Model financial regulation for public–private partnership bodies

SUMMARY OF:

Delegated Regulation (EU) 2019/887 on the model financial regulation for public-private partnership bodies referred to in Article 71 of Regulation (EU, Euratom) 2018/1046

WHAT IS THE AIM OF THE REGULATION?

It lays down the essential principles and rules that public–private partnership bodies (PPP bodies)* covered by Article 71 of the financial regulation (see summary) must respect when adopting their own specific financial arrangements.
The purpose of the delegated regulation is to ensure sound financial management of European Union (EU) funds given to these bodies.
Each PPP body adopts its own financial rules in line with the delegated regulation. PPP bodies may only depart from its rules, because of their specific needs, with the prior consent of the European Commission.

KEY POINTS

The PPP body’s annual budget must forecast and authorise all revenue and expenditure. This covers:

members’ financial contributions to administrative and operational costs;
revenue earmarked for specific expenditure;
revenue the PPP body generates;
expenditure, including on administration.

The PPP body must respect the following budgetary principles.

Unity and budgetary accuracy
- All revenue and expenditure must be booked to a budget line.
- No expenditure can be greater than the amount authorised in the budget.
Annuality
- The budget’s financial year runs from 1 January to 31 December.
- Commitment appropriations* cover the total costs legally entered into during the financial year.
- Payment appropriations* cover expenditure to honour the legal commitments made in the current or preceding financial years.
Equilibrium
- Revenue and payment appropriations must be in balance.
- The PPP may not raise loans within its budget.
Unit of account
- The budget is drawn up and implemented in euro.
- The accounting officer, for cash-flow purposes, may operate in other currencies.
Universality
- Total revenue must cover total payments.
- Revenue that has been earmarked for a particular purpose, such as income from foundations, subsidies, gifts and bequests, must be used for that specific purpose.
Specification
- Appropriations are earmarked for specific purposes by title and chapter.
- The director may transfer appropriations from one budget line and chapter to another, subject to certain conditions.
Sound financial management and performance
- Payments must respect the principles of economy, efficiency and effectiveness.
- Payments focus on performance, based on objectives and indicators to measure progress made.
Internal control of budget implementation
- Applies at all management levels.
- Aims to achieve reasonable assurance of:
  - effectiveness, efficiency and economy of operations;
  - reliability of reporting;
  - safeguarding of assets and information;
  - prevention, detection, correction and follow-up of fraud and irregularities;
  - adequate management of risks of underlying transactions.
Transparency
- The PPP body must publish its budget, recipients of payments and other relevant information on its website, in an easily accessible, transparent and comprehensive way.
- As regards conflicts of interest, the PPP body publishes the declaration of interest of the governing board members on its website every year.

Financial planning requires:

the PPP body to send the Commission and other members a detailed estimate of the following year’s revenue and expenditure and draft annual work programme no later than 31 January;
the PPP body’s governing board to adopt the PPP body’s budget and staff establishment plan.

The regulation makes the following statements.

The duties of the authorising officer and the accounting officer are segregated and mutually exclusive.
The director performs the authorising officer’s duties. These include:
- respecting the PPP body’s financial rules and the principle of sound financial management;
- applying checks before and possibly after payments are made;
- reporting annually to the governing board by submitting a consolidated annual activity report;
- acting, when necessary, to protect the EU’s financial interests.
The governing board appoints an accounting officer responsible for:
- properly implementing payments, collecting revenue and recovering amounts due;
- keeping, preparing and presenting the accounts;
- implementing the accounting rules and the chart of accounts;
- laying down and validating the accounting systems;
- managing the treasury.
Authorising and accounting officers, members of the governing board and others involved in implementing and managing the budget must avoid any conflicts of interest.

PPP bodies must have an internal audit function. The Commission’s internal auditor carries out this role by:

advising on risks, the quality of management and control systems and possible improvements;
enjoying complete independence in their work.

Revenue and expenditure operations require:

revenue: drawing up estimates of amounts receivable, establishing entitlements to be recovered and recovering undue amounts;
expenditure: every item being committed, validated, authorised and paid.

The PPP body’s financial contributions must help achieve an EU policy objective with specific results. They can range from reimbursement of eligible costs to flat-rate financing.

The PPP body must inform the Commission of cases of presumed fraud or other financial irregularities without delay.

Accounting rules require the PPP body to:

set up an accounting system providing accurate, complete and reliable information in a timely manner;
follow standard procedures when providing supporting documents, financial statements, budget implementation reports, provisional and final accounts and an annual report on budgetary and financial management.

An independent external auditor verifies the PPP body’s annual accounts, and the European Parliament is responsible for approving how the budget was implemented (the ‘discharge procedure’).

Commission staff and the Court of Auditors have access to the PPP body’s sites and premises to carry out audits, and the European Anti-Fraud Office (OLAF) may conduct investigations, on-the-spot checks and inspections.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 30 May 2019, apart from the rules on the consolidated activity report (Article 23) and annual work programme (Article 33(4)) which have applied since 1 January 2021.

BACKGROUND

For more information, see:

Financial regulation applicable to the general budget of the Union — publication (European Commission)
Guidance on the avoidance and management of conflicts of interest under the financial regulation — notice (European Commission).

KEY TERMS

Public–private partnership bodies. Bodies with legal personality set up by a basic act and entrusted with the implementation of a public–private partnership on research and innovation activities and other programmes of the EU, as referred to in Article 71 of the financial regulation. These bodies harness both the public and private sectors to provide goods and services normally supplied by the former. They place various responsibilities and risks on the private partner, while easing stringent budgetary constraints on public expenditure.

They can be structured in different ways to achieve a wide range of objectives in sectors such as transport or health.

Commitment appropriations. Pledges to pay, provided certain conditions are fulfilled.

Payment appropriations. Expenditure from commitments in the current, or preceding, financial years.

MAIN DOCUMENT

Commission Delegated Regulation (EU) 2019/887 of 13 March 2019 on the model financial regulation for public–private partnership bodies referred to in Article 71 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (OJ L 142, 29.5.2019, pp. 16–42).