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Document 52023DC0392

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS ANNUAL ACCOUNTS OF THE EUROPEAN DEVELOPMENT FUND FOR THE FINANCIAL YEAR 2022

COM/2023/392 final

Brussels, 28.6.2023

COM(2023) 392 final

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS

ANNUAL ACCOUNTS OF THE EUROPEAN DEVELOPMENT FUND FOR THE FINANCIAL YEAR 2022


CONTENTS

CERTIFICATION OF THE ACCOUNTS    

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES    

FUNDS MANAGED BY THE EUROPEAN COMMISSION    

FINANCIAL STATEMENTS OF THE EDF    

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF    

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2022    

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2022    

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS    

EDF REPORT ON FINANCIAL IMPLEMENTATION    

CERTIFICATION OF THE ACCOUNTS

The annual accounts of the European Development Fund for the year 2022 have been prepared in accordance with Title X of the Financial Regulation of the 11th European Development Fund and with the accounting principles, rules and methods set out in the notes to the financial statements.

I acknowledge my responsibility for the preparation and presentation of the annual accounts of the European Development Fund in accordance with Article 18 of the Financial Regulation of the 11th European Development Fund.

I have obtained from the authorising officer and from the EIB, who guarantee its reliability, all the information necessary for the production of the accounts that show the European Development Fund's assets and liabilities and the budgetary implementation.

I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts, I have a reasonable assurance that the accounts present a true and fair view of the financial position of the European Development Fund in all material aspects.

Rosa ALDEA BUSQUETS

Accounting Officer

IMPLEMENTING AND ACCOUNTING FOR THE EDF RESOURCES

1.BACKGROUND

The European Union (hereinafter referred to as the ‘EU’) has cooperative relations with a large number of developing countries. The main objective is to promote economic, social and environmental development, with the primary aim of reducing and eradicating poverty in the long-term by providing beneficiary countries with development aid and technical assistance. To achieve this, the EU draws up, jointly with the partner countries, cooperation strategies and mobilises the financial resources to implement them. These EU resources allocated to development cooperation come from three sources:

-The EU budget;

-The European Development Fund; and

-The European Investment Bank.

Up until 2021 when the 11th European Development Fund (hereinafter referred to as the ‘EDF’) reached its final stage as the sunset clause came into effect on 31 December 2020, the EDF was the main instrument for providing aid for development cooperation to the African, Caribbean and Pacific (hereinafter referred to as the ‘ACP’) States and Overseas Countries and Territories (hereinafter referred to as the ‘OCTs’). However, from 2021 onwards EU cooperation with ACP countries and OCTs is funded through the EU budget.

The EDF is not funded by the EU budget. It was established by an Internal Agreement of the Representatives of the Member States, sitting within the Council, and is managed by a specific committee. The European Commission (hereinafter referred to as the ‘Commission’) is responsible for the financial implementation of the operations carried out with EDF resources. The European Investment Bank (hereinafter referred to as the ‘EIB’) manages the Investment Facility.

Each EDF is concluded for a period of around five years and is governed by its own Financial Regulation, which requires the preparation of specific financial statements. In addition, these financial statements are aggregated so as to provide a global view of the financial situation of the resources for which the Commission is responsible.

The Internal Agreement establishing the 11th EDF was signed by the participating Member States, meeting within the Council, in June 2013 1 . It came into force on 1 March 2015.

In 2018, the Council adopted the Financial Regulation applicable to the 11th EDF 2 . This new text repealed the previous regulation and is applicable to operations financed from previous EDFs without prejudice to existing legal commitments. This Regulation does not apply to the Investment Facility under previous EDFs.

Within the framework of the ACP-EU Partnership Agreement, the Investment Facility was established, managed by the EIB, and used to support private sector development in the ACP States by financing essentially – but not exclusively – private investments. The Facility is designed as a renewable fund, so that loan repayments can be reinvested in other operations, thus resulting in a self-renewing and financially independent facility. As the Investment Facility is not managed by the Commission, it is not consolidated in the first part of the annual accounts – the financial statements of the EDF and the related report on financial implementation. The financial statements of the Investment Facility, prepared by the EIB, are included as a separate part of the annual accounts (part II) to provide a full picture of the development aid of the EDF.

2.HOW IS THE EDF FUNDED?

The Council of 2 December 2013 adopted the Regulation 1311/2013 laying down the multiannual financial framework for 2014-2020. In this context, it was decided that geographical cooperation with the ACP States would not be integrated into the EU budget, but would continue to be funded through the existing intergovernmental EDF.

The EU budget is annual and according to the budgetary principle of annuality, expenditure and revenue are planned and authorised for one year. Unlike the EU Budget, the EDF is a fund operating based on multiannuality. Each EDF establishes an overall fund to implement development cooperation during a period of usually five years. As resources are allocated on a multiannual basis, the allocated funds may be used over the period of the EDF. The lack of budget annuality is highlighted in the budgetary reporting, where the budgetary implementation of the EDFs is measured against the total funds.

The EDF resources are "ad hoc" contributions from the EU Member States. Approximately every five years, Member State representatives met at intergovernmental level and decided on an overall amount to be allocated to the fund and to oversee its implementation.

The Commission manages the fund in accordance with the Union policy on development cooperation. Since Member States have their own development and aid policies in parallel to the Union policy, the Member States must coordinate their policies with the EU to ensure they are complementary.

In addition to the above mentioned contributions, it is also possible for Member States to enter into co‑financing arrangements or to make voluntary financial contributions to the EDF.

3.EDF ACTIVITIES AFTER 31 DECEMBER 2020

The 8th EDF and 9th were closed in 2021. While all contracts under the 8th EDF are closed, there are 19 open contracts under the 9th EDF which should in principal close by 2024.

The 11th EDF has reached its final stage as the sunset clause came into effect on 31 December 2020. This clause sets a cut-off date for commitments meaning that as of 2021 no further financing agreements can be signed under the 11th EDF. However, specific contracts for the existing financing agreements will still be signed until 31 December 2023 (and even later for audit and evaluation). Furthermore, the implementation of the ongoing projects funded by the European Development Fund will continue until their final completion.

In the context of the current Multi-Annual Financial Framework 2021-2027, EU cooperation with ACP countries is integrated in the Neighbourhood, Development and International Cooperation Instrument –Global Europe. Similarly, the cooperation with OCTs is now covered by the Overseas Association Decision (OAD). This means that while up to 2021 the EDF programmes were funded by the voluntary contributions of EU Member States, as of 2021 development programmes will be funded through the EU budget. This also implies that the funding of development programmes are subject to the authorisation of the European Parliament and that the transactions have to comply with the EU financial regulations in the same way as other EU funded programmes.

4.YEAR-END REPORTING

4.1.ANNUAL ACCOUNTS

In accordance with Article 18(3) of the EDF Financial Regulation, the EDF financial statements are prepared based on accrual-based accounting rules that themselves are based on International Public Sector Accounting Standards (IPSAS). These accounting rules adopted by the Accounting Officer of the Commission are applied by all the Institutions and bodies of the EU in order to establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to harmonising the process for drawing up the financial statements. These EU accounting rules are also applied by the EDF while taking into account the specific nature of its activities.

