Modernisation of the rules on the execution of the EU budget

The European Parliament and the Council have agreed on a significant reform of applicable rules to EU funding: Less red tape for beneficiaries, simpler rules, less bureaucracy, improved transparency, better controls and accountability for a more efficient use of public money. For the first time in the history of the EU budget, the number of financial rules has been reduced by half and their overall volume by a quarter and there is a common core of financial rules applicable to all modes of management by the Commission and Member states.

European Commission Günther Oettinger in charge of budget and human resources stated: "I am very happy that we have reached an agreement before Christmas. The new rules will simplify access to EU funding and decrease red-tape for many recipients and managing authorities: less paperwork, lower risk of errors, no duplication of audits and controls and recognition of volunteer work. At the same time, transparency has increased and there are additional safeguards against fraud. This is a big step toward better management of EU finances as of 2018. It also provides a solid basis for preparing the next generation of EU programmes, making sure that every euro from the EU budget delivers maximum added value".

Simpler access to EU funding and improved cooperation between administrations

• Recipients asking for EU funding need to provide less and more targeted information. The same information will not be asked for twice.
• When applying for funding, volunteer work will be taken into account.
• Checks and audits will no longer be duplicated thanks to increased reliance on previous controls by national authorities or international partners.
• Payment for results and lump-sums can be more widely used. For instance, payments would be based on a fixed amount upon demonstration that a certain action has been made (such as training or provision of humanitarian assistance) rather than checking hundreds of bills and receipts for costs incurred.

This reform will particularly benefit citizens, small and medium size enterprises and non-governmental organisations.

Moreover, simplification of the rules will lead to an increased focus on achieving better results with less bureaucracy and improved controls at a lower cost. For instance, use of lumps-sum will not only reduce the cost of controls of hundreds of receipts but also decrease the level of potential errors linked to the number of checks. The new framework will also improve cooperation between the European Commission and national authorities implementing EU programmes - such as the Common Agricultural Policy or structural funds - as well as partner organisations across the world, like the European Investment Bank, the United Nations and the World Bank.

A more modern EU budget

The revised framework will result in more leverage for EU funding and more flexibility to the EU budget via:

• New instruments, such as budgetary guarantees (like the one underpinning the European Fund for Strategic Investment), which will be efficiently managed in the future through a common provisioning fund.
• Simpler rules for the combination of national funds and the EU funds (e.g. Structural Funds and the European Fund for Strategic Investment) and the possibility to combine grants and financial instruments (e.g. Connecting Europe Facility).

Better protection of the EU budget

Simplification of the rules allows for a more efficient protection of EU funding. For instance, the use of lump sums leads to fewer errors and reliance on assessments and audits of the authorities on the ground leads to more efficient controls.

Moreover, the new rules reinforce the fight against shell companies and the use of tax havens by intermediaries managing EU funds. Voluntary disclosure of shareholders is foreseen. There will be increased transparency, streamlined reporting and reinforced accountability for public expenditure, with existing rules on conflict of interest explicitly extended to Member State authorities.

Background

The Financial Regulation sets out the principles and procedures for implementing the EU budget. Over the last 30 years, the number of general financial rules contained in the Financial Regulation has sharply increased. In addition, many sectoral financial rules have emerged.

A first step towards more coherent and simpler financial rules was achieved in 2012. Recent revisions have aligned the Financial Regulation to the Multiannual Financial Framework 2014-2020 (2013 revision) as well as to the new EU Procurement Directives (2015 revision).

However, there was still room for further simplification. In 2016 the Commission has therefore proposed an ambitious revision of the general financial rules accompanied by corresponding changes to the sectorial financial rules. A public consultation on the revision of the Financial Regulation was carried out in April/May 2016.

Next steps

The European Parliament and the Council both have to formally approve the text reflecting the political compromise reached today.

For more information

Financial Regulation proposal

Impact of the change on The Common Agricultural Policy