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Implementation of Union funds and budgetary guarantees

1. Persons and entities implementing Union funds or budgetary guarantees shall provide the Commission with:

(a) a report on the implementation of Union funds or budgetary guarantees, including the fulfilment of the conditions or the achievement of results referred to in Article 125(1), first subparagraph, point (a);

(b) where the contribution reimburses expenditure, their accounts drawn up for the expenditure incurred;

(c) a management declaration covering the information referred to in point (a) and, where appropriate, point (b) confirming that:

(i) the information is properly presented, complete and accurate;

(ii) the Union funds were used for their intended purpose, as defined in the contribution agreements, financing agreements or guarantee agreements, or where applicable, in the relevant sector-specific rules;

(iii) the control systems put in place give the necessary guarantees concerning the legality and regularity of the underlying transactions;

(d) a summary of the final audit reports and of controls carried out, including an analysis of the nature and extent of errors and weaknesses identified in systems, as well as corrective action taken or planned. Where cross-reliance on audits as referred to in Article 127 takes place, the summary referred to in the first subparagraph, point (d), of this paragraph shall include all relevant audit documentation to be relied upon. For actions terminating before the end of the financial year concerned, the final report may replace the management declaration referred to in the first subparagraph, point (c), provided it is submitted before 15 February of the following financial year. The documents referred to in the first subparagraph shall be accompanied by an opinion of an independent audit body, drawn up in accordance with internationally accepted audit standards. That opinion shall establish whether the control systems put in place function properly and are cost-effective, and whether the underlying transactions are legal and regular. The opinion shall also state whether the audit work puts in doubt the assertions made in the management declaration referred to in the first subparagraph, point (c). Where such an opinion is absent, the authorising officer may seek an equivalent level of assurance through other independent means. The documents referred to in the first subparagraph shall be provided to the Commission no later than 15 February of the following financial year. The opinion referred to in the third subparagraph shall be provided to the Commission no later than 15 March of that year. The obligations set out in this paragraph shall be without prejudice to agreements concluded with the EIB, the EIF, Member State organisations, international organisations and third countries. With regard to the management declaration, such agreements shall include at least the obligation of those entities to provide the Commission annually with a statement that, during the financial year concerned, the Union funds were used and accounted for in compliance with Article 157(3) and (4) and with the obligations laid down in such agreements. Such statement may be incorporated in the final report if the action implemented is limited to 18 months.

2. When implementing Union funds, a person or entity referred to in Article 62(1), first subparagraph, point (c) shall:

(a) not support actions that contribute to money laundering, terrorism financing, tax avoidance, tax fraud or tax evasion according to applicable Union law and international and Union standards;

(b) when implementing financial instruments and budgetary guarantees in accordance with Title X, not enter into new or renewed operations with entities incorporated or established in jurisdictions listed under the relevant Union policy on non-cooperative jurisdictions or that are identified as high-risk third countries pursuant to Article 9(2) of Directive (EU) 2015/849. Entities may derogate from the first subparagraph, point (b), only if the action is physically implemented in one of those jurisdictions, and does not present any indication that the relevant operation falls under any of the categories listed in the first subparagraph, point (a). Entities implementing financial instruments and budgetary guarantees in accordance with Title X shall ensure that:

(a) third parties to which they directly provide support from the budget comply with the first subparagraph, points (a) and (b), of this paragraph;

(b) for other third parties, rules, procedures and remedial measures assessed as appropriate in line with Article 157(4), and in particular the first subparagraph, point (a), thereof, are in place in order to ensure that those third parties benefit from support from the budget subject to respecting Union or equivalent international standards on money laundering, terrorism financing, tax avoidance, tax fraud or tax evasion. When concluding agreements with financial intermediaries, entities implementing financial instruments and budgetary guarantees in accordance with Title X shall request the financial intermediaries to report on the observance of the requirements laid down in this paragraph.

3. When implementing financial instruments and budgetary guarantees in accordance with Title X, persons and entities shall apply the principles and standards set out in Union law on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, in particular Regulation (EU) 2015/847 of the European Parliament and of the Council and Directive (EU) 2015/849. They shall make funding under this Regulation contingent upon the disclosure of beneficial ownership information in accordance with Directive (EU) 2015/849 and publish country-by-country reporting data within the meaning of Article 89(1) of Directive 2013/36/EU of the European Parliament and of the Council .

4. The Commission shall verify that the Union funds or budgetary guarantees have been used in accordance with the conditions laid down in the relevant agreements. Where the costs of the person or entity are reimbursed based on a simplified cost option in accordance with Article 125(1), first subparagraph, points (c), (d) and (e), Article 184(1) to (5) and Articles 185 to 188 shall apply mutatis mutandis. Where Union funds or budgetary guarantees have been used in breach of the obligations laid down in the relevant agreements, Article 132 shall apply.

5. Article 36(6), first subparagraph, shall apply to persons or entities implementing Union funds pursuant to Article 62(1), first subparagraph, point (c), with regard to the direct recipients of such funds and in respect of the beneficial owners of those recipients to the extent that data on beneficial owners is collected in accordance with the rules and procedures of those persons or entities.

6. The requirements of Article 38(6) shall apply to persons or entities implementing Union funds pursuant to Article 62(1), first subparagraph, point (c), where the financial support directly provided by persons or entities to third parties amounts to more than EUR 500 000.

7. Contribution agreements, financing agreements and guarantee agreements shall clearly define the responsibilities and obligations of the person or entity implementing Union funds, including the obligations set out in Article 129 and the conditions for payment of the contribution. Such agreements shall also, where applicable, define the mutually agreed remuneration which shall be commensurate with the conditions under which the actions are implemented, taking due account of situations of crisis and fragility, and, where appropriate, be performance-based. Those agreements shall also include rules on reporting to the Commission on how the tasks are performed, the results expected, including indicators on measuring performance, and the obligation for persons or entities implementing Union funds or budgetary guarantees to notify the Commission without delay of cases of established fraud and irregularities and their follow-up as well as any information relating to suspected cases of fraud, corruption or any other illegal activity affecting the financial interests of the Union.

8. All contribution agreements, financing agreements and guarantee agreements shall be made available to the European Parliament and to the Council at their request.

9. This Article shall not apply to the Union contribution to Union bodies which are subject to a separate discharge procedure under Articles 70 and 71, with the exception of possible ad-hoc contribution agreements.