The preparation of the EDF annual accounts is entrusted to the Commission's Accounting Officer who is the Accounting Officer of the EDF. She ensures that the annual accounts of the EDF present a true and fair view of the financial position of the EDF.

The annual accounts are presented as follows:

Part I: Funds managed by the Commission

(I)Financial statements and explanatory notes of the EDF

(II)Financial statements of the EU trust funds consolidated in the EDF

(III)Consolidated financial statements of EDF and the EU trust funds

(IV)Report on financial implementation of the EDF

Part II: Annual report on implementation - Funds managed by the EIB

(I)Financial statements of the Investment Facility

The part 'Financial statements of the European trust funds consolidated in the EDF' includes the financial statements of the two trust funds created under the EDF: The Bêkou EU Trust Fund (see section 'Financial statements of the Bêkou EU Trust Fund') and the EU Trust Fund for Africa (see section 'Financial statements of EU Trust Fund for Africa'). The trust funds individual financial statements are prepared under the responsibility of the Commission’s Accounting Officer and are subject to external audit carried out by a private auditor. The trust funds' figures included in these annual accounts are provisional.

The EDF annual accounts must be adopted by the Commission no later than 31 July of the year following the balance sheet date and presented to the European Parliament and to the Council for discharge.

5.AUDIT AND DISCHARGE

5.1.AUDIT

The EDF annual accounts are audited by its external auditor, the European Court of Auditors (hereinafter referred to as the ‘ECA’), which draws up an annual report for the European Parliament and the Council.

5.2.DISCHARGE

The final control of the financial implementation of the EDF resources for a given financial year is the discharge. Following the audit and finalisation of the annual accounts, it falls to the Council to recommend, and then to the European Parliament to decide, whether to grant discharge to the Commission for the financial implementation of the EDF resources for a given financial year. This decision is based on a review of the accounts and the annual report of the ECA (which includes an official statement of assurance) and replies of the Commission to questions and further information requests of the discharge authority.

HIGHLIGHTS OF FINANCIAL IMPLEMENTATION 2022

* Net amount, only 10th & 11th EDF

Budget implementation

In 2022 the financial implementation for the 10th and 11th EDF (individual commitments: EUR 853 million and payments EUR 2 386 million) was marked by the Council ‘s decision 3 to reuse EUR 600 million of decommitted funds from the 10th and 11th EDF.

The decision was adopted by the Council in order to finance actions addressing the food security crisis and economic shock in ACP countries following Russia’s war of aggression against Ukraine. In particular, the funds will finance actions providing support up to EUR 350 million for food production and the resilience of food systems, up to EUR 100 million for macroeconomic support and up to EUR 150 million for humanitarian assistance.

The total amount of gross payments for all EDFs (EUR 2 452 million) represents 98.1% of the target of EUR 2 500 million communicated to the Member States.

Impact of the activities in the financial statements

In the financial statements, the impact of the above mentioned activities is most visible when looking at:

·Pre-financing (see note 2.2): a decrease of EUR 239 million largely as a result of fewer advances paid out due to the decrease in the number of contracts signed (EUR 2 118 million in 2021 vs EUR 853 million in 2022). Consequently, cash and cash equivalents increased by EUR 34 million as a result of the decrease in pre-financing and other payments (see note 2.5);

·Accrued Charges (see note 2.8): an increase of EUR 123 million as a result of the increase in the number of open contracts at the end of the year for which no cost claims were validated by year-end and thus expenses had to be estimated;

·Operating expenses (see note 3.4): an overall decrease in operating expenses of EUR 74 million mainly as a result of the winding down of the Trust Funds which resulted in a decrease in the contributions needed to cover their expenses. Despite this, expenses relating to emergency aid increased as decommitted funds from the 10th and 11th EDF were reused to combat the negative effects of the Russian war against Ukraine.

EUROPEAN DEVELOPMENT FUND

FINANCIAL YEAR 2022

FUNDS MANAGED BY THE EUROPEAN COMMISSION

CONTENTS

FINANCIAL STATEMENTS OF THE EDF    

EDF BALANCE SHEET    

EDF STATEMENT OF FINANCIAL PERFORMANCE    

EDF CASHFLOW STATEMENT    

EDF STATEMENT OF CHANGES IN NET ASSETS    

BALANCE SHEET BY EDF    

STATEMENT OF FINANCIAL PERFORMANCE BY EDF    

STATEMENT OF CHANGES IN NET ASSETS BY EDF    

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF    

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF    

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2022    

BALANCE SHEET    

STATEMENT OF FINANCIAL PERFORMANCE    

CASHFLOW STATEMENT    

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2022    

BALANCE SHEET    

STATEMENT OF FINANCIAL PERFORMANCE    

CASHFLOW STATEMENT    

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS    

CONSOLIDATED BALANCE SHEET    

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE    

CONSOLIDATED CASH FLOW STATEMENT    

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS    

EDF REPORT ON FINANCIAL IMPLEMENTATION    

FINANCIAL STATEMENTS OF THE EDF

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up.

   EDF BALANCE SHEET

EUR million

Note

31.12.2022

31.12.2021

NON-CURRENT ASSETS

Financial assets

2.1

67

39

Pre-financing

2.2

488

671

Trust Fund contributions

2.3

254

382

Exchange receivables

2.4

7

4

816

1 096

CURRENT ASSETS

Financial Assets

2.1

3

Pre-financing

2.2

1 396

1 453

Exchange receivables and non-exchange recoverables

2.4

27

35

Cash and cash equivalents

2.5

1 027

994

2 454

2 481

TOTAL ASSETS

3 270

3 577

NON-CURRENT LIABILITIES

Financial liabilities

2.6

(7)

(7)

(7)

(7)

CURRENT LIABILITIES

Payables

2.7

(426)

(501)

Accrued charges

2.8

(1 131)

(1 008)

(1 558)

(1 509)

TOTAL LIABILITIES

(1 565)

(1 516)

NET ASSETS

1 705

2 061

FUNDS & RESERVES

Called fund capital - active EDFs

2.9

65 100

62 643

Called fund capital from closed EDFs carried forward

2.9

2 252

2 252

Economic result carried forward from previous years

(62 834)

(59 860)

Economic result of the year

(2 813)

(2 974)

NET ASSETS

1 705

2 061

EDF STATEMENT OF FINANCIAL PERFORMANCE

EUR million

Note

2022

2021

REVENUE

Revenue from non-exchange transactions

Recovery activities

3.1

18

27

18

27

Revenue from exchange transactions

Financial revenue

3.2

2

(26)

Other revenue

3.2

77

74

80

48

Total Revenue

98

75

EXPENSES

Implemented by other entities

3.3

(1)

Aid instruments

3.4

(2 789)

(2 864)

Co-financing expenses

3.5

4

(19)

Finance costs

3.6

(6)

(20)

Other expenses

3.7

(119)

(145)

Total Expenses

(2 911)

