INTERNATIONAL ORGANISATIONS QUESTIONS

A. General
1. What is an International Organisation?
An international Organisation can only be considered as such under the Financial Regulation if the following criteria are met:
- it is international;
- it is a public sector organisation;
- it is set up by intergovernmental agreements.
The specialised agencies set up by these organisations will also be considered international organisations.
The following entities are assimilated to international organisations:
- The International Committee of the Red Cross;
- The International Federation of National Red Cross and Red Crescent Societies;
- The European Investment Bank and European Investment Fund.
2. How can the European Union finance the actions of an International Organisation?
There are two possible ways by which the European Union can finance, in full or in part, the actions of an International Organisation:
- Joint management (see Section B below).
- Grants: use of call for proposals or direct award cases (see section C below);
The graph below represents the legal arrangements as in force from 13 March 2013 (under the previous Financial Regulation, grants to international organisations
were also contracted via SCA).

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How to finance an
action from an IO?
Grants under
Centralised/Decentralised
Management
Contribution
under Joint
Management
Call for
Proposals
Exceptional cases
Direct award of
grants
Transfer of
tasks
SCA

Grant
Contract
Grant
contract

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B. Joint Management
3. What is joint management?
Joint management is a specific budget allocation modality ("method of implementation" or management mode of the European Union (EU) budget or the
European Development Fund according to EU terminology) applicable to international organisations by which the European Commission entrusts some of its
implementing tasks to an international Organisation complying with international standards with regard to the "four pillars" (i.e. accounting, internal control, audit
and procurement) (see Question 5). Despite its name, the EU funds entrusted to an International Organisation under joint management are not jointly managed
between the European Commission and the International Organisation. The management of the tasks related to the implementation of these funds is delegated by
the European Commission to the International Organisation. The European Commission, however, keeps some prerogatives of control and verification, as required
by the Financial Regulation.
4. When can joint management be applied?
This specific budget allocation modality ("management mode" or "method of implementation" in EU terminology) is decided by the College of the European
Commission when adopting the relevant financing decision for a specific action, when the conditions for joint management are met. These conditions, which apply
to International Organisation as defined by the Financial Regulation and offers guarantees equivalent to internationally accepted standards, are the following:
a) in case of Multi-Donor Action, that is where at least two donors pool their contribution to the action (the second donor could be the International
Organisation itself) and these contributions are not earmarked for specific items or categories of expenditure (also referred to as "joint co-financing" or
"multi-donor actions"); or
b) Where a long standing framework agreement has been concluded with an International Organisation (e.g. the FAFA with the UN agencies, the framework
agreement with the World Bank); or
c) Where the project or programme is jointly elaborated with the International Organisation.
These cases are not cumulative. One of them would suffice to use the joint management modality.
Before the revision of the EU Financial Regulation in May 2007, the only possibility to use joint management was in case of multi-donor actions (condition a)
above). After the entry into force of that Financial Regulation, joint management can be applied even in cases of single-donor actions (when one of the conditions
b) or c) above applies). The use of joint management does not exclude the possibility for the International Organisation to receive EU funds through other
allocation modalities (e.g. call for proposals open to international organisations, or a grant directly awarded, see Question 14).
The authorising officer should choose the International Organisation in an objective and transparent manner.
5. What is the four-pillar review?
Joint management can only apply if the International Organisation applies in its accounting, audit, control and procurement procedures standards, which offers
guarantees equivalent to internationally accepted standards.
Each authorising officer should assess whether these organisations offer such guarantees. This can be done in two ways:
1) The authorising officer can rely on a review already carried out by another service. It has to be noted that the main UN agencies as well as the World Bank
have already been assessed with that respect.
The list of the organisations whose assessment is ongoing and/or completed is published and regularly updated in the AIDCO Intranet at the following address:
http://www.cc.cec/dgintranet/europeaid/contracts_finances/fin_and_cont_rules/co-financing_with_nb/index_en.htm.
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The findings of these assessments may be provided for upon request of the authorising officer concerned.
2) If the Organisation has not been subject to the review indicated above, the authorising officer should perform the "four pillars" review him/herself. In that
case, he/she should inform units EUROPEAID/R.2 and EUROPEAID/R.3 in advance. The name of the organisation assessed as regards the four pillars
will be published in the list mentioned in (1) above. Before such review is completed, joint management could only be used on the basis of "presumption
of conformity" stemming from the experience of the European Commission of long-standing and problem-free cooperation with the International
Organisation and the consequent assessment of low-level of risk, it being understood that the four pillars review shall have to be carried out within a
reasonable period of time.
6. What happens if the "4 pillar" review is not satisfactory as regards one or more pillars?
The following pillars are reviewed in this process: accounting; audit; internal control and procurement procedures. Joint management, may only be used in the
event this 4 pillar review outcome is satisfactory: they all offer guarantees equivalent to internationally accepted standards. If the only failing pillar is procurement
procedures, Joint Management can still be used if the required guarantees are provided, for instance using the PRAG.
7. Which Framework Agreements have been signed by the European Commission?
The Commission has signed the following framework agreements with international organisations:
- The Financial and Administrative Framework Agreement ("FAFA") with the United Nations (see Question 10);
- The Trust Fund and Co-financing Framework Agreement with the World Bank.
Also the European Commission has also signed framework agreement with several international Organisations (e.g. World Trade Organisation, Organisation for
Security and Cooperation in Europe, Organisation for Economic Co-operation and Development, Council of Europe and World Organisation for Animal Health
(OIE) in order to adapt the Standard Contribution Agreement to their specific requirements).
8. What is a "project or a programme jointly elaborated with the International Organisation?
A project or programme shall be considered to be jointly elaborated when the European Commission and the international Organisation jointly assess the
feasibility and define the implementation arrangements. This may be the case for instance the description of the action is jointly designed by the International
Organisation and the European Commission.
9. What does Multi-Donor Actions mean? Does it correspond to the notion of joint management?
Multi-donor action covers those cases where the European Commission funds are pooled with those of other donors (the implementing international
Organisation may be one of the other co-financing donors), and not earmarked for specific items or categories of expenditures.
When the funds are earmarked, then this is a case of parallel co-financing (i.e each donor will contribute to specific categories of expenditures) (and not of joint
co-financing) and, hence, this case shall not be considered as a case of Multi-Donor Action. However, should one of the other conditions for joint management be
fulfilled, then joint management would be considered.
Since 2007, a Multi-Donor Action is not any longer the only case where Joint management can be used. Whether an Action is/is not a Multi-Donor Action has to
be defined in the Special Conditions of the standard contribution agreement and shall be used for the purpose of interpreting some of the provisions of the General
Conditions of the standard contribution agreement in the light of the Financial and Administrative Framework Agreement (FAFA) with the United Nations.
10. What is the scope of application of the Financial and Administrative Framework Agreement (FAFA) with the United Nations.?
The Financial and Administrative Framework Agreement ("FAFA") is a framework agreement signed in 2003 between the European Commission and the United
Nations and which applies to all contributions of the European Commission to actions managed by the United Nations entities listed therein, and by those UN
specialised agencies which have subsequently acceded to it (Euratom has also acceded to the FAFA through a specific exchange of letters between the European
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Commission and the UN Secretariat. Updated list of the signatories of FAFA can be found at the following address:
http://ec.europa.eu/europeaid/work/procedures/implementation/international_organisations/other_documents_related_united_nations/index_en.htm
The FAFA shall apply to all contribution agreements concluded by all the European Commission services, except the EU's Framework Research Programme and
the LIFE Programme.
