1. Ministry of Finance Financial management and control of the Operational Programmes, co- financed under the Structural funds and the Cohesion fund of EU Sylvia Indjova Director of the National Fund Directorate, Ministry of Finance 20 June 2008 Second NSRF Monitoring Committee

2. Financial Management and Control Systems  Financial control: setting up rules and procedures and monitoring the compliance of the activities with them  Financial management: a set of management responsibilities for introducing rules, aiming at effective, efficient and economical use of the available funds. The financial management is related to the planning, budgeting, accounting, reporting and the ex-ante control  Financial management and control systems: policies, organizational rules and procedures. The aim of the management and control systems is to secure and implement the activities in a way that ensures the achievement of the aims of the organization

3. Legislation  National Legislation  Financial Management and Control in the Public Sector Act  Public Sector Internal Audit Act  Public Procurement Act  Accountancy Act  State Budget Procedures Act  State Budget of the Republic of Bulgaria Act - annual  European Legislation  Council Regulations 1083/2006, 1080/2006, 1081/2006, 1084/2006, 1082/2006, 1605/2002  Commission Regulations 1828/2006

4. Regulation of the Relations Between the Certifying Authority and the Managing Authority  Guidelines issued in 2007 on the procedures for financial management, monitoring and control on the implementation of the Operational Programmes  Purpose of the Guidelines – to set the grounds for an unified and sound system for financial management and control of the Operational Programmes  Obligatory for the Managing Authorities and Intermediate bodies  Additional explanations issued in 2008 on some of the Guidelines, concerning the processes of control and verification  Published on the website of the Ministry of Finance (www.eufunds.bg)

5. Payment Process Scheme 1. Advance 6. Payment flowsDocuments flows Contractors/suppliers/ consultants Beneficiaries of the OP Managing Authority of the OP Body, responsible for receiving funds from EC - National Fund Directorate 2. 3. Intermediate body for the OP Invoices and other accounting documents Request for funds Request for funds 4. 8. Expenditure reimbursement 5. 7. Opening a limit for payment 1. Advance Invoice payment 1. Advance Request for funds

6. Financial Flows at National Level - continuation  Main participants in the payment process:  Beneficiary – executes payments to the contractors, receives advance, interim and final payments from the MA/IB;  Managing Authority/Intermediate body - Managing Authority executes payments to the beneficiary. This function can be delegated to the Intermediate body;  National Fund – Body, responsible for receiving funds from the EC under the SCF; ensures the availability of funds (SF, CF and corresponding national co-financing) to the MA/IB for payments to the beneficiaries.

7. National Co-financing  The state budget co-financing is ensured by National Fund as an extra-budgetary fund  The state budget co-financing – fixed as a maximum amount in the State Budget Act for the respective year  National Fund ensures the respecting of the EC/national co-financing proportion

8. Basic Principles for Organization of the Payment Process  Payments to the beneficiaries will be executed through the single account, used by the State Treasury (SEBRA);  Payments to the beneficiaries will be executed in national currency (BGN);  The system of the bank accounts consists of two levels (three) – bank accounts of the Certifying Authority; bank accounts of the Managing Authority (bank accounts of the Intermediate body, in case of delegation of payment function) and bank accounts of the specific beneficiaries (ministries, agencies and state enterprises) under the Operational Programmes  Certifying Authority opens limits and the Managing Authority/ Intermediate body executes payments amounting the total sum of the funds from the EC and the corresponding national co-financing;  Limits are opened on a monthly basis, they are not closed up to their exhaustion;

9. Financial Flows at National Level - Types of Payments  Advance payments Up to 20 % of the amount of the signed contract (10% in case of an infrastructure project above 1 million leva)  Interim payments On the basis of eligible expenditure actually incurred by the beneficiaries and verified and confirmed by the MA  Final payment Equal to: Total amount of the verified expenditure – Interim payments – Advance payment

10. Rules for Eligibility of Expenditure  European Rules Stipulated in the Regulations, as basic principles only  National Rules  Obligation of the Member State, according to art. 56 of Regulation 1083/2006  General rules for eligibility of expenditure under all Operational Programmes  Detailed rules for eligibility of expenditure under each Operational Programme

11. General Rules for Eligibility of Expenditure  Regulated with Council of Ministers Decree № 62/2006  The general period for eligibility of expenditure is set – 01.01.2007  Basic rules for eligibility of expenditure are defined – for example:  To correspond to actually performed activities, supported by primary accounting documents  To be incurred for activities, approved according to the selection criteria;  To be in actual expenditure (three exceptions – depreciation, in-kind contribution, overheads);

12. General Rules for Eligibility of Expenditure  The eligible expenditure at national level for all Operational Programmes are defined  For example: expenditures for legal advice, technical and financial experts, audit, insurances, etc.  The ineligible expenditures at national level for all Operational Programmes are defined  For example: fines, financial sanctions, warranties, recoverable value added tax, etc.  The ineligible expenditure for the respective funds are defined  For example: expenditure for equipment, vehicles, investments etc. are not eligible under the European Social Fund

13. Detailed Rules for Eligibility of Expenditure  Define the specific period for eligibility of expenditure per Operational programme  for example: for OP “Competitiveness” – after the submission of the project applications by the beneficiaries, etc.  Additional conditions and rules for eligibility of expenditure are defined  for example the expenditure shall be fixed in the contract, etc.  The specificity of the eligible expenditure, according to the type of the activities, financed under the Operational Programmes is defined  Specifying the types of eligible expenditures, their division into direct and indirect, etc.  The specificity of the ineligible expenditure, according to the type of activities, financed under the Operational Programme  Increase of the types of ineligible expenditures over and above those already in the common rules

14. Detailed Rules for Eligibility of Expenditure - continuation  Decree of Council of Ministers № 180/27.07.2007 - OP “Human Recourses Development”  Decree of Council of Ministers № 215/05.09.2007 - OP ”Technical Assistance”  Decree of Council of Ministers № 231/20.09.2007 - OP “Administrative Capacity”  Decree of Council of Ministers № 236/27.09.2007 - OP “Development of the competitiveness of the Bulgarian economy 2007 – 2013”  Decree of Council of Ministers № 245/09.10.2007 - OP „Regional Development”  Decree of Council of Ministers № 249/17.10.2007 - OP „Environment”  Decree of Council of Ministers № 258/24.10.2007 - OP„Transport”

15. Ministry of Finance THANK YOU FOR YOUR ATTENTION! Sylvia Indjova Director of the National Fund Directorate, Ministry of Finance