(3 049)

ECONOMIC RESULT OF THE YEAR

(2 813)

(2 974)

EDF CASHFLOW STATEMENT

EUR million

Note

2022

2021

Economic result of the year

(2 813)

(2 974)

Operating activities

Capital increase - contributions (net)

2 458

3 657

(Increase)/decrease in trust funds contributions

128

12

(Increase)/decrease in pre-financing

239

101

(Increase)/decrease in exchange receivables and non-exchange recoverables

5

105

Increase/(decrease) in provisions

1

Increase/(decrease) in financial liabilities

(1)

5

Increase/(decrease) in payables

(75)

(114)

Increase/(decrease) in accrued charges and deferred income

123

(519)

Other non-cash movements

Investing activities

(Increase)/decrease in non-derivative financial assets at fair value through surplus or deficit*

(31)

(7)

NET CASHFLOW

34

266

Net increase/(decrease) in cash and cash equivalents

34

266

Cash and cash equivalents at the beginning of the year

2.5

994

728

Cash and cash equivalents at year-end

2.5

1 027

994

EDF STATEMENT OF CHANGES IN NET ASSETS

EUR million

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Fair value reserve (F)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2020

73 041

14 055

58 986

(59 854)

2 252

(5)

1 379

Impact of revised EAR 11

(5)

5

BALANCE AS AT 01.01.2021

73 041

14 055

58 986

(59 860)

2 252

1 379

Capital increase - contributions

(43)

(3 700)

3 657

3 657

Economic result of the year

(2 974)

(2 974)

BALANCE AS AT 31.12.2021

72 998

10 355

62 643

(62 834)

2 252

2 061

Capital increase - contributions

(43)

(2 500)

2 457

2 457

Economic result of the year

(2 813)

(2 813)

BALANCE AS AT 31.12.2022

72 955

7 855

65 100

(65 647)

2 252

1 705

BALANCE SHEET BY EDF

EUR million

31.12.2022

31.12.2021

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Total

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Total

NON-CURRENT ASSETS

Financial assets

2.1

(1)

67

67

(2)

41

39

Pre-financing

2.2

221

267

488

219

452

671

Trust Fund contributions

2.3

31

9

213

254

31

9

341

382

Exchange receivables

2.4

7

7

4

4

31

229

555

816

31

226

839

1 096

CURRENT ASSETS

Financial Assets

2.1

3

3

Pre-financing

2.2

14

427

954

1 396

14

353

1 085

1 453

Exchange receivables and non-exchange recoverables

2.4

10

16

27

180

(314)

1 296

(1 127)

35

Inter-EDF accounts

180

(369)

803

(612)

181

(316)

1 279

(1 144)

Cash and cash equivalents

2.5

1 027

1 027

994

994

180

(355)

1 240

1 389

2 454

361

(615)

2 928

(192)

2 481

TOTAL ASSETS

180

(324)

1 469

1 945

3 270

361

(584)

3 154

646

3 577

NON-CURRENT LIABILITIES

Financial liabilities

2.6

(7)

(7)

(7)

(7)

(7)

(7)

(7)

(7)

CURRENT LIABILITIES

Payables

2.7

(34)

(391)

(426)

(27)

(473)

(501)

Accrued charges

2.8

(7)

(119)

(1 006)

(1 131)

(6)

(110)

(892)

(1 008)

(7)

(153)

(1 397)

(1 558)

(6)

(138)

(1 365)

(1 509)

TOTAL LIABILITIES

(7)

(153)

(1 404)

(1 565)

(6)

(138)

(1 372)

(1 516)

NET ASSETS

180

(331)

1 315

541

1 705

361

(591)

3 016

(725)

2 061

Called fund capital - active EDFs

2.9

12 164

10 450

20 960

21 527

65 100

12 164

10 492

20 960

19 027

62 643

Called fund capital from closed EDFs carried forward

2.9

627

1 625

2 252

627

1 625

2 252

Called fund capital transfers between active EDFs

2.9

(2 513)

2 010

(38)

541

(2 512)

2 018

101

394

-

Economic result carried forward from previous years

(10 098)

(14 410)

(19 325)

(19 001)

(62 834)

(10 098)

(14 404)

(19 065)

(16 293)

(59 860)

Economic result of the year

(6)

(282)

(2 526)

(2 813)

(1)

(6)

(260)

(2 708)

(2 974)

NET ASSETS

180

(331)

1 315

541

1 705

180

(274)

1 737

419

2 061

STATEMENT OF FINANCIAL PERFORMANCE BY EDF

EUR million

2022

2021

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Total

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Total

REVENUE

Revenue from non-exchange transactions

Recovery activities

3.1

(1)

(8)

28

18

1

26

27

(1)

(8)

28

18

1

26

27

Revenue from exchange transactions

Financial revenue

3.2

2

1

2

(22)

(4)

(26)

Other revenue

3.2

3

8

66

77

5

14

55

74

3

10

67

80

5

(8)

51

48

Total revenue

1

2

94

98

5

(7)

78

75

EXPENSES

Implemented by other entities

3.3

(1)

(1)

Aid instruments

3.4

(5)

(295)

(2 489)

(2 789)

(7)

(214)

(2 644)

(2 864)

Co-financing expenses

3.5

22

(18)

4

(0)

(19)

(19)

Finance costs

3.6

1

2

(3)

(5)

(6)

7

(23)

(3)

(20)

Other expenses

3.7

-

(5)

(8)

(107)

(119)

(11)

(16)

(119)

(145)

Total expenses

1

(7)

(284)

(2 620)

(2 911)

(12)

(252)

(2 785)

(3 049)

ECONOMIC RESULT OF THE YEAR

1

(6)

(282)

(2 526)

(2 813)

-

(8)

(259)

(2 708)

(2 974)

STATEMENT OF CHANGES IN NET ASSETS BY EDF

EUR million

Eighth EDF

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Called fund capital transfers between active EDFs (F)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2020

12 164

12 164

(10 098)

627

(2 512)

181

Transfers to/from the 10th EDF

BALANCE AS AT 31.12.2021

12 164

12 164

(10 098)

627

(2 512)

181

Transfers to/from the 10th EDF

(1)

(1)

BALANCE AS AT 31.12.2022

12 164

12 164

(10 098)

627

(2 513)

180

EUR million

Ninth EDF

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Called fund capital transfers between active EDFs (F)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2020

10 550

15

10 535

(14 404)

1 625

2 041

(203)

Transfers to/from the 10th EDF

Transfers to/from the 10th EDF

(23)

(23)

Refund to Member States

(43)

(43)

(43)

Economic result of the year

(6)

(6)

BALANCE AS AT 31.12.2021

10 507

15

10 492

(14 410)

1 625

2 018

(274)

Capital increase - contributions

Transfers to/from the 10th EDF

(8)

(8)

Refund to Member States

(43)

(43)

(43)

Economic result of the year

(6)

(6)

BALANCE AS AT 31.12.2022

10 464

15

10 450

(14 416)

1 625

2 010

(331)