11. Which contract is to be signed with an International Organisation under joint management?
Under joint management, the European Commission's services should use the Standard Contribution Agreement which applies to all the International
Organisations offering the guarantees according to the four pillars review (see Question 5). For grants under centralised/decentralised management, see Question
n17 below.
This model of contract gives flexibility and allows the international Organisation to use its own rules and procedures.
For the World Bank, the Administration Agreement models ("AA") attached to the Trust Fund and Co-financing Framework Agreement must be used instead
which is basically the model of the Standard Contribution Agreement adapted to the specificities of the World Bank.
12. When can the European Commission fully finance an action implemented by an International Organisation under joint management?
Co-financing is not any longer a pre-requisite for the use of joint management (see Question 4). As a consequence, full financing by the Commission is possible in
the two following cases where:
(a) a long-standing framework agreement (i.e. the Financial and Administrative Framework Agreement (FAFA) with the United Nations, Framework
agreement with the World Bank) has been concluded with an international organisation; or
(b) the project or programme is jointly elaborated with the international organisation.
C. Grants to International Organisations
13. How can a grant be awarded to an International Organisation?
An International Organisation can be awarded a grant in response to a call for proposals or directly (see Question 14).
14. When can a grant be awarded by direct agreement to an International Organisation?
As any other entity, an International Organisation can be awarded a grant by direct agreement in the exceptional cases (i.e. cases of humanitarian and crisis
management; a body with a de jure or de facto monopoly; urgency). The authorising officer needs to duly substantiate this in the award decision. Please note
that International Organisations are not treated differently than other grant beneficiaries (e.g. NGOs). For instance, before arguing than an Organisation has the
monopoly to implement certain actions, the relevant authorising officer needs to make sure that such international Organisation is the only entity, being public or
private, who can actually carry out the required action. A direct award of grant to an international Organisation would no longer be advisable when the conditions
for joint management (see Question 4) are met.
15 Can a grant finance in full an action of an International Organisation?
Yes, .
16. What is the difference between a grant and joint management?
Joint management and grants are both used to provide financial support to an action implemented by an International Organisation.
However, joint management implies at the same time the delegation by the European Commission of implementation tasks to an International Organisation. In
other words, the element of delegation of the management of the EU funds to an international Organisation (organising tenders, sub-granting schemes, payments to
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third parties) can be an essential element under joint management.
The use of joint management is more flexible than the grants procedure:
- the European Commission may directly transfer the contribution to the International Organisation (selected in an objective and transparent manner), while
in the case of grants, the Contracting Authority must follow a call for proposals procedure or, exceptionally, duly justify a direct award according to a
limited number of circumstances (e.g. monopoly). Thus, joint management is more flexible in procedural terms since the decision of the authorising
officer to delegate the implementation of tasks to an international Organisation needs to be reasoned but does not need to be justified on the basis of pre-
established criteria (like it is the case of a decision justifying a direct award of grants);
- the use of joint management also means that the implementing International Organisation will have in contractual terms, more flexibility to manage the
entrusted EU funds: more flexibility is given with regards to interests on pre-financing (see Article 15.7 of the General Conditions of the Standard
Contribution Agreement) and use of provisions (see article 14.2 of the General Conditions) where the rules of the international Organisation would apply
under joint management.
- also, under Joint Management, there is no limitation for the International Organisation when the International Organisation gives financial support to third
parties ("re-granting") (see Question 20).
The choice (contribution under Joint Management or grant under other method of implementation) shall be established by the Financing Decision.
17. Which agreement model is used in case of grants?
A) Within calls for proposals launched before 13 March 2013, if the International Organisation respects the basic principles of tendering procedures provided
for in Article 120 of the Financial Regulation and, in general, their institutional "pillars" offer sufficient guarantees for the European Commission to rely
on their procedures (see Question 5), the Standard Contribution Agreement or any other contract template agreed between the international Organisation
concerned and the European Commission (i.e. Administration Agreement in the case of the World Bank) should be used instead of the standard grant
contract. This applies irrespective of the management mode: centralised or decentralised. The possibility for the International Organisations to use a
Standard Contribution Agreement or Administrative Agreement instead of the standard grant contract should be clearly indicated in the guidelines of the
call for proposals (cf. Section 2.6 of the Guidelines for grant applicants attached to the Practical guide to contract procedures for EU external actions).
Where the four pillar review shows that the institutional capacities are not considered sufficiently sound due to one or more failing pillars, a Standard
Contribution Agreement may be signed, where the failing pillar concerns procurement procedures only. In that case, a contribution agreement may be
signed if the International Organization applies EU procedures (which correspond to international standards). On the other hand, in case of a negative
assessment of the other pillars (audit, internal control and accounting), no Contribution Agreement may be signed, and the standard grant contract shall be
used instead.
B) For direct award of grants and contracts within calls for proposals launched after 13 March 2013 the standard grant contract must be used.
18. Are there any differences between a Standard Contribution Agreement signed in the context of Joint Management and a Standard Contribution
Agreement signed in the context of a grant?
The standard contribution agreement has been used under joint management and, until 13 March 2013, for direct award of grants and calls for proposals launched
before such date.
The Standard Contribution Agreement (applicable to all international organisations except for the World Bank) is more flexible than the standard grant contract.
The differences are basically limited to the applicable rules to bank interests on pre-financing (Article 15.7 of the General Conditions), and use of provisions
(Article 14.2 of the General Conditions). It is important to note that different rules on sub-granting also apply (see Question 20):
- in case of interests on pre-financing, the rules of the International Organisation will apply for joint management Which is not always the case in grants.
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- In case of joint management, cost of staff assigned to the action can take the form of provisions.
- Sub-granting: under Joint Management, there is no limitation for the International Organisation, while limitations exist in the context of grants.
The relevant Financing Decision establishes whether the agreement is concluded under Joint Management. (See Question 16).
19.
Void.
20. May the Organisation sub-grant funds to third parties with funds received from the European Commission under the form of a grant?
In general yes, but the maximum amount may vary depending on the specific contract.
In case of a grant received from the EU (i.e. outside cases of Joint Management) before 2013 the International Organisation could only re-grant (i.e. provide grants
to third parties) under the following conditions: sub-granting is not the primary aim of the action and the maximum amount of financial support that can be paid to
third parties by a beneficiary is 100,000 with a maximum of 10,000 per each third party (see Article 1 General Conditions).
In contracts signed since January 2013 the same rule applies if the Action is funded by the European Development Fund. However, when the grant is funded by
the EU Budget the maximum amount per third party has been increased to 60,000 EUR and no limit applies in cases where giving financial support in the form
of sub-grants is the primary aim of the action.
D. Standard Contribution Agreement
21. When does the Standard Contribution Agreement have to be used?
The Standard Contribution Agreement, or the Administration Agreement in case of the World Bank, has to be used in case of delegation of tasks to an
International Organisation under joint management (see Question 4)
22. Is there a format for establishing budgets, descriptions of the action and reports?
The Standard Contribution Agreement does not impose a template and hence International Organisations are free to use their own format, save for call for
proposals (see below).
