1. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 1 Bölgesel Rekabet Edebilirlik Operasyonel Programı’nın Uygulanması için Kurumsal Kapasitenin Oluşturulmasına Yönelik Teknik Yardım Technical Assistance on Institutional Building for the Implementation of RCOP in Turkey This project is co-financed by the European Union and the Republic of Turkey Financial Management 8th October, 2012

2. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY CONTENT 1. Financial Management Actors 2. General Overview to IPA Funds 3. Flow of Funds and disbursement rules 4. Financial Management of Contracts 5. Tax issues 2

3. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 1. FINANCIAL MANAGEMENT ACTORS 3

4. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Institutions/bodies for Financial Management European Commission (EC) National Authorizing Officer (NAO) National Fund (NF) Operating Structure/Contracting Authority (OS/CA) End Recipient of Assistance (ERA) Controctors/Consultant 4

5. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 2. GENERAL OVERVIEW TO IPA FUNDS 5

6. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Candidate Status Croatia (Hırvatistan) the Former Yugoslav Republic of Macedonia (Makedonya) Turkey (Türkiye) Iceland (İzlanda) Montenegro (Karadağ) Potential candidate status Albania, Bosnia& Herzegovina (Arnavutluk, Bosna Hersek) Serbia, Kosovo (Sırbistan, Kosova) Budget Allocation (IPA) 2007-2013 Instrument for Pre- Accession Assistance

7. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Budget Allocation (IPA) 2007-2013 Instrument for Pre- Accession Assistance Total Budget forAmount (EUR) IPA11.468.000.000 Turkey4.874.000.000 Component III1.802.000.000 RCOP480.387.185

8. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY YearEU Contribution (EUR) %85 National Contribution (EUR) %15 Total EUR %100 2007 41.900.0007.394.118 49.294.118 2008 43.500.0007.676.471 51.176.471 2009 54.800.0009.670.588 64.470.588 2010 71.430.00012.605.294 84.035.294 2011 88.020.00015.532.941 103.552.941 2012 89.016.59715.708.811 104.725.408 2013 91.720.58816.185.986 107.906.574 TOTAL 480.387.18584.774.209 565.161.394 Yearly Budget Allocation for RCOP

9. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 3. FLOW OF FUNDS AND DİSBURSEMENT RULES 9

10. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 10 Government Budget Ministry of Finance Releasing of Budget (RCOP) Ministry of Science, Industry and Technology Request of National Contribution from OS National Fund Transfer of National Contributi on to Sub- acc. RCOP Flow of Funds for TR Contribution

11. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 11 Flow of Funds for EU Contribution IPA Funds EC Advance Interim Final Payment NF Transfer of EU Contributio n to sub.acc. RCOP Request of payment Contractors

12. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Flow of Funds Main Account (EU) Main Account (TR) Sub-Account (EU) Sub-Account (TR) Contractor Account 12

13. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Disbursement Rules of IPA Funds n+3 Rules; by 31 December of the third year following year n being the one in which the budget commitment should be used for the purpose of pre-financing or interim payments. Pre-financing (for OP): 30% of the total IPA contribution for the three most recent years. m+15 rules; The total amount paid as pre-financing shall be reimbursed to the Commission with all interest accrued if no payment application for the programme concerned is sent within 15 months of the date on which the Commission pays the first pre-financing amount.

14. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 4. FINANCIAL MANAGEMENT OF CONTRACTS 14

15. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Responsibilities of the Finance Division Expenditure Forecast, Management of flow of funds (request for funds, allocation of national contribution, transfer of national contribution to the NF ) Payments (check and keep of letter of guarantee, preparation of payment dossier, read&approved by ERA’s, invoice check, execution of payment, transfer of payment order, releasing of guarantee,) Reports to the NF (yearly expenditure forecast, monthly financial report, statement of expenditure, financial reports) Tax issues (VAT exemption form, tax ruling, tables for MoF) 15

16. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Responsibilities of the Finance Division Accounting (data entries, approvals of data entry, reconciliation, back-up) Participation to kick off meeting, Participation to provisional and final acceptances visits of supply and works contracts. Participation to Monthly Management Meetings of service and works contracts. 16

17. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Types of Contracts Service: Procurement of consultancy, research, know-how and training Supplies: Procurement of equipment, materials Works: infrastructure, superstructure and other engineering works 17

18. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 18 Payment Types of Contracts Type of ContractAdvanceInterimFinal (balance) Fee based Service 12 months or less %40 12-24 (24 not included) %30 24 months or more %20 6 monthly installement (up to %90) % 10 Global Price Service % 60N/a%40 FwC%60N/a%40 Supply%60N/a%40 Works%10After 3-5 months monthly progress payment %5 retention money) %2,5 Provisional %2,5 Final acceptance

19. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY SERVİCE CONTRACTS Budget items of the fee-based service contract: Man-day/Fees (Adam günü/Ücret) Incidentals (Arizi Bütçe) Expenditure Verification (Harcama Teyidi) 19

20. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY AdvanceInterimFinal Signed Contracts Invoice/Request of advance payment Guarantee letter (if advance payment exceeds 150.000 EUR) * The consultant are not obliged to ask for a/p Invoice Detailed list of expenses for fees and incidentals Interim progress report (financial and technical. Copies of Time sheets for the related period Incidental expenditure approvals, STE, NKE approvals, Working at weekend or nationals holidays approvals. Expenditure Verification Report Invoice Detailed list of expenses for fees and incidentals Final report Copies of Time sheets for the related period Incidental expenditure approvals, STE, NKE approvals, Working at weekend or nationals holidays approvals. Expenditure Verification Report 20 Required documents for fee based service contracts payments

21. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY AdvanceFinal Signed Contracts Invoice/Request of advance payment Guarantee letter (if advance payment exceeds 150.000 EUR) * The consultant are not obliged to ask for a/p Invoice Final report Final Account 21 Required documents for global price service contracts payments

22. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Documents to be Approved for Service Contracts All the approvals should be received from the relevant authority prior to the implementation 22 DocumentsERAOS Invoice 1. √ 2. √ Timesheets 1. √ Progress /final reports 1. √2. √ STE Approval Request Non-key expert Approval Request 1. √2. √ Incidental Budget Approval 1. √2. √ Weekend/national/public holiday approval 1. √

23. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Templates for service contracts Invoice and Annex I10 (Invoice control checklist) Invoice Annex I10 Timesheet Progress Report STE Approval Request Incidental Budget Approval 23

24. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY WORKS CONTRACTS Budget items of works contracts: Permanent works (construction, electrical, mechanical works…) Contingency (%10 of the permanent works) 24

25. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Required documents for fee based service contracts payments 25 AdvanceInterimFinal Signed Contracts Invoice/Request of advance payment Interim Payment Certificate (0) Guarantee letter (if advance payment exceeds 150.000 EUR) Performance Security (%10 of the accepted contract amount) Insurance Policy (if applicable) SGK Apply Form * The consultant are not obliged to ask for a/p Invoice Interim Payment Certificate Progress report (financial and technical. Certificate of origin (materials used for construction) Insurance payment receipt Invoice Final Payment Certificate Final report Discharge (14.12) Certificate of Provisional Acceptance Certificate of Origin «Receipt of Discharge» from SGK

26. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Documents to be Approved for Works Contracts All the approvals should be received from the relevant authority prior to the implementation 26 DocumentsERAOS Invoice 1. √ 2. √ Progress /final reports 1. √2. √ Provisional/Final Acceptances 1. √2. √ Weekend/national/public holiday approval 1. √

27. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Templates for works contracts Invoice and Annex I10 (Invoice control checklist) Progress Report Provisional / Final Acceptance Provisional Final Acceptance 27

28. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY SUPPLY CONTRACTS Budget items of works contracts: Equipment 28

29. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY AdvanceFinal Signed Contracts Invoice/Request of advance payment Guarantee letter (if advance payment exceeds 150.000 EUR) * The consultant are not obliged to ask for a/p Invoice Certificate of Provisional Acceptance Certificate of Origin (for each item) Copy of warranty Copy of Inspection test certificate 29 Required documents for supply contracts payments

30. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Documents to be Approved for Supply Contracts All the approvals should be received from the relevant authority prior to the implementation 30 DocumentsERAOS Invoice 1. √ 2. √ ProvisionalProvisional / Final AcceptancesFinal Acceptances 1. √2. √

31. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Time Frame for payment Service and Supply; Within 45 days of receipt of the contract signed by all parties and all relevant documents (request for payment, financial guarantee if applicable). Works; Within 56 days of receipt of advance payment request, 77 days of receipt of interim and final payment requests.

32. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY The role of the End Recipient of Assistance (ERA) Approving the copy of invoice/s “Read and Approved” in technical terms by filling the checklist (Annex 4) which will be sent to ERA with the copy of the invoice stamped ‘Read and Approved’ by the Contracting Authority. ERA should approve the invoice within 5 calendar days following the receipt of invoice by the ERA. If “Read and Approved” is not received from the ERA in 5 calendar days following the receipt of invoice by the ERA and in the absence of any comments within that period they will be considered to be tacitly approved.

33. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 5. TAX ISSUES 33

34. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY TAX REGULATIONS To approve documents according to the IPA General Tax Exemption Communique for IPA Framework Agreement No.1 introduced by the Ministry of Finance and its annexes for Attachments: 1/a, 7, 8,10,. Please see the “Tax Exemption Guide for EU Financial Aid” published by Revenue Administration under the below link: http://www.gib.gov.tr/fileadmin/beyannamerehberi/abmaliyardim_ rehberi.pdf 34

35. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Documents to be Approved by ERA Responsibilities and duties of the ERA related to financial implementation and tax regulations are as follows; To approve the Contracts between the Contractor and supplier/service provider for the VAT exemption for the purchases above 2.000 TL and list (Ek-7) of the contracts/purchases above 2000 TL in three monthly basis; To approve the list (Ek-8) for the purchases of contractors below 2.000 TL in three monthly basis; 35

36. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY Documents to be Approved by ERA To approve (Ek-1/a) “List of goods to be imported (İthal Edilecek Mallar Listesi)” prepared by Contractor, To approve the list (Ek-10) of goods purchased with “Special Compsumption Tax” 36

37. This project is co-financed by the European Union and the Republic of Turkey REPUBLIC OF TURKEY MINISTRY OF SCIENCE, INDUSTRY AND TECHNOLOGY 37 Thank you...