EUR million

10th EDF

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Fair value reserve (G)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2020

20 960

20 960

(19 063)

188

(2)

2 084

Impact of revised EAR 11

(2)

2

BALANCE AS AT 01.01.2021

20 960

20 960

(19 065)

188

2 084

Transfers to/from the Eighth and Ninth EDF

23

23

Transfers to/from the 11th EDF

(110)

(110)

Economic result of the year

(260)

(260)

BALANCE AS AT 31.12.2021

20 960

20 960

(19 324)

101

1 737

Transfers to/from the Eighth and Ninth EDF

9

9

Transfers to/from the 11th EDF

(148)

(148)

Economic result of the year

(282)

(282)

BALANCE AS AT 31.12.2022

20 960

20 960

(19 606)

(38)

1 315

EUR million

11th EDF

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Called fund capital transfers between active EDFs (F)

Fair value reserve (G)

Total Net Assets (C)+(D)+(E)+(F)+(G)

BALANCE AS AT 31.12.2020

29 367

14 040

15 327

(16 290)

283

(4)

(683)

Impact of revised EAR 11

(4)

4

-

BALANCE AS AT 01.01.2021

29 367

14 040

15 327

(16 294)

283

-

(683)

Capital increase - contributions

(3 700)

3 700

110

3 810

Economic result of the year

(2 708)

(2 708)

BALANCE AS AT 31.12.2021

29 367

10 340

19 027

(19 002)

394

419

Capital increase - contributions

(2 500)

2 500

148

2 648

Economic result of the year

(2 526)

(2 526)

BALANCE AS AT 31.12.2022

29 367

7 840

21 527

(21 528)

541

541

NOTES TO THE FINANCIAL STATEMENTS OF THE EDF

 

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to add-up

1.SIGNIFICANT ACCOUNTING POLICIES

1.1.ACCOUNTING PRINCIPLES

The objective of financial statements is to provide information about the financial position, performance and cashflows of an entity that is useful to a wide range of stakeholders.

The overall considerations (or accounting principles) to be followed when preparing the financial statements are laid down in EU Accounting Rule 1 ‘Financial Statements’ and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information. The qualitative characteristics of financial reporting are relevance, faithful representation (reliability), understandability, timeliness, comparability and verifiability.

1.2.BASIS OF PREPARATION

2.Reporting period

Financial statements are presented annually. The accounting year begins on 1 January and ends on 31 December.

3.Currency and basis for conversion

The annual accounts are presented in euros, the euro being the EU’s functional currency. Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance. Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the date when they were purchased.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are translated into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December.

Euro exchange rates

Currency

31.12.2022

31.12.2021

Currency

31.12.2022

31.12.2021

BGN

1.9558

1.9558

PLN

4.6808

4.5969

CZK

24.1160

26.8580

RON

4.9495

4.9490

DKK

7.4365

7.4364

SEK

11.1218

10.2503

GBP

0.88693

0.84028

CHF

0.9847

1.0331

HRK

7.5345

7.5156

JPY

140.6600

130.3800

HUF

400.8700

369.1900

USD

1.0666

1.1326

4.Use of estimates

In accordance with IPSAS and generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most reliable information available. Significant estimates include, but are not limited to: amounts for employee benefit liabilities, financial risk of accounts receivable and the amounts disclosed in the notes concerning financial instruments, impairment allowance for financial assets at amortised cost and for financial guarantee contract liabilities, accrued revenue and charges, provisions, degree of impairment of intangible assets and property, plant and equipment, net realisable value of inventories, contingent assets and liabilities. Actual results could differ from those estimates.

Reasonable estimates are an essential part of the preparation of financial statements and do not undermine their reliability. An estimate may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience. By its nature, the revision of an estimate does not relate to prior periods and is not the correction of an error. The effect of a change in accounting estimate shall be recognised in the surplus or deficit in the periods in which it becomes known.

5.Application of new and revised European Union Accounting Rules (EAR)

New EAR which are effective for annual periods beginning on or after 1 January 2022

There are no new EAR which became effective for annual periods beginning on or after 1 January 2022.

New EAR adopted but not yet effective at 31 December 2022

There were no new EAR adopted during 2022.    

5.1.BALANCE SHEET

6.Financial assets

Classification at initial recognition

The classification of the financial instruments is determined at initial recognition. Based on the management model and the asset contractual cash-flow characteristics the financial assets can be classified in three categories: Financial assets at amortised cost (‘AC’), financial assets at fair value through net assets/equity (‘FVNA’) or financial assets at fair value through surplus or deficit (‘FVSD’).

(I)Financial assets at amortised cost

Financial assets at amortised cost are non-derivative financial assets that meet two conditions: (1) The entity holds them in order to collect the contractual cash flows. (2) On specified days, there are contractual cash flows that are solely payments of the principal and interest on the outstanding principal.

This category comprises:

·Cash and cash equivalents;

·Loans (including term deposits with original maturity of more than three months);

·Exchange receivables

Financial assets at amortised cost are included in current assets, except for those with maturity of more than 12 months from the reporting date.

(II)Financial assets at fair value through net assets/equity

These non-derivatives financial assets have contractual cash flows that represent only principal and interest on the outstanding principal. In addition, the management model is to hold the financial assets both to collect contractual cash flows and to sell the financial assets.

Assets in this category are classified as current assets, if they are expected to be realised within 12 months from the reporting date.

The entity does not hold such assets at 31 December 2021.

(III)Financial assets at fair value through surplus or deficit

The entity classifies derivatives and equity investments as FVSD because the contractual cash flows do not represent only principal and interests on the principal.

In addition, the entity classifies the debt securities it holds as FVSD because the portfolios of debt securities are managed and evaluated on a portfolio fair value basis.

Assets in this category are classified as current assets, if they are expected to be realised within 12 months from the reporting date.

Initial recognition and measurement

Purchases of financial assets at fair value through surplus or deficit are recognised on their trade-date – the date on which the entity commits to purchase the asset. Cash equivalents and loans are recognised when cash is deposited in a financial institution or advanced to borrowers.

Financial assets are initially measured at fair value. For all financial assets not carried at fair value through surplus or deficit, the transactions costs are added to the fair value at initial recognition. For financial assets carried at fair value through surplus or deficit the transaction costs are expensed in the statement of financial performance.

The fair value of a financial asset on initial recognition is normally the transaction price unless the transaction is not at arm’s length i.e. at no or at nominal consideration for public policy purposes. In this case, the difference between the fair value of the financial instrument and the transaction price is a non-exchange component which is recognised as an expense in the statement of financial performance. In this case, the fair value of a financial asset is derived from current market transactions for a directly equivalent instrument. If there is no active market for the instrument, the fair value is derived from a valuation technique that uses available data from observable markets.

Subsequent measurement

Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method.

Financial assets at fair value through surplus or deficit are subsequently measured at fair value. Gains and losses from changes in the fair value (including those stemming from foreign exchange translation and any interests earned) are included in the statement of financial performance in the period in which they arise.