Therefore, an International Organisation can use its own templates/form (e.g. resources-based budget or activity based budget). The budget structure (Annex 3 of
the Contribution Agreement) should reflect the one normally used by the Organisation in its own accounting system. It is not advisable to impose models which
do not reflect this structure (for instance, Annex III of the EU Grant Contract may not necessarily match). The advantages of reflecting the budget structure of the
Organisation include more robust financial reporting and audit trail showing the link between the financial report and the underlying accounting methods. For the
Organisation it should considerably reduce project transaction costs.
However, regardless of the model used, clarifications on the budget should be sought by the Contracting Authority's services during the negotiation process in
order to ensure a good understanding of the information contained in the document provided by the International Organisation and to avoid any dispute at a later
stage. This information should be used for the purpose of the reporting requirements. In particular, the structure of the budget for the action will determine to a
great extent the structure of the financial reports to be provided by the International Organisation: see also section C2 of the joint UN-EC guidelines on reporting
that can be consulted at the following address.
http://ec.europa.eu/europeaid/work/procedures/implementation/international_organisations/other_documents_related_united_nations/index_en.htm
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In case of reports Article 2 of the General Conditions sets out minimum requirements that the financial and narrative reports must comply with. These reports
should ensure that the Contracting Authority is duly informed about the implementation of the action by the International Organisation. This Article foresees one
report every twelve-months. This frequency of reporting is in principle considered sufficient by the Contracting Authority under normal circumstances (for
instance, where reporting by the International Organisation generally complies with the requirements established in Article 2 in terms of timely delivery, quality of
the report and result-oriented approach).
To request more than one report per year represents an exception to this general rule. Where specific circumstances require an increase in the frequency of reports,
this will be agreed by the parties, and explicitly stipulated in the contribution-specific agreement.
In case of a Standard Contribution Agreement signed with an UN entity, please refer to the Joint Guidelines on reporting obligations under the Financial and
Administrative Framework Agreement (FAFA) with the United Nations.
23. What are the contracting arrangements to be specified in the description of the action?
Article 10 of the General Conditions requires the International Organisation to state what parts of the action it intends to contract out, which types of contracts are
foreseen and what procedures will be followed for such contracting. In deciding which activities will be contracted to other entities and which ones will be
implemented directly, the international Organisation shall consider cost as one of the determining factors, considering that contracting should not lead to increased
costs over direct implementation by the international Organisation itself. It does not require the International Organisation to provide specific names of consultants
that it intends to hire for carrying out the Action nor does it require the International Organisation to inform the Contracting Authority of any non-substantial
change in that respect. Such level of detail needs to be included only in the final report.
24. Can the Organisation extend the Action unilaterally?
No, since this is a modification which affects the basic purpose of the action. This modification will be set out in writing in an amendment. A letter sent by the
International Organisation to the Contracting Authority is enough to amend the contract in some limited fields (see Question 25 and 27).
25. Within what limits can the International Organisation modify the budget unilaterally? How do I establish the 15% threshold?
Pursuant to Article 9.2 of the General Conditions, the International Organisation may modify unilaterally the Description of the Action and/or the Budget of the
Action provided that the basic purpose of the Action is not affected and that the financial impact of the change concerns either the reallocation of funds within the
same heading or the transfer of funds from one heading to another, as long as the total amount of each concerned heading does not deviate by more than 15 %
from the original amount set out in the contract for each of those headings. Original amount means the amount set out in the contract, as the case may be modified
by formal addendum/a. The basic purpose could refer to the specific objective of the project, target groups and/or location of activities. In case of doubts, it is
advisable to check with the Contracting Authority that the proposed modifications are acceptable and do not impact on the basic purpose of the Action.
The 15% variation is calculated on both the original value of the heading where funds are taken from, and the original value of the heading where the funds are to
be added. The modifications to the budget made by the International Organisation are taken into account in a cumulative way. This means, if a budget heading was
increased by, for instance, 10% of its initial value (as set out in the Budget of the Action) through unilateral modification, that same heading can be further
increased only by up to 5% of that same initial value set out in the budget of the Action (thus reaching in total up to 15% variation of its initial value). Therefore, it
is not possible to proceed with several reallocations of 14% each! When the cumulative variations of a given budget heading exceed 15% of the budget headings
value in force, it is necessary to process a formal budget revision (Addendum) for which the EUs formal approval is required. Any amount in excess of the 15%
ceiling which is not covered by an Addendum is not eligible for EU-financing.
The 15% is calculated on the total value of the heading (i.e. the total amount for all years in case of multi-annual actions and/or multi-donor actions) set out in the
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actual Budget of the Action (original one or as put into force through an Addendum), not just on the EU's contribution.
For reallocations between items within the same budget heading, there is no limit (i.e. a 100% modification including deleting or inserting new items is allowed).
Just to remind it, within the parameters specified above (and provided the basic purpose of the action is not affected), the Organisation can, for instance, adjust the
unit rates or monthly fees which are indicative (estimate) at the time when the agreement is signed. The unit rates included in the budget headings are considered
as an average and can therefore change over the time of implementation. These changes are subject to the same conditions as explained above and as set out in
Article 9.2 of the General Conditions. Any costs which are covered by the part of the Budget of the Action financed by the EU must always meet the eligibility
criteria set out in Article 14 of the General Conditions.
The International Organisation may not amend unilaterally the headings for indirect costs or the contingency reserve (unless the contingency reserve is subject to
other agreed procedures see FAQ 53).
In particular, it is important to inform the Contracting Authority about the changes introduced in the Description of the Action or in the Budget of the Action, to
make sure that the changes are acceptable and do not affect the basic purpose of the action. This has to be done in writing as soon as possible and at the latest at the
next report due in line with Article 2.4 of the General Conditions. For substantial changes (those which fall out of the unilateral modification method foreseen in
the Article 9.2 of the General Conditions), the International Organisation must formulate a request for addendum and submit it to the Contracting Authority one
month before the amendment is intended to enter into force and, in any case, one month before the end of the execution period, unless there are special
circumstances duly substantiated by the Organisation and accepted by the Contracting Authority.
As a general rule, the modifications may not have the effect of calling into question the award of the contribution.
26. What constitutes a budget heading and a budget item?
As there is no standard template for the budget (except where the International Organisation responds to a call for proposals), there is room for discussion on what
constitutes a budget heading. In order to avoid disputes at a later point, this should be clarified between the Contracting Authority and the International
Organisation when a contract is being signed.
For the purpose of interpreting the 15% flexibility rule mentioned in Question 25 above, a budget heading is an aggregate of individual budget lines. In input-
based budgets, a group of individual budget lines related to a particular type/nature of the input : for instance, in the EU template Budget for the Action , the
sections 1"human resources", 2 "travel", 3 "equipment and supplies", etc would constitute a budget heading. The detailed categories of expenses within a heading
respectively would constitute a budget item: (e.g, 1.1 "salaries -gross amount local staff", 1.1.1 "Technical", 1.1.2 "Administrative/support staff", 1.2 "Salaries -
gross amount, expat/int. staff). This is the way most budgets are drawn up. In results-based budgets, the aggregation of the resources required to implement an
activity/result could be considered as the budget heading. However, as mentioned above, this should be clarified at the moment of contract signature.
27. Is an answer letter from the Contracting Authority necessary to officialise a change of address, bank account or budget (within the 15 % limit)?
