Contractual and Regulatory Framework

1. Contractual and Regulatory Framework The Subsidy Contract and Partnership Agreement

2. Most relevant EU Regulations • The provision of the contract to be concluded by the LP and the PPs is based on the following legal framework and guidelines: • Council Regulations • Commission Regulations • Directive 2004/18/EC • Community rules regarding horizonal policies • European Territorial Cooperation Operational Programme SOUTH-EAST EUROPE 2007- 2013 and its Implementation and Control & Audit Guidelines

3. National rules • National rules vary from country to country and between states. • project partners must be familiar with the national and state rules relevant to the project • The most importantnationalrules: tax and accountingrelatedlegislation, public procurement, VAT, etc. • Where national standards are more demanding / stricterthan Community rules, the stronger standards must be applied. • Meeting withnationalrules and regulationswill be checkedbythenationalcontroller (NC) inthereportingprocess

4. Contractual background • Contractual background governing the Project’s implementation is based on the above described legal regulatory background, and consists of two separate contracts and pertaining annexes: • The Subsidy Contract (SCT) • The Partnership Agreement • However both contracts and annexes thereto are applicable to all PPs

5. Actual Status of contracts Partnership Agreement: • signed in the application phase • 10 copies need to be prepared and signed / stamped Subsidy Contract • All necessary documents were submitted by 30 June • Signature process is planned to be finished by 31 July • Eligibility of expenses in not linked to SC (MC meeting: 15 March)

6. I. Subsidy Contract • The Subsidy Contract is the primary source of contractual obligations for the LP as well as the PPs. • The Subsidy Contract is concluded by and between the MA (National Development AgencyAuthority for International Cooperation Programmes acting as the Managing Authority of the SOUTH-EAST EUROPE Programme) and the LP (Municipality of Budapest 21th District, CSEPEL)

7. I. Subsidy Contract • Although no PPs have signed the Subsidy contract themselves,obligations and liabilities arising from it on the side of LP will be transposed onto the PPs to a fair and reasonable extent, necessary to ensure the due implementation of the project • Since the Partnership Agreement itself is made an inseparable part of the Subsidy Contract this latter is a directly binding contract for the PPs

8. I. Subsidy Contract • The approved application form and the signed PA are integral part of the Subsidy Contract. • The following documents were/are used for the contractive procedure and can be downloaded from the Programme website: www.southeast-europe.net • SEE Implementation Manual • Annex 1: Statement on project bank account: • separate bank account      • single bank account • Annex 2 Request for project modification • Annex 3 SEE Programme Visual Identity Guidelines (includes specifications for the beneficiaries)

9. I. SC: Management guides • Notwithstandingany other Annexes to the Partnership Agreement the PPs should give special attention to - the Project Management Guide and - the Financial Handbook issued by the LP. • These documents will help the PPs to comply with their contractual obligations. (On many occasions the Partnership Agreement will only make a short reference to the Project Management Guide and the Financial Handbook instead of giving a detailed description of the Parties obligations. It is important therefore that the PPs become familiar with their provisions).

10. II. The Partnership Agreement • Transposition of duties and liabilities from the LP to the PPs is made by means of the Partnership Agreement to be concluded by and between the LP and the PPs. • The Partnership Agreement is strongly based on- the aforesaid legal framework- the Subsidy Contact- the Model Agreement as provided for by the EU document library but specially adapted to the needs and characteristics of every and each one of the PPs.

11. II. Partnership Agreement • The Partnership Agreements has two very distinct parts:- One that reflects the directly binding provisions of the EU regulations is imposed to the PPs by the LP with very little or no possibility for individual modifications (these provisions ensure that for each PP the implementation of the Project will remain in line with the EU’s aims and standards, and any money allocated under the Project will be spent on eligible expenditures with respect to the Project Budget).

12. II. Partnership Agreement • The other part of the Partnership Agreement focuses on the individual features of the PPs and allows the Partnership Agreement the degree of reasonable flexibility elaborated on a case-to-case basis based on the PPs feedback.

13. II. Key issues covered by the PA • Public procurement: national controller (NC) will be responsible to ensure compliance with community, national and state rules • Documentation requirements: storing obligation at least until 31 December 2022 (all importantinformation, documents, financial documents) • Recovery of funds due to irregularities: In cases of expenditure unduly paid out to beneficiaries, these funds must be recovered by the Programme bodies according to one of the following two options:-For operations still running, the amounts must be deducted from the next payment claim due;-For already closed operations, a recovery procedure towards the Lead Partner must be launched.

14. II. Key issues covered by the PA • In case the irregularity refers to a project partner, it will be up to the concerned partner to repay the Lead Partner any amounts unduly paid in accordance with the agreement existing between them. The rate of the late interest applied to the amount to be recovered will be calculated in accordance with Article 102(2) of the General Regulation.