Fair value at subsequent measurement

The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities and over-the–counter derivatives), the EU establishes a fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cashflow analysis, option pricing models and other valuation techniques commonly used by market participants.

Investments in venture capital funds which do not have a quoted market price in an active market are valued at the attributable net asset value, which is considered as an equivalent of their fair value.

Impairment of financial assets

The EU recognises and measures an impairment loss for expected credit losses on financial assets that are measured at amortised cost and at fair value through net assets/equity.

The expected credit loss (ECL) is the present value of the difference between the contractual cash flows and the cash flows that the EU expects to receive. The ECL incorporates reasonable and supportable information that is available without undue cost or effort at the reporting date.

For assets at amortised cost, the asset’s carrying amount is reduced by the amount of the impairment loss which is recognised in the statement of financial performance. If, in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed through the statement of financial performance.

(a)Receivables

The entity measures the impairment loss at the amount of lifetime ECL, using practical expedients (e.g. provision matrix).

(b)Cash and cash equivalents

The entity holds cash and cash equivalents in current bank accounts and term deposits of up to 3 months. The cash is held in banks with very high credit ratings, thus having very low default probabilities. Given the short duration and low default probabilities, the expected credit losses from cash and cash equivalents are negligible. As a result, no impairment allowance is recognised for cash equivalents.

(c)Loans 

The ECL is measured with a three stage model that takes into account probability weighted default events during the lifetime of the financial asset and the evolution of credit risk since the origination of the financial asset. For loans, origination is the date of the irrevocable loan commitment

If there is no significant increase in credit risk since origination (‘stage 1’), the impairment loss is the ECL from possible default events in the next 12 months from the reporting date (’12 months ECL’). If there is a significant increase in credit risk since origination (‘stage 2’) or if there is objective evidence of a credit impairment (‘stage 3’), the impairment loss equals the ECL from possible default events over the whole lifetime of the financial asset (‘lifetime ECL’).

De-recognition

Financial instruments are derecognised when the rights to receive cash flows from the investments have expired or the entity has transferred substantially all risks and rewards of ownership to another party. Sales of financial assets through surplus or deficit are recognised on their trade-date.

7.Pre-financing amounts

Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid. If the beneficiary does not incur eligible expenditure, he has the obligation to return the pre-financing advance to the entity. Thus, as the entity retains control over the pre-financing and is entitled to a refund for the ineligible part, the amount is recognised as an asset.

Pre-financing is initially recognised on the balance sheet when cash is transferred to the recipient. It is measured at the amount of the consideration given. In subsequent periods pre-financing is measured at the amount initially recognised on the balance sheet less eligible expenses (including estimated amounts where necessary) incurred during the period.

8.Receivables and recoverables

The EU accounting rules require separate presentation of exchange and non-exchange transactions. To distinguish between the two categories, the term ‘receivable’ is reserved for exchange transactions, whereas for non-exchange transactions, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange, the term ‘recoverables’ is used (e.g. recoverables from Member States related to own resources).

Receivables from exchange transactions meet the definition of financial instruments. The entity classified them as financial assets at amortised cost and measured them accordingly.

Recoverables from non-exchange transactions are carried at fair value as at the date of acquisition less write-down for impairment. A write-down for impairment is established when there is objective evidence that the entity will not be able to collect all amounts due according to the original terms of the recoverables. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance.

9.Cash and cash equivalents

Cash and cash equivalents are financial assets at amortised cost and include cash at hand, deposits held at call or at short notice with banks, and other short-term highly liquid investments with original maturities of three months or less.

10.Payables

Included under accounts payable are both amounts related to exchange transactions such as the purchase of goods and services, and to non-exchange transactions e.g. to cost claims from beneficiaries, grants or other EU funding, or pre-financing received (see note 1.4.1).

Where grants or other funding are provided to the beneficiaries, the cost claims are recorded as payables for the requested amount, at the moment when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the accepted and eligible amount.

Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount. The corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the entity.

11.Financial liabilities

Financial liabilities are classified as financial liabilities carried at amortised cost, financial liabilities at fair value through surplus or deficit, or as financial guarantee contract liabilities.

Financial liabilities at amortised cost are initially recognised at fair value including transaction costs incurred and subsequently carried at amortised cost using the effective interest method. They are derecognised from the statement of financial position if and only if the obligation is discharged, waived, cancelled or expired.

Financial liabilities at fair value through surplus or deficit include derivatives where the fair value is negative. Where the guarantee contract requires the entity to make payments in response to changes in financial instruments prices or foreign exchange rates, the guarantee contract is a derivative. They follow the same accounting treatment as financial assets at fair value through surplus or deficit.

The entity recognises a financial guarantee contract liability when it enters into a contract that requires to make specified payments to reimburse the guarantee holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee contract liabilities are initially recognised at fair value.

The subsequent measurement depends on the evolution of the credit risk exposure from the financial guarantee. If there is no significant increase in credit risk (‘stage 1’), financial guarantee liabilities are measured at the higher of the 12 months expected credit losses and the amount initially recognised less, when appropriate, cumulative amortisation. If there is a significant increase in credit risk (‘stage 2’), financial guarantee liabilities are measured at the higher of the lifetime expected credit losses and the amount initially recognised less, when appropriate, cumulative amortisation.

Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date. Financial guarantee contracts are classified as current liabilities except if the entity has an unconditional right to defer the settlement of the liability for at least twelve months after the reporting date.

12.Accrued and deferred revenue and charges

Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, or the supplies have been delivered by the entity or a contractual agreement exists (e.g. by reference to a contract), an accrued revenue will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.

Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Accounting Officer. These aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if a payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period.

12.1.STATEMENT OF FINANCIAL PERFORMANCE

13.Revenue

Revenue comprises gross inflows of economic benefits or service potential received and receivable by the entity, which represents an increase in net assets, other than increases relating to contributions from owners.

Depending on the nature of the underlying transactions in the statement of financial performance, revenue is distinguished between:

Revenue from non-exchange transactions

Revenue from non-exchange transactions are taxes and transfers, because the transferor provides resources to the recipient entity, without the recipient entity providing approximately equal value directly in exchange. Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other than taxes. For the EU entities, transfers mostly comprise funds received from the Commission (e.g. balancing subsidy to the traditional agencies, operating subsidy for the delegation agreements).

The entity shall recognise an asset in respect of transfers when the entity controls the resources as a result of a past event (the transfer) and expects to receive future economic benefits or service potential from those resources, and when the fair value can be reliably measured. An inflow of resources from a non-exchange transaction recognised as an asset (i.e. cash) is also recognised as revenue, except to the extent that the entity has a present obligation in respect of that transfer (condition), which needs to be satisfied before the revenue can be recognised. Until the condition is met the revenue is deferred and recognised as a liability.

Revenue from exchange transactions

Revenue from the sale of goods and services is recognised when the significant risk and rewards of ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving the provision of services is recognised by reference to the stage of completion of the transaction at the reporting date.

(a)Interest revenue and expense

Interest revenue and expense from financial assets and financial liabilities at amortised cost are recognised in the statement of financial performance using the effective interest method. This is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest revenue or interest expense over the relevant period.