No. The letter sent by the International Organisation to the Contracting Authority is enough to amend the contract within these limited fields. A change of a bank
account number would also require the international Organisation to provide the European Commission with a Financial Identification Form.
28. What are eligible costs? What are direct and indirect costs?
Eligible costs are costs incurred by the Organisation for the implementation of an Action which may be reimbursed by the Contracting Authority under the
conditions provided for in the applicable Contribution Agreement. Eligible costs can be direct or indirect.
Direct costs eligible for EU funding should fulfil a number of conditions: be identifiable; demonstrable; have actually been incurred in the course of the
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implementation period of the action (except for costs linked to closure activities, such as audit or evaluation) and be directly linked to (and necessary for) the
action. These conditions are defined in Article 14.1 of the General Conditions. Article 14.2 of the General Conditions sets out some examples, whereas Article
14.3 provides an exhaustive list of costs which can never be qualified as eligible even if they comply with the eligibility test.
Indirect costs are costs indirectly related to the Action, but which are not easily identifiable with the degree of accuracy required to comply with the conditions for
direct eligible costs under article 14.1 of the General Conditions (e.g. costs which cannot be identified and substantiated with invoices or timesheets so as to
comply with article 14.1 of the General Conditions, etc). To cover such costs, a flat-rate funding of the International Organisation's indirect costs up to a maximum
of 7% of total eligible direct costs for contributions is allowed (Article 14.4 of the General Conditions), (see Questions 33 and 36).
Indirect costs do not necessarily equate to a specific category of costs (for instance, indirect costs do not mean "administrative costs" and vice versa). Indirect costs
cover any other costs related to the Action but which cannot be substantiated as required by article 14.1 of the General Conditions and which cannot therefore be
regarded as direct costs. Likewise, costs which could be regarded as administrative can be charged as direct costs if the conditions are met. For instance, if the
Organisation assigns to an Action a project manager working at Headquarters and the time devoted by such manager on the specific Action can be identified and
substantiated in compliance with article 14.1 of the General Conditions, the Organisation can charge the corresponding remuneration-related costs of such manager
as direct cost (see also first indent of article 14.2 of the General Conditions). On the contrary, if the Organisation cannot substantiate such costs, they can only be
covered for as indirect cost.
The conditions for indirect costs are provided for in article 14.4 of the General Conditions. (for further information, see Questions 33 to 37).
Before the signature of the Contribution Agreement, in case of ambiguity as of the direct nature of costs contained in the draft budget, it is important that such
costs are thoroughly explained and that such explanations are documented in the file so that the eligibility of these costs is established with clarity.
29. How can the Contracting Authority control that costs qualify as "direct"?
Prior to the signature of the agreement, the Contracting Authority should carefully study what are exactly the sub-items or elements included in these budget
headings when discussing the budget with the International Organisation.
During the implementation of the agreement, the Contracting Authority can also request clarifications of the financial reports (Article 2 of the General Conditions)
and/or check the documents relating to these direct costs within the framework of a verification mission pursuant to Article 16.4 of the Standard Contribution
Agreement ( see question 48).
The International Organisation should be in a position to justify that direct costs arise as a direct consequence of the action and comply with Article 14.1 of the
General Conditions. In case of doubt, the Contracting Authority should control that the qualification of such costs as "direct" is justified;
These discussions/requests should be duly documented in the file.
30. When can taxes be considered eligible costs of the action? In particular what is the meaning of if allowed by the applicable regulatory provisions
in the 7th bullet of Article 14.3 of the General Conditions?
Taxes may be eligible when the International Organisation cannot reclaim them and if the applicable regulation does not explicitly regards these costs as non-
eligible. Most of the regulations governing the EUs external actions expressly forbid the payment of taxes out of Commission funds (European Development
Fund is one exception). Article 3(7) of the Special Conditions specifies whether taxes are eligible or not. When an International Organisation asks for the
reimbursement of taxes it cannot reclaim, the relevant Regulation must first be checked to ascertain whether this is allowed, and in the affirmative the impossibility
for the International Organisation to otherwise reclaim the taxes must be demonstrated.
31. How can the Contracting Authority comply with the rules on eligibility of costs of the action when it contributes to a Multi-Donor Action covering
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costs that may not be eligible under EU rules?
When an action is a Multi-Donor Action (for the definition of a Multi-Donor Action, see Questions 4 and 10), it may occur that the compliance with EU
requirements regarding the eligibility of costs of the action would require some degree of traceability, which would make it difficult to conciliate with the nature of
a Multi-Donor Action, where funds are fungible by nature (see e.g. EU rules on nationality and origin, restrictions on eligibility of local taxes, geographical scope
of the instruments governing the EU funds, etc.).
In such case, it may be allowed to apply the "notional approach", according to which the relevant authorising officer may decide to consider that these EU
requirements are met as long as the amount contributed by the other donors to the co-financed action is sufficient to pay for the activities which are ineligible
under EU rules.
The purpose of applying such a notional approach to certain areas is to allow the EU to contribute to multi-donor actions without having to require separate
accounting for the EUs specific contribution.
32. Are the subsistence and travel expenses of the staff of the International Organisation's partners included in the eligible costs under Article 14.2 of
the General Conditions?
Yes. The costs incurred by the staff of the partners taking part in the action are considered eligible costs in the same way as the International Organisations.
33. Is the 7% for indirect costs a fixed figure?
The 7% percentage is a maximum and not a fixed figure. When the policy of the International Organisation foresees to charge 7% as indirect costs this may be in
principle acceptable for the EU.
Notwithstanding the above, if for instance, the Contracting Authority services, consider that i) for comparable actions or in case of multi-donor actions, the
proposed percentage is higher than for other comparable contributions; or ii) some of the costs covered by the flat-rate for indirect costs may already be included in
another heading of the budget as a direct cost (for instance, in cases where headings such as "backstopping costs", "other direct costs" or "administrative/support
costs" are included in the budget and costs are charged as lump sums), then this percentage may be subject to clarifications/negotiations before signing the
agreement. These discussions should be duly documented in the file.
See Questions 35 to 37 for further information.
34. Is it correct that, in order to judge if the requested indirect cost percentage is not higher than that requested from other donors to a multi-donor
action, the Contracting Authority needs to have that information in the proposal-budget?
Yes. Where there is more than one donor the amount recovered shall not, in percentage terms, be higher or lower than for other comparable contributions (up to
the 7% maximum).
35. Are indirect costs subject to the eligibility test required for direct costs?
No. Once the percentage of indirect costs incurred by the International Organisation for the action has been fixed and the agreement signed, indirect costs are not
subject to the test of eligibility required for direct costs. (See Question 28).
36. How is the amount of indirect costs calculated?
The flat-rate figure not exceeding 7% is calculated as a percentage of the final amount of the direct eligible costs to be paid/reimbursed by the Contracting
Authority. The exact amount due to an International Organisations will only be known after the direct eligible costs have been established by the Contracting
Authority on the basis of the final report.
37. If an international Organisation has higher than 7% indirect costs and includes part of these into the direct eligible costs, are the 7% then to be
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calculated on the basis of the new total?
Indirect costs are calculated on the basis of direct costs. If an international Organisation normally charges a rate of indirect costs higher than 7% but some of these
costs correspond to the definition of direct costs (see Question 28) and can be justified as such, the International Organisation may include them in the budget as
direct eligible costs (see question 28). In such a case they will also be taken into account when calculating indirect costs.
