers and, where appropriate, other representatives of the operating structure, representatives of the Commission, as well as, where appropriate, representatives of international financial institutions and civil society, designated by the beneficiary country in agreement with the Commission.

(4) In accordance with Article 59(2) of Regulation (EC) 718/ 2007 the TAIB committee shall satisfy itself as to the effectiveness and quality of the concerned programmes and operations by, in particular:

(a) reviewing implementation status reports detailing financial and operational progress of the programmes;

(b) reviewing the achievement of objectives and results of the programmes;

(c) reviewing procurement plans as well as relevant evaluation recommendations;

(d) discussing problematic issues and operations;

(e) proposing corrective actions as appropriate;

(f) reviewing the cases of fraud and irregularities and present the measures taken to recover the funds and to avoid the recurrence of similar cases;

(g) reviewing the annual audit work plan prepared by the audit authority and the findings and recommendations of the audits carried out.

(5) The TAIB committee shall monitor all ongoing programmes under this component. In the case of, inter alia, investment operations, transfer of assets or privatizations, the beneficiary country shall monitor the programmes until their closure and shall notify the TAIB committee of any changes to the results of these programmes that significantly affect their impact, sustainability and ownership.

(6) The TAIB committee may be assisted by sectoral monitoring sub-committees, set up by the beneficiary country to monitor programmes and operations of this component, grouped by monitoring sectors. Sub-committees shall report to the TAIB committee. They shall draw up and adopt their internal rules of procedure, in compliance with a mandate to be set out by the Commission.

13 ROADMAP FOR DECENTRALISATION WITH EX POST CONTROLS

(1) The Beneficiary country shall establish a roadmap with indicative benchmarks and time limits to achieve decentralisation without ex ante controls by the Commission.

(2) The Commission shall monitor the implementation of the roadmap mentioned in paragraph 1, and shall take due account of the results achieved by the beneficiary country in this context, in particular in the provision of assistance and in the negotiation process. The roadmap to achieve decentralization without ex ante controls may refer to a phased waiver of different types of ex ante control.

(3) The Beneficiary country shall keep the Commission regularly updated with the progress made in the implementation of this roadmap.

14 TREATMENT OF RECEIPTS

(1) Receipts for the purposes of IPA include revenue earned by an operation, during the period of its co-financing, from sales, rentals, service enrolment/fees or other equivalent receipts with the exception of:

(a) receipts generated through the economic lifetime of the co-financed investments in the case of investments in firms;

(b) receipts generated within the framework of a financial engineering measure, including venture capital and loan funds, guarantee funds, leasing;

(c) where applicable, contributions from the private sector to the co-financing of operations, which shall be shown alongside public contribution in the financing tables of the programme.

(2) Receipts as defined in paragraph 1 above represent income which shall be deducted from the amount of eligible expenditure for the operation concerned. No later than the closure of the programme, such receipts shall be deducted from the relevant operation's eligibility expenditure in their entirety or pro-rata, depending on whether they were generated entirely or only in part by the co-financed operation.

15 ELIGIBILITY OF EXPENDITURE

(1) Expenditure under the programme in Annex A shall be eligible for European Union contribution if it has been incurred after the contracts and grants implementing such programme have been signed, except in the cases explicitly provided for in the Financial Regulation.

(2) The following expenditure shall not be eligible for European Union contribution under the programme in Annex A:

(a) taxes, including value added taxes;

(b) customs and import duties, or any other charges;

(c) purchase, rent or leasing of land and existing buildings;

(d) fines, financial penalties and expenses of litigation;

(e) operating costs;

(f) second hand equipment;

(g) bank charges, costs of guarantees and similar charges;

(h) conversion costs, charges and exchange losses associated with any of the component specific euro accounts, as well as other purely financial expenses;

(i) contributions in kind;

(j) any leasing costs;

(k) depreciation costs.

(3) By way of derogation from paragraph 2 above, the Commission will decide on a case-by-case basis whether the following expenditure is eligible:

(a) operating costs, including rental costs, exclusively related to the period of co financing of the operation;

(b) value added taxes, if the following conditions are fulfilled:

(i) the value added taxes are not recoverable by any means;

(ii) it is established that they are borne by the final beneficiary, and

(iii) they are clearly identified in the project proposal.

(4) Expenditure financed under IPA shall not be the subject of any other financing under the European Union budget.

16 RETENTION OF DOCUMENTS

(1) All documents related to a given programme shall be retained by the Beneficiary for at least three years after the closure of the programme. This period shall be interrupted either in the case of legal proceedings or at the duly motivated request of the Commission.