(b)Revenue from dividends

Revenue from dividends and similar distributions is recognised when the right to receive payment is established.

(c)Revenue and expense from financial assets at fair value through surplus or deficit

This refers to the fair value gains (revenue) and fair value losses (expense) from these financial assets, including those stemming from foreign exchange translation. For interest-bearing financial assets, this also includes interest.

(d)Revenue from financial guarantee contracts

The revenue from financial guarantee contracts (guarantee premium) is recognised over the time the entity stands ready to compensate the holder of the financial guarantee contract for the credit loss it may incur.

14.Expenses

Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or the incurring of liabilities that result in decreases in net assets. They include both the expenses from exchange transactions and expenses from non‑exchange transactions.

Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the entity. They are valued at the original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are recognised in the statement of financial performance.

Expenses from non‑exchange transactions relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations. Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation or an agreement has been signed authorising the transfer; any eligibility criteria have been met by the beneficiary; and a reasonable estimate of the amount can be made.

When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expense.

14.1.CONTINGENT ASSETS AND LIABILITIES

15.Contingent assets

A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.

16.Contingent liabilities

A contingent liability is either a possible obligation of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or a present obligation where it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation.

A contingent liability also arises in the rare circumstances where a present obligation exists but cannot be measured with sufficient reliability.

Contingent liabilities are not recognised in the accounts. They are disclosed unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

16.1.FUND CAPITAL

The EDF member states provide contributions to the Fund for the implementation of EDF programmes as laid down in the Internal Agreement of each EDF. According to the applicable legal basis the capital calls, i.e. the requests for funding for a given year N, are decided by a Council Decision in year N-1, with the funds to be received clearly assigned to specified future periods.

The contributions meet the criteria of contribution from owners (EAR 1) and are thus treated as fund capital in the EDF financial statements. The fund capital represents the total amount of contributions to be received from the EDF members states. As the uncalled fund capital is openly deducted from the total fund capital (see Statement of Changes in Net Assets), only the called fund capital is recognised in the Balance Sheet.

As the agreed contributions are assigned to specified reporting periods, with the EDF’s legal claim against the EDF member states arising only in these periods, any amounts received in advance are recognised as deferred capital contributions under payables rather than as called capital.

16.2.CO-FINANCING

Co-financing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and they are presented as payables to Member States, non-Member States and others. The EDF is required to use the contributions to deliver services to third parties or is otherwise required to return the assets (the contributions received). The outstanding payables relating to co-financing agreements represent the co-financing contributions received less the expenses incurred related to the project. The effect on net assets is nil.

Expenses relating to co-financing projects are recognised as they are incurred. The corresponding amount of contributions is recognised as operating revenue and the effect on the economic result of the year is nil.

17.NOTES TO THE BALANCE SHEET

ASSETS

17.1.FINANCIAL ASSETS

A financial asset is any asset that is:

(a) Cash;

(b) An equity instrument of another entity;

(c) A contractual right: to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity; or

(d) A contract that will or may be settled in the entity’s own equity instruments.

Financial assets are classified in the following categories: financial assets at amortised cost (‘AC’), financial assets at fair value through net assets/equity (‘FVNA’) or financial assets at fair value through surplus or deficit (‘FVSD’). The classification of the financial instruments is determined at initial recognition and re-evaluated at each balance sheet date.

The financial assets of the EDF comprise financial assets at FVSD and loans and are as follows:

EUR million

31.12.2022

31.12.2021

Non-Current

Financial assets at fair value through surplus or deficit (FVSD)

61

38

Loans

5

1

67

39

Current

Financial assets at fair value through surplus or deficit (FVSD)

3

3

Total

69

39

The EUR 61 million of financial assets at FVSD relate to equity investments in the following areas:

·Renewable sustainable energy via Climate Investor One, ElectriFI and GEEREF;

·Promoting inclusive smallholder and rural SME finance via the ABC FUND;

·Financial inclusion in Uganda via the aBi Finance; and

·Creating jobs and sustainable growth in Africa via the Boost Africa intitiative.

The EUR 5 million of non-current loans concern two main areas: sustainable agriculture via the AgriFI and electricity access and generation from sustainable energy sources via ElectriFI investment facility.

EUR 3 million under the heading current financial assets relates entirely to an equity investment under the ElectriFI financial instrument which is aimed at financing early-stage and small-sized projects focusing on electricity access and generation from sustainable energy sources in emerging markets with a particular focus on sub-Saharan Africa.

17.2.PRE-FINANCING

Many contracts provide for payments of advances before the commencement of works, delivery of supplies or the provision of services. Sometimes the payment schedules of contracts foresee payments based on progress reports. Pre-financing is normally paid in the currency of the country or territory where the project is executed.

The timing of use of pre-financing governs whether it is disclosed as a current or a non-current pre‑financing. The use is defined by the project's underlying agreement. Any use due within twelve months after the reporting date is disclosed as current pre‑financing. As many of the EDF projects are long-term in nature, it is necessary that the related advances are available for more than one year. Thus some pre-financing amounts are shown as non‑current assets.

EUR million

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Non-current pre-financing

2.2.1

221

267

488

671

Current pre-financing

2.2.2

14

427

955

1 396

1 453

Total

14

649

1 222

1 884

2 123

The decrease in total pre-financing by EUR 239 million at 31 December 2022 can be largely explained by the decrease in pre-financing paid out to beneficiaries under the 11th EDF which fell from EUR 1 537 million in 2021 to EUR 1 222 million in 2022. This is in line with the life cycle of the EDF and is also related to the evolution of the number of open contracts. The 11th EDF reached maturity as the sunset clause came into effect at the end of 2020. Since 1 January 2021 no further financing agreements could be signed under the 11th EDF, however specific contracts for the exsisting agreements can still be signed until 31 December 2023. This led to a decrease in new contracts signed from EUR 2 118 million in 2021 to EUR 853 million in 2022.

On the other hand, pre-financing of the 10th EDF increased from EUR 572 in 2021 to EUR 649 in 2022. This is because, by means of Council Decision EU 2022/1223 EUR 600 million of decommitted funds from the 10th and 11th EDF were reused to finance actions addressing the food security crisis and economic shock in ACP countries following Russia’s war against Ukraine.

18.Non-current pre-financing by management mode

EUR million

31.12.2022

31.12.2021

Direct Management

Implemented by:

Commission

11

72

EU executive agencies

10

8

EU delegations

7

15

28

95

Indirect Management

Implemented by :

EIB and EIF

181

230

International organisations

221

278

Private law bodies with a public service mission

16

12

Public law bodies

25

40

Third countries

16

14

EU bodies and Public Private Partnership

1

1

460

575

Total

488

671

19.Current pre-financing

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Pre-financing (gross)

23

1 041

4 553

5 616

5 711

Cleared via cut-off

(9)

(614)

(3 598)

(4 220)

(4 258)

Total

14

428

955

1 396

1 453

20.Current pre-financing by management mode

EUR million

31.12.2022

31.12.2020

Direct Management

Implemented by:

Commission

85

61

EU executive agencies

10

11

EU delegations

105

159

200

231

Indirect Management

Implemented by :

EIB and EIF

209

160

International organisations

642

642

Private law bodies with a public service mission

96

109

Public law bodies

116

119

Third countries

131

190

EU bodies and Public Private Partnership

2

1

1 196

1 221

Total

1 396

1 453

21.Guarantees received in respect of pre-financing

Guarantees are held to secure pre-financing and are released when the final claim under a project is paid.