Article 14.4 of the General Conditions acknowledge the fact that some International Organisations may, in their own management accounting policies and
practices use overheads exceeding 7%, however, it also insist on the fact that, regardless the policy applied by the International Organisation, the definition of
direct costs and rules of eligibility under the Standard Contribution Agreement need to be applied in all cases. In short, it is just a reminder of the rules on
eligibility and does not provide additional rules or rights to either of the parties to the Contribution Agreement.
If an International Organisation wants to apply that provision, it would first analyse what kind of costs are included in its rates to check whether some of these
costs are actually eligible direct costs under the Standard Contribution Agreement. Costs which are not direct according to the Standard Contribution Agreement
are always subject to the 7% limit.
It is therefore necessary that the services of the Contracting Authority adequately understand such allocation of costs in the budget of the action when negotiating
the agreement with the International Organisation.
38. Is a contribution in kind eligible?
No. However, the staff assigned to the action and whose remuneration directly linked to the implementation of the Action can be justified by for instance payslips
can be regarded as direct eligible costs rather than as a contribution in kind.
39. Who decides about the percentage of the pre-financing in the Contribution Agreement?
Article 15 of the General Conditions provides a level of pre-financing from 80% to 95%. Further instalments should cover the remainder of the budget for the
previous year plus 80% to 95% of the forecast budget for the next 12 months. Thus at any time a maximum of only 20% of the budget for the current period can be
retained by the Contracting Authority. It is for the authorising officer to make his/her own judgement on the basis of previous experience with the concerned
International Organisation as well as the need to ensure that the International Organisation has sufficient funds in place to implement the programme. For that
purpose, he/she may also rely on the experience of other authorising officers or even other donors. Where the past record of the International Organisation is good
and subject to the final decision of the authorising officer it is recommended to duly reflect this in the level of pre-financing by establishing the instalment at 95%.
If there is no past experience with the International Organisation, it is recommended to make full use of the range between 80% and 95%, preferably starting with
a high rate for a first pre-financing, and adapting this for the further pre-financing in accordance with the Organisation's performance in relation to reporting. In
any case, a written justification for the level of pre-financing decided should be included in the file.
The Standard Contribution Agreement does not foresee that a percentage of the total programme budget be retained by the Contracting Authority. The level of pre-
financing should not be used to avoid potential over-payments. Since the Contracting Authority has many ongoing contracts with the UN, over-payments, if they
arise, may be recovered, if necessary through an offsetting against other programmes with that International Organisation.
Guidelines on recovery and offsetting can be found at the following page:
http://ec.europa.eu/europeaid/work/procedures/implementation/international_organisations/other_documents_related_united_nations/index_en.htm

40. Which schedule of payment is to be used in the contribution agreement?
In multi-annual actions (contribution agreements with duration longer than 12 months), unless otherwise agreed, the Special Conditions foresee the amount of the
instalment for each of the twelve month periods referred to in the General Conditions. Consequently, there should be as many advance payments listed in Art.
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4.2 of the special conditions as commencing" twelve months periods.
The following provides an example of how to establish the amounts: If an Action has a duration of 30 months (i.e. there are 3 commencing twelve month
periods) there should be one pre-financing, two further instalments (two interim payments covering the remainder of the Contracting Authoritys part of the
actual budget for the previous period plus further pre-financing from 80% to 95% of that part of the forecast budget for the subsequent periods) and one final
payment. Amounts corresponding to the advance payments would be specified in Article 4(2) of the Special Conditions one by one:
First pre-financing (80- 95% of the EUs contribution for period: months 1-12)
Second instalment (5-20% of the EUs contribution for the previous period: months 1-12 plus 80- 95% of the EUs contribution for period: months 13-24)
Third instalment (5-20% of the EUs contribution for the previous period: months 13- 24 plus 80- 95% of the EUs contribution for period: months 25-30)
Forecast final payment (5-20% of the EUs contribution for period: months 25-30)
To ensure that the payment of the consecutive instalments foreseen in the Special Conditions is subject to an acceptable level of expenditure, additional
instalments are subject to the condition that at least 70% of the immediate preceding instalment (and 100% of the previous one if any) has been subject to legal
commitment by the Organisation (cf. Article 15 of the General Conditions).
When the Organisation complies with this threshold provided for in Article 15, it would be entitled to the next instalment foreseen in the Special Conditions. Such
specified instalments are not subject to deductions or amendments unless through a formal amendment of the subject Contribution Agreement.
41. What are the consequences of failure to meet reporting deadlines?
If the International Organisation fails to supply a final report by the final report deadline, and fail to furnish an acceptable written explanation of the reasons why it
is unable to comply with this obligation, the Contracting Authority may refuse to pay any outstanding amount and recover any amounts unduly paid.
In case of failure to meet reporting deadlines of interim reports, the International Organisation shall inform the Contracting Authority of the reasons why it is
unable to do so, and shall provide a summary of the date of the progress of the action. If the International Organisation fails to comply with this obligation, the
Contracting Authority may terminate the Contribution Agreement, refuse to pay any outstanding amount and recover any amount unduly paid.
Failure to meet reporting deadlines may have also an impact in determining the precise percentage of pre-financing (see Question 39).
42. What is the currency in which reports are to be presented?
Financial reports are always to be presented in Euros regardless the currency used by the International Organisation implementing the action. Whenever it is
necessary to convert actual expenditure into euro, the date and rate used for calculation of the exchange rate are those used by the International Organisation when
recording each instalment of the EU's contribution in its accounts. The rate and date cannot be changed unilaterally by one of the parties to the contract. The
Parties may however agree to apply a different exchange rate. In such case, the exchange rate and the conversion method will explicitly be mentioned in article 4.3
of the Special Conditions.
Step Action Example
1 : Final Report
UN Organisation
The UN Organisation submits its Final Financial Report.
Expenditure presented in Euro (converted from USD to
EUR as per the rate of exchange applicable for reporting
expenditure)
The UN Organisation specifies the amount of surplus
balance in USD with an estimated amount in Euro
according to its applicable exchange rate at the time
The UN submits the Final Reports on 7
th
June 2010.
The surplus balance on its accounts equals 50,307 US$. The UNORE in force
at the time of processing is 1US$ = 0,819 as per the rates listed here:
http://treasury.un.org/
Estimated amount in Euro = EUR 41,201
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when the report is processed
Step 2 : Pre-
information notice
European
Commission
The European Commission reviews and endorses reports,
and on sends UN a pre-information notice in Euro
The pre-information note (sent to UN on 25
th
August) indicates the estimated
amount EUR 41,201

Step 3 :
Confirmation /
Updates
UN Organisation
The UN Organisation either confirms or updates the
amount in Euro according to its applicable exchange rate
at the time when the UN responds to the pre-information
note
On 2
nd
September, the UN replies to the European Commission providing an
updated amount in Euro (UNORE in force at that time 1US$ =0,787)
(Updated) Amount in Euro = 39,592
Step 4 : Recovery
Order
European
Commission
The European Commission establishes the recovery order
on the amount confirmed or updated by the UN and
sends out the debit note for this amount, if possible, in
the same month.
