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1. The participating Member States and, where applicable, third countries, partner countries and OCTs, may agree in the monitoring committee of an Interreg programme that expenditure falling under one or more of the categories referred to in Articles 39 to 44 shall not be eligible under one or more priorities of an Interreg programme.

2. Any expenditure eligible in accordance with this Regulation shall relate to the costs of initiating or initiating and implementing an operation or part of an operation.

3. The following costs are not eligible:

(a) fines, financial penalties and expenditure on legal disputes and litigation;

(b) costs of gifts; or (c) costs related to fluctuation of foreign exchange rate.

4. Where the flat rate provided for in Article 56(1) of Regulation (EU) 2021/1060 is used to calculate eligible costs other than direct staff costs of an operation, it shall not be applied to direct staff costs calculated on the basis of a flat rate as referred to in point (c) of Article 39(3) of this Regulation.

5. By way of derogation from point (c) of Article 76(1) of Regulation (EU) 2021/1060, expenditure paid in another currency shall be converted into euro by each beneficiary coming from countries which have not adopted the euro as their currency using the monthly accounting exchange rate of the Commission in the month during which that expenditure was submitted for verification.