EUR million

31.12.2022

31.12.2021

Guarantees for pre-financing

37

44

The majority of pre-financing is paid under the indirect management mode. In this case, the beneficiary of the guarantee is not the EDF but the contracting authority. Even though the EDF is not the beneficiary, those guarantees secure its assets. In 2022, those guarantees amounted to EUR 482 million.

21.1.TRUST FUND CONTRIBUTIONS

This heading represents the amount paid as contributions to the EU Trust Fund for Africa and the Bêkou EU Trust Fund. The contributions are net of the costs incurred by the trust funds and attributable to the EDF.

The trust fund contributions are implemented by the EDF under the direct management mode.

EUR million

Net contribution at 31.12.2021

Contributions paid in 2022

Allocation of TF's net expenses 2022

Net contribution at 31.12.2022

Africa

381

300

(438)

243

Bêkou

1

30

(20)

11

Total

382

330

(458)

254

The decrease of contributions from EUR 634 million in 2021 to EUR 330 million in 2022 stems from the decline in Trust Funds expenses due to the winding down of both Trust Funds. At the end of 2021, the EUTF Africa and EUTF Bêkou had reached the peak of their activities as they reached the end of the contracting period. The winding down of the Trust Funds that started thereafter led to a decrease in the number of open contracts and thus a decrease in expenses.

21.2.NON-EXCHANGE RECOVERABLES AND EXCHANGE RECEIVABLES

Exchange transactions are transactions in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange. Non-exchange transactions are transactions in which an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.

22.Non-current exchange receivables

As at 31.12.2022, EDF has EUR 7 million of long-term exchange receivables comprising mainly of deferred charges arising from several financial instruments.

23.Current non-exchange recoverables and exchange receivables

EUR million

Note

31.12.2022

31.12.2021

Recoverables from non-exchange transactions

2.4.2.1

15

26

Receivables from exchange transactions

2.4.2.2

12

9

Total

27

35

24.Recoverables from non-exchange transactions

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Member States

Customers

3

46

7

56

56

Public bodies

4

13

3

19

25

Third states

1

4

2

7

6

Write down

(7)

(54)

(5)

(67)

(66)

Inter-company accounts with EU Institutions

5

Total

0

9

7

15

26

25.Receivables from exchange transactions

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Accrued income

-

-

-

1

1

-

Inter-EDF accounts

180

(369)

803

(612)

1

-

Other

10

10

9

Total

180

(369)

803

(602)

12

9

For efficiency reasons, the single treasury covering all the EDFs is allocated to the 11th EDF; this leads to operations between the various EDFs, which are balanced out in the inter-EDF accounts between the various EDF balance sheets.

The heading “other” comprises mainly of receivables deriving from financial instrument receivables. Out of the EUR 10 million other receivables, an amount of EUR 4 million relates to a receivable from the Global Energy Efficiency and Renewable Energy Fund (GEEREF) and an amount of EUR 5 million relates to a receivable from Climate Investor One.

25.1.CASH AND CASH EQUIVALENTS 4

Cash and cash equivalents are financial instruments at amortised cost and include cash at hand, deposits held at call or at short notice with banks (such as current accounts and savings accounts), and other short-term highly liquid investments with original maturities of three months or less.

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Special accounts

Central banks

835

835

795

835

835

795

Current accounts

Commercial banks

161

161

165

Cash belonging to financial instruments

31

31

34

192

192

199

Total

1 027

1 027

994

The increase in cash and cash equivalents by EUR 34 million can be explained mainly by the decrease in payments made during the year. This is in line with the decrease in expenses (see note 3.4) and the decrease in pre-financing (see note 2.2). In fact, EDF net payments decreased by 30% in 2022 amounting to EUR 2 388 million.

As in previous years and in order to limit counterparty risk, more cash is kept in accounts with central banks than in the commercial banks (see note 5.1).

LIABILITIES

25.2.FINANCIAL LIABILITIES

26.Financial Provisions

These provisions represent the estimated credit losses that will be incurred in relation to the loans given under different financial instruments.

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Financial provisions

1

1

The amount of EUR 1 million represents the estimated loss in relation to the guarantee given under the following financial instruments: ElectriFI CW and ElectriFI CW II.

27.Financial Guarantees

These provisions represent the estimated losses that will be incurred in relation to the guarantees given under different financial instruments, whereby entrusted entities are empowered to issue guarantees in their own name but on behalf of, and at the risk of, the EDF. The financial risk of the EDF linked to the guarantees is capped and financial assets are gradually provisioned to cover for the future guarantee calls.

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Financial guarantee liability

1

1

1

The amount of EUR 1 million represents the estimated loss in relation to the guarantee given under the Euritz financial instrument of EUR 11 million (see note 3.2.1).

28.Other Financial Liabilities

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Financial liabilities at fair value through surplus and deficit

2

2

The amount of EUR 2 million relates entirely to the payables arising from the financial instrument ElectriFI CW II.

29.Co-financing payables

Co-financing payables represent funds received by the EDF in respect of the co-financing agreements. The EDF is required to use these contributions to deliver agreed services to third parties and return the unused funds to the contributors. Timing of the use of the co-financing amounts determines whether it is disclosed as current or non-current.

At the year-end a case-by-case assessment of all co-financing payables is performed and all amounts that are unlikely to be used in the following 12 months are considered non-current. Current amounts are shown under note 2.7.2.

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Non-current co-financing payables

3

3

6

Current co-financing payables

19

27

46

35

Total

20

29

49

41

29.1.PAYABLES

Payables are liabilities to pay for goods or services that have been received or supplied and - unlike accrued charges - have already been invoiced or formally agreed with the supplier. Payables can relate to both exchange transactions (such as the purchase of goods and services) and non-exchange transactions (e.g. cost claims from beneficiaries of grants, pre-financing or other EU funding).

EUR million

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Current payables

2.7.1

-

17

213

230

263

Sundry payables

2.7.2

17

178

196

238

Total

34

391

426

501

30. Current payables

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Suppliers

-

3

61

63

72

Member States

3

Third states

126

126

158

Public bodies

-

(1)

41

41

51

Institutions and Agencies

-

4

Other current payables

-

14

(15)

(25)

Total

17

213

230

263

Payables largely comprise cost statements received by the EDF in respect of grants provided to the beneficiaries. They are recorded at the moment when the cost statement is received and for the full amount of the cost statement. Following an eligibility check, only the eligible amounts are paid to the beneficiaries. At year-end, the outstanding cost claims are analysed and the estimated eligible amounts related to those cost claims are recognised in the statement of financial performance. The estimated non-eligible amounts are shown under other current payables.