A few days later, the UN receives from the European Commission a debit
note for 39,592 Euro which is to be settled within 45 days of the issuing of the
debit note (the due date is specified on the debit note)
43. Which exchange rate should be applied to the surplus balance at the closure of a project?
If a surplus balance exists on the Organisation's accounts at the end of a project, the European Commission's procedure for establishing recovery orders and
issuing debit notes shall be pursuant to the procedure detailed in the applicable Guidelines on Recovery Orders and Recovery by Offsetting under FAFA (this can
be consulted here). Furthermore the debit note sent to the Organisation by the European Commission should include the reference number of the Contribution
Agreement.
In order to minimise the risk due to exchange rate fluctuations, Article 17.3 of the General Conditions of the Standard Contribution Agreement has been amended
as follows:
"In the event of a final surplus balance of total financing over expenditures at the financial closure of the Action, the Organisation shall specify in the final report
the amount of the surplus balance in the holding currency used by the Organisation together with the estimated amount in Euro and where the exchange rate of
the Organisation can be consulted. This surplus in the Organisation's accounts expressed in holding currency used by the Organisation shall be converted into
Euro using the rate of exchange of the Organisation in force on the day when the Contracting Authority's internal recovery order is established, which amount is
later reflected in the debit note sent to the Organisation. The resulting Euro equivalent shall then be refunded to the Contracting Authority. This provision shall
not apply to the exchange rates used for reporting."
In the case of the UN, an example of the step-by-step process is as follows:
- The UN submits its final financial reports, drawn up in Euro (using the rate of exchange applicable to a given contribution agreement which is set in
Article 2.7 of the General Conditions or under Article 4 (3) of the Special Conditions; or, in the case of humanitarian aid actions, the rate indicated in
Article 10.4 of ECHO's General Conditions or under Article 8.2 of ECHO's Special Conditions). The amount of the surplus in the holding currency of the
UN Organisation should be indicated together with the Euro equivalent of this surplus at the time when the report is processed.
- Once the European Commission has made its analysis of the final report and established the amount of the surplus the Commission will issue a pre-
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information note (= advice of recovery) with the estimated amount in Euro. The UN shall either confirm that amount or revert with an updated amount
representing the Euro equivalent of the residual balance established by using the UN Operational Rate of Exchange in force at the time when the UN
responds to the Commissions pre-information note (the UNORE is available here: http://treasury.un.org/).The UN is encouraged to respond to the pre-
information notice (i.e. give its agreement or provide an updated amount in Euro) as early as possible in the calendar month in order to avoid exchange
rate changes when issuing the debit note (UN Operational Rate of Exchange changes monthly). Once the UN Organisation expresses their agreement to
the amount in Euro to be reimbursed, by informing the focal point for recoveries at the European Commission, the European Commission can then
establish its internal Recovery Order.
- Based on the sum fixed in the Recovery Order the European Commission will then issue the debit note to the UN Organisation for this same amount.
44. Are supporting documents required in order to close out the action?
Supporting documents are not required in order to close out the action and make the final payment. Supporting documents must be retained for 5 years after the
"end date" of the action and may need to be produced in the course of a verification of the action (see Question 48).
45. Is an audited financial statement a precondition for the approval of the final report and the release of the final instalment? Can I hold the payment
of the final instalment pending the conclusion of a verification mission? There is no obligation on the International Organisation to provide these statements
before the final payment is made. Final payments are made on the basis of approval of the final report and should not be held up until the audited statements are
received.
With regard to audits, Article 16.2 of the General Conditions of the Standard Contribution Agreement states that financial transactions and financial statements
shall be subject to the internal and external auditing procedures laid down in the Financial Regulations, Rules and directives of the Organisation. A copy of the
audited financial statements shall be submitted to the European Commission by the Organisation.
This provision refers to the financial statements of the International Organisation in its entirety, which is made publicly available and shared with the European
Commission outside the scope of an individual Contribution Agreement.
Payments schedules, governed by Article 15 of the General Conditions, and the mechanism of verification provided for in Article 16, are independent processes. If
the final report contains the information required by Article 2 of the General Conditions and final reports can be approved by the Contracting Authority pursuant
to Article 15.2 of the General Conditions, the payment of the final instalments cannot be withheld for the sole purpose of waiting for the conclusion of an
upcoming (or on-going) verification mission.
46. Can the European Commission request and/or impose an evaluation?
Considering the shared principles of aid effectiveness as promoted by the Paris Declaration, the European Commission and the International Organisation are
encouraged to conduct joint evaluation missions. The European Commission may perform evaluation missions as a donor. These evaluations are funded by the
EU separately from the budget of the contribution agreement with the International Organisation. Such missions should be planned and completed in a
collaborative manner. For that purpose, matters as timing of the missions, questions to be addressed with management of the Organisation will be previously
discussed by both Parties. In this respect, Commission services shall ensure that advance notice of intended evaluations and monitoring exercises is communicated
to International Organisations as soon as this is available. The mission will offer to make a draft of its report available to the International Organisations
management for comments prior to final issuance.
Where evaluations by the International Organisation take place, the European Commission should be invited to take part in the mission and should receive the
evaluation report. These missions should be completed in a collaborative manner, it being understood that they will be conducted under the International
Organisation's responsibility.
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47. How is assurance obtained in the context of a Contribution Agreement?
The assurance required in this context is obtained in a different way. The Standard Contribution Agreement recognises in its Article 16.2 of the General
Conditions that "financial transaction and financial statements shall be subject to the internal and external auditing procedures laid down in the Financial
Regulations, Rules and directives of the Organisation. A copy of the audited financial statements shall be submitted to the European Commission by the
Organisation.
Where the International Organisation respects the internationally standard principles as concerns internal and external auditing procedures with respect to Article
16.2 General Conditions, the Contracting Authority should be able to derive assurance from them. No audit opinion (and consequently, no audit assurance) needs
to be obtained directly by the Contracting Authority
48. What is verification? What is a verification report? How is the verification process handled?
Verification is not an audit, but an agreed upon procedural engagement, and due to its nature it is always risk-based and never mandatory. It is of utmost
importance to understand the differences between the two and not to confuse one with the other. A helpful overview of the main differences is presented in the
table below, which is only applicable to UN System Organisations.
As regards verification missions of UN System Organisations, the EU-UN framework agreement recognises that the European Commission acknowledges the
mandated primacy of UN oversight and control systems, including the principle of exclusive or single audit by United Nations External Auditors, and in keeping
with internationally-accepted practice in the discipline of financial oversight and control, will endeavour to build reliance on these systems. On its side, the UN
recognises the need for the European Commission to obtain an assurance that an adequate system of accountability is in place (accounting systems and
procedures, reporting, including the oversight mechanisms), to acquire an understanding of that system, and to report to its own institutions on the proper use of
European Unions funds.
The objective of these verification missions is to acquire an understanding of the organisation's system of accountability (accounting systems and procedures,
internal control and procurement procedures, reporting, oversight/audit mechanisms), and verify how the EU funds have been used and to enable the European
Commission to report to its own institutions on the proper use of its funds.
The verification clause is a part of all agreements concluded between the EU and UN since January 1995. In the case of the Standard Contribution Agreement it is
reproduced under Article 16.4 of the General Conditions which sets out that "() the European Communities may undertake, including, on the spot, checks
related to the Actions financed by the Contracting Authority".
This provision must be read together with Article 16.3 (which obliges the International Organisation to keep financial accounting documents for five years after
the "end date" i.e. 18 months after the implementation period defined in Article 2 of the Special Conditions and to make available all relevant information) and
with Article 14.1 (which establishes that costs must be verifiable pursuant to Article 16.4 in order to be eligible as direct costs).