(2) By way of derogation from paragraph 1, written records of the entire procurement, grant award and contracting procedure shall be retained by the operating structure for a period of at least seven years from the payment of the balance of the contract.

17 FURTHER RESPONSIBILITIES OF THE NATIONAL IPA COORDINATOR

Where the national IPA coordinator exercises his responsibility for the programming of the transition assistance and institution building component at national level, he shall carry out the following tasks:

(a) organize the preparation of project proposals as referred to in Article 69 of the IPA Implementing Regulation.

(b) elaborate and present to the Commission the project fiches referred to in Article 69 of the IPA Implementing Regulation.

(c) monitor the technical execution of the national programmes.

18 DESIGNATION AND RESPONSIBILITIES OF THE PROGRAMME AUTHORISING OFFICERS

(1) The national authorizing officer shall, after consulting the national IPA co-ordinator, designate programme authorizing officers to head the implementing agencies. They shall be officials within the state administration of the Beneficiary and shall be responsible for the activities mentioned in Section 6(b) of Annex A to the Framework Agreement, in accordance with Article 8(3) of the Framework Agreement and with Article 11(3) of the IPA Implementing Regulation.

(2) Programme authorizing officers shall designate officials within the national administration as senior programme officers. Under the overall responsibility of the programme authorizing officer concerned, senior programme officers shall carry out the following tasks:

(a) be responsible for the technical aspect of the operations within the line ministries;

(b) assist the programme authorizing officers in the good and timely preparation and implementation of operations at technical level;

(c) be in charge of the co-ordination within each priority axis set down in the Beneficiary's project proposal.

19 DETAILED RULES ON THE ACCREDITATION OF THE OPERATING STRUCTURES

(1) Where European Union funds have been managed by existing national bodies in the Beneficiary under Regulation (EEC) No 3906/89 or Regulation (EC) No 2500/2001 prior to the date of entry into force of the IPA Implementing Regulation, those bodies (hereinafter referred to as the «existing national bodies») shall manage funds under the transition assistance and institution building component, until the Commission adopts a Decision on conferral of management powers.

(2) In no case the existing national bodies can manage funds under the transition assistance and institution building component without a conferral of management powers by the Commission in accordance with the IPA Implementing Regulation for more than one year from the entry into force of the IPA Implementing Regulation.

(3) The Commission shall decide whether to confer management powers on the existing national bodies in particular having regard to the list of deviations submitted in accordance with paragraph 4 and the decision taken by the national authorizing officer in accordance with paragraph 5.

(4) The national authorizing officer shall carry out an assessment of the operating structure, which include the existing national bodies, with regard to the requirements referred to in Article 11 of the IPA Implementing Regulation. In particular, he/she shall establish a list of any requirements under the IPA Implementing Regulation, as set out in Article 11 therein, which the operating structure does not comply with, based on an opinion of an external auditor functionally independent from all actors in the management and control system. The list of deviations shall be sent to the Commission at the latest four months after the entry into force of the IPA Implementing Regulation.

(5) Where the non-compliance referred to in paragraph 4 is deemed to be compatible with the efficient and effective functioning of the operating structures, the national authorizing officer may decide to accredit the bodies concerned.

At the latest five months after the entry into force of the IPA Implementing Regulation, he/she shall send to the Commission a decision relating to the accreditation of the bodies concerned. This decision shall include a roadmap, with time bound objectives, laying down the steps to be taken to remedy the non-compliance as set out in the list referred to in paragraph 4. The roadmap shall be agreed by the Commission.

(6) Where the non-compliance referred to in paragraph 6 is not deemed to be compatible with the efficient and effective functioning of an operating structure, the national authorizing officer shall proceed to establish an accreditation for the operating structure concerned, in accordance with the provisions of Article 13 of the IPA Implementing Regulation.

20 DETAILED RULES ON THE CONFERRAL OF MANAGEMENT POWERS BY THE COMMISSION

(1) In the event that the Commission decides to confer management powers on the «existing national bodies» mentioned in Section 19(1) above, the Commission may lay down further conditions on the national authorities. In the event of further conditions, the Commission shall set a time limit for compliance by the national authorities for the conferral of management powers to remain effective. The Commission Decision shall also lay down the list of ex-ante controls mentioned in Article 12(4) of Annex B.

(2) Irrespective of the national authorizing officer's decision, the Commission may decide to maintain, suspend or withdraw the conferral of management powers on any of the bodies concerned at any time.

At all stages, the national authorizing officer shall ensure that all the information required by the Commission is provided by the Beneficiary.