Verifications should be carried out in accordance with the agreements between the European Commission and the International Organisation. There are
Framework agreements with several International Organisations (for example, the United Nations, the World Bank Organisation for Economic Co-operation and
Development, and the Council of Europe). In some cases there may be further documents agreed between EC and the International Organisation (such as Common
Terms of Reference for Verification Missions.
Planning
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The decision to conduct a verification mission can be taken by a respective Authorizing Officer (AO). While considering whether to do so, the AO should take
into account the following:
- Timing - ideally the verification mission should take place during the lifetime of the project or shortly after its end;
- Have there already been other verification missions (by EuropeAid or other European Commissions service) conducted on the same project or office or
International Organisation? If yes what were the findings? (repetitions/multiplications should be avoided in case there were not any major issues raised);
- Is there any audit information on the project (co)funded by the EU? If yes, the AO may request such information to be provided, where possible and
available, and - based on the information provided - decide whether the verification mission is still necessary.
- The European Commission provides a consolidated list of planned Verifications for UN actions in the first quarter of each year. If the AO considers that a
verification mission of a UN-implemented Action is necessary s/he should inform the focal point in EuropeAid (DEVCO R2) of his/her intention in due
time in order for this information to be included in the indicative verification plan.
Conduct of a verification mission
The decision to conduct a verification mission should be announced to the International Organisation in due time, bearing in mind that it is not an audit.
The EU Authorising Officer shall ensure that the verification team is properly briefed by the European Commission on the verification process, its scope, nature,
conduct and outcome. There may be differences in verification procedures depending on the International Organisation (for instance, verification missions with
UN System Organisations are governed by the FAFA and the EC-UN Common Terms of Reference for Verification Missions, there may be different documents
applicable for other entities). The European Commission has developed a specific set of Terms of References (ToRs) for the contractors performing verifications
of UN managed actions (see here). Any verification questionnaire should be filled out by the verifiers and/or the European Commission / Delegation themselves,
to the extent possible, based on information already available (previous verification missions, 4-pillar assessments). In case the International Organisation visited
passed the pillars compliance assessment, the verifiers should familiarize themselves with the existing assessments before contacting the International
Organisation.
Before the verification teams arrival, parties should discuss and agree on the details of the exercise (such as timetable for the fieldwork visits, the starting date, its
duration, location and other organisational aspects). The verification mission fieldwork should start with a briefing with the International Organisation
management at the office where the International Organisation which is subject to verification is established. During the briefing, practical arrangements regarding
the verification process (scope, sampling and other relevant aspects as per the applicable ToRs) for the specific mission shall be clarified. A verification closing
meeting should be held at the end of the verification fieldwork with the Offices management during which verifiers should present their findings and obtain
clarifications on any outstanding matters. Further explanation may be required afterwards, but the main objective of the debriefing meeting is for the verifiers to
make sure that their understanding of the findings is correct and for the International Organisation subject to verification to provide clarifications as necessary or
relevant. It may not be possible to provide access to further supporting documents after the verification mission has left. Therefore it is of utmost importance that
the verification fieldwork closing meeting is used effectively and documents are reviewed in situ. There should not be new major findings listed in the draft
verification report if the matter hadnt been raised during the verification closing meeting (when all the relevant staff and supporting documents were available).
The verification mission draft report must be transmitted to the International Organisation as soon as it is available. The International Organisation will review
the report and provide its comments which shall be reflected in the report. As a result, certain findings may be cancelled or adjusted. A copy of the final
verification report will be transmitted to the International Organisation as per the agreed communication lines. All this shall be done in a timely manner.
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The verification missions reports are not public. Requests to access such reports will be analysed on a case-by-case basis in consultation with the International
Organisation concerned before any communication of the report. These documents are subject to the Regulation (EC) No 1049/2001 regarding public access to
EU documents, and in particular its article 4.
The final verification mission report & follow up on the findings
A verification mission final report is a management tool at the disposal of the AO. It is not an audit report and therefore shall not be considered to present an
audit opinion.
The responsibility to follow up on factual findings lies with the operational (and eventually financial) officer who requested the verification.
If there are financial findings a contradictory process between the AO and the International Organisation shall be started in order for the International
Organisation subject to verification and the AO to discuss the findings indicated in the final report. For instance, for amounts considered ineligible by the verifiers
for EU funding and contested by the International Organisation, the AO shall examine whether the amount concerned is indeed ineligible (the eligibility criteria
are set out in each contribution agreement concluded between the EU and the International Organisation) given the specific conditions applicable in the
contribution agreement.
In case the parties cannot agree on certain findings in the final verification report, the case should be reported to the next hierarchical level which shall contact the
International Organisations representative in order to convene an appropriate dispute settlement mechanism (see the FAQ 51).
Ineligible expenditure found may lead to a recovery of the concerned amount by the EU (the recovery process under the FAFA has been defined by the Guidelines
on Recovery Orders and Recovery by Offsetting under FAFA). In such case the terms of the specific contribution agreement must be reviewed to determine the
amount to be recovered taking into account e.g. whether the action is fully-funded by the EU, whether the EU contribution is reflected as a percentage of eligible
costs etc.
In practical terms, only after receipt and examination of the comments of an International Organisation concerning the findings (or, in case there wasnt an
agreement on the matter upon settlement of the dispute) there might be a pre-information notice and a subsequent debit note.
Other findings shall be addressed within the framework of the project (if it is still on-going) or in the context of the broader cooperation with the International
Organisation (for future projects). In practical terms, the operational (and eventually financial) officer shall convene a meeting with the International Organisation
during which the correctness (vis--vis provisions of a specific contribution agreement and applicable framework agreements) of the findings should be reviewed.
Where possible, a common way forward shall be agreed.
The following table summarizes the principal differences between an audit and verification :




Page 19/22

Audit (e.g. of an NGO in receipt of EC funds) Verification of an EC-funded agreement with the UN System
Organization
Objective To express an independent and formal opinion on:
i) the auditee's financial report; and / or
ii) its internal control system.
To understand the UN System Organisation and to report on the proper use of
EC funds under the selected financing agreements.

Basis for the audit /
verification
The Auditor uses professional judgement to
determine nature, timing and extent of audit tests
and procedures in accordance with International
Standards of Auditing.
Procedures agreed between the EC and the UN System Organisation prior to
the verification in accordance with the International Standard on Related
Services (ISRS) 4400, Engagements to perform agreed-upon procedures
regarding financial information'' as promulgated by the International Auditing
and Assurance Standards Board (IAASB) and within the scope and principles
of a verification assignment, as set out in the FAFA.
Scope Determined by the auditor on the basis of his/her
professional assessment of risk.
Discussed and agreed beforehand between the EC and UN System
Organisation based on the Common Terms of Reference for Verification
Missions.
Internal Control
Questionnaire (ICQ)
Used to determine the risk level of the
organisation's internal control procedures and
serves as a basis for sample size for the
substantive testing.
Not used for sample size determination as there is no substantive testing, but
only compliance testing. ICQ is used to gain information and aid
understanding of the UN System Organisations s procedures.
Number of financing
agreements selected for
examination
Representative sample of EC- funded agreements. No representative sample. Limited number of agreements selected for
verification.
Sampling: selection of the
expenditure to be tested
per agreement.
Representative samples (statistical and other) and
the amount to be tested are determined by the
auditor considering the risk level identified on the
basis of answers provided to the questions in the
ICQ.
No representative sample; selection of a limited number of transactions
randomly chosen for compliance testing: 5 transactions per key process
(agreed beforehand with the UN System Organisation) per project.
Accessibility/confidentiali
ty of documentation.
The Auditor must have full access to staff and
relevant documents.
Access to documents is governed by the FAFA; conditions set out in the
specific-contribution agreement and EC-UN Common ToRs for verifications.
Confidentiality issues are discussed on a case-by-case basis.
Copying of tested Copies are taken to support audit findings as For the most part will not be taken. Requests for copies will be considered by
Page 20/22

documentation. evidence. the UN System Organisation on a case-by-case basis.
Access to internal audit
reports.
Yes Depends on the UN System Organisation verified (for many now internal
policies allow sharing internal audit reports or executive summaries of these
with the EC). To be analysed on case-by-case basis.
Outcome Report with an audit opinion. Report of factual findings with no audit opinion.
49. Which per diems are used for the calculation of the cost of staff assigned to the action in contribution agreements?
The per diems (or "daily subsistence allowance DSA" according to UN terminology) used are those of the international Organisation.
50. In which case interests on pre-financing are to be reported to the Contracting Authority?
Interest is only due under certain conditions in grants. The concrete contract needs to be followed.
51. Is there any administrative dispute-settlement mechanism in case of disagreement between an International Organisation and the European
Commission relating to the implementation of a specific contribution agreement?
In case of disagreement regarding the implementation of a specific Contribution Agreement between an International Organisation and the Contracting Authority
the Organisation may bring such dispute to the attention of the next hierarchical level. For instance, if the disagreement is at the level of an European Union
Delegation, the Organisation may raise the issue with the Operational Director in Brussels to which that Delegation reports. Further assistance can be sought from
the Director in charge of relations with International Organisations within EuropeAid.
For the United Nations agencies the same logic applies whereby disagreements may be raised with the relevant representative in a given country and further - to
the designated focal points in the hierarchy, including Agencies representatives to the EU. Finally, cases may be directed to the UN Controllers office in default
of amicable settlement.
52. Does an International Organisation have to donate all equipment, vehicle and supplies purchased during an Action financed by the European Union?
Yes. However, in cases of Multi-Donor Actions certain exemptions may apply (see what is set out in the specific agreement).
In the context of humanitarian aid actions, special provisions apply whereby International Organisations which purchase supplies in the framework of a multi-
donor action are excluded from the general obligation to donate remaining supplies (Article 19.1 ECHO's General Conditions).
In other multi-donor actions which continue after the end of the implementation period of the contribution-specific agreement, this transfer may take place at the
end of the overall action. If there are no local authorities or partners to whom the equipment, vehicles and supplies could be transferred, the organisation may
transfer the assets to another action funded by the European Union or Contracting Authority or, exceptionally, retain ownership.
Provisions for that are provided in the Article 7.3 of the General Conditions which requires that all assets should be transferred to local authorities or partners
(excluding commercial contractors) of the Organisation or to the final recipients of the action by the end of the action.
Please note that the International Organisation is not required to submit copies nor originals of certificates of donation with the final reports. The Organisation,
however, shall keep the documentary proof of the transfer for verification along with the documents mentioned in Article 16.3 of the General Conditions (see
Question 48 for information about verification).
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In the event that there are no local authorities or partners to whom the equipment, vehicles and supplies could be transferred, and/or the Organisation intends to
transfer the assets to another action funded by the European Union or Contracting Authority, or, exceptionally, retain ownership it should submit a justified
written request with an inventory listing the items concerned and a proposal concerning their use in due time and at the latest with the submission of the final
reports. In no event may the end use jeopardize the sustainability of the action or result in a profit for the Organisation.
In the context of Multi-Donor Actions (see Question 9) the duration of agreements between the implementing International Organisation and other donors does
not necessarily match the duration of the contribution agreement between the Organisation and the Contracting Authority. In such cases, it would not be
reasonable to require donation of equipment purchased for the implementation of Multi-Donor Action before the actual project is completed since this could
hinder the achievement of the projects objectives.
Other aspects of the financial closure of the contribution agreement would not be affected (for example, a final payment be due to the Organisation may not be
withheld due to the project continuing beyond the timeframe of the contribution agreement).
53. When can the contingency reserve included in the Budget of the Action be used?
A contingency reserve of maximum 5% of the eligible costs may be included in the budget of the action to cover any adjustment necessary in the light of changed
circumstances on the ground. Article 14(5) of the General Conditions specifies that the use of this contingency reserve requires the prior written (by letter)
authorisation of the Contracting Authority, upon a duly justified request from the organisation.
When the action is a Multi-Donor Action (for the definition of a Multi-Donor Action, see Questions 4 and 9), it is recommended not to include a contingency
reserve in the budget. If a contingency reserve is, however, deemed necessary, the Contracting Authority may, on a case by case basis and based on the risk
assessment of the authorising officer, grant a derogation to the rule that prior written authorisation is required for its use. Such derogation should be reflected in
article 7 of the Special Conditions of the Contribution Agreement. This may in particular be the case in Multi-donor Actions in which the use of the contingency
reserve is decided upon by e.g. a Steering Committee/Project Board where the EU is a member and participates in the decision-making process of the project.
For Multi-donor Actions where no such derogation has been granted, the 5% limit will be applied to the EU contribution only. This means that, the approval of the
Contracting Authority will only be required before using an amount corresponding to 5% of the EU's contribution. The organisation will only have to ask the
Contracting Authority for written authorisation once it wishes to spend the part of the contingency reserve corresponding to 5% of the eligible costs of the EU
contribution. In such a case, the organisation would henceforth use other sources of funds first and only use the EU contingency when all other funds have been
exhausted. (For the unilateral amendment of the heading for the contingency reserve in the budget see Question 25) "
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54 What are the execution and implementation periods?
The implementation period starts at the date defined in the Article 2.2 of the Special Conditions and lasts the number of months specified in the Article 2.3 of the
Special Conditions. The implementation period ends at the conclusion of that number of months.
The execution period starts when the agreement enters into force by the last of the two signatures (Article 2.1 of the Special Conditions) and lasts until the final
payment is paid by the Contracting Authority or the Organisation returns the funds paid in excess of the final amount of the EU contribution. In cases where there
is no final payment or return of funds the execution period shall end 18 months following the end of the implementation period.
Between the end of the implementation period and the end of the execution period it is still possible to amend the agreement (in line with Article 9.1. of the
General Conditions) and the only eligible costs which can be incurred relate to final report, expenditure verification and evaluation of the Action (article 14.1 of
the General Conditions).
Example: for a Contribution Agreement signed on 28 November 2012, the Special Conditions state in Article 2.2 that the implementation begins on 23 December
2012 and Article 2.3 that it lasts12 months. Therefore the implementation period starts on 23 December 2012 and ends on 22 December 2013. The execution
period starts on 28 November 2012 and ends with the final payment, repayment of unspent funds or in case there is no final payment of repayment due - on 22
June 2015.
E. The World Bank Administration Agreements
Please refer to FAQ agreed with the World Bank (available at:
http://ec.europa.eu/europeaid/work/procedures/implementation/international_organisations/other_documents_relating_world_bank/index_en.htm).