The decrease in payables in particular to suppliers and third states is due to a decrease in invoices that have not yet been validated and paid before year-end. Included under payables to Third States is an amount of EUR 60 million of budget support to Ethiopia, which has been suspended since November 2020 due to the situation in the country.

31.Sundry payables

EUR million

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Co-financing payables

2.6.4

19

27

46

35

Deferred capital contributions

2.7.2.1

147

147

199

Other sundry payables

(2)

4

2

4

Total

 

17

178

196

238

32.Deferred capital contributions

An amount of EUR 43 million of deferred capital contributions relates to a refund to Member States and the United Kingdom from decommitted or unused funds from projects under the Ninth EDF (see note 2.9.1). The Member states agreed for the refund to be offset with the contributions from the 11th EDF during the first call for contributions in 2023.

In addition to the refund, an amount of EUR 105 million relates to the 1st instalment of 2023 paid in advance by the United Kingdom. According to Article 152 of the Withdrawal Agreement, the United Kingdom remains party to the EDF until the closure of the 11th EDF and all previous unclosed EDFs, and assumes the same obligations as the Member States in this respect (see note 2.9.1).

32.1.ACCRUED CHARGES

Accruals are liabilities to pay for goods or services that have been received or supplied but - unlike payables - have not yet been invoiced or formally agreed with the supplier. The calculation of accruals is based on the open amount of budgetary commitments at year-end. The portion of the estimated accrued charges relating to pre-financing paid has been recorded as a reduction of the pre-financing amounts.

Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is issued but the services have not yet been rendered or the goods have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Accrued charges

7

119

1 004

1 130

1 007

Other accruals and deferrals

2

2

1

Total

7

119

1 006

1 131

1 008

Accrued charges comprise estimated operating expenses for on-going or completed contracts without validated cost claims where the eligible expenses incurred by beneficiaries were estimated using the best available information. The portion of the estimated accrued charges that relates to pre‑financing paid has been recorded as a reduction of the pre-financing amounts (see note 2.2 above).

The increase in accrued charges is mainly driven by the increase of accrued charges under the 11th EDF from EUR 891 million in 2021 to EUR 1 006 million in 2022. This is because at the end of 2022 there were more on-going projects for which cost claims had not yet been received and validated and thus the underlying expenses had to be estimated during the closure.

NET ASSETS

32.2.FUND CAPITAL

The EDF Member States provide contributions to the Fund for the implementation of EDF programmes as laid down in the Internal Agreement of each EDF. According to the applicable legal basis the capital calls, i.e. the requests for funding for a given year N, are decided by a Council Decision in year N-1, with the funds to be received clearly assigned to specified future periods.

The contributions meet the criteria of contributions from owners (EAR 1) and are thus treated as fund capital in the EDF financial statements. The fund capital represents the total amount of contributions to be received from the EDF members states. As the uncalled fund capital is deducted from the total fund capital (see Statement of Changes in Net Assets), only the called fund capital is recognised in the Balance Sheet.

As the agreed contributions are assigned to specified reporting periods, with the EDF’s legal claim against the EDF member states arising only in these periods, any amounts received in advance are recognised as deferred capital contributions under Payables rather than as called capital.

33.Called fund capital – active EDFs

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Total

Fund capital

12 164

10 507

20 960

29 367

72 998

Uncalled fund capital

(15)

-

(10 340)

(10 355)

Called fund capital 31.12.2021

12 164

10 492

20 960

19 027

62 643

Fund capital

12 164

10 464

20 960

29 367

72 955

Uncalled fund capital

(15)

-

(7 840)

(7 855)

Called fund capital 31.12.2022

12 164

10 450

20 960

21 527

65 100

The uncalled funds represent amounts not yet called from Member States. The called fund capital represents the contributions which have been called by the EDF and transferred to the treasury accounts by the Member States (see below 2.9.2.).

By means of Council Decision (EU) 2022/2242, the Member States' contributions set out in the Internal Agreements of the Eighth and Ninth EDF were reduced accordingly for an amount of EUR 43 million from funds decommitted under the Ninth EDF. Refunds arising from this reduction have been compensated against additional call for funds under the 11th EDF. In fact, the refund will be used against the first instalment of 2023 which explains the EUR 43 million of deferred capital (see note 2.7.2.1).

While the United Kingdom remains party to the EDF until the closure of all programmes, in accordance with Article 153 of the Withdrawal Agreement, its share of uncommitted and decommitted funds from the Eighth, Ninth and 10th EDF cannot be reused.



34.Called and uncalled fund capital by Member States and the UK

EUR million

Contributions 11th EDF

%

Uncalled capital 31.12.2021

Capital called in 2022

Uncalled capital 31.12.2022

Austria

2.40

248

(60)

188

Belgium

3.25

336

(81)

255

Bulgaria

0.22

23

(5)

17

Croatia

0.23

23

(6)

18

Cyprus

0.11

12

(3)

9

Czech Republic

0.80

83

(20)

63

Denmark

1.98

205

(50)

155

Estonia

0.09

9

(2)

7

Finland

1.51

156

(38)

118

France

17.81

1 842

(445)

1 397

Germany

20.58

2 128

(514)

1 614

Greece

1.51

156

(38)

118

Hungary

0.61

64

(15)

48

Ireland

0.94

97

(24)

74

Italy

12.53

1 296

(313)

982

Latvia

0.12

12

(3)

9

Lithuania

0.18

19

(5)

14

Luxemburg

0.26

26

(6)

20

Malta

0.04

4

(1)

3

Netherlands

4.78

494

(119)

375

Poland

2.01

208

(50)

157

Portugal

1.20

124

(30)

94

Romania

0.72

74

(18)

56

Slovakia

0.38

39

(9)

29

Slovenia

0.22

23

(6)

18

Spain

7.93

820

(198)

622

Sweden

2.94

304

(73)

230

United Kingdom

14.68

1 518

(367)

1 151

Total

100.00

10 340

(2 500)

7 840

Since the capital of the Eighth, Ninth and 10th EDF has been called up and received in its entirety in previous years, in 2022, an amount of EUR 2 500 million has been called which relates entirely to the 11th EDF.

35.Called fund capital transfers between active EDFs

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

Total

Balance at 31.12.2020

(2 512)

2 041

188

283

Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs

(23)

23

Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs

(110)

110

Balance at 31.12.2021

(2 512)

2 018

101

394

Transfer of decommitted amounts to the 10th EDF performance reserve from previous EDFs

(1)

(8)

9

Transfer of decommitted amounts to the 11th EDF performance reserve from previous EDFs

(148)

148

Balance at 31.12.2022

(2 513)

2 010

(38)

541

This heading includes the resources transferred between the active EDFs.

Since the entry into force of the Cotonou Agreement, all the unspent funds in previous active EDFs are transferred to the most recently opened EDF after decommitment. The resources transferred from other EDFs increase the appropriations of the receiving fund and reduce the appropriations of the fund of origin. Funds transferred to the performance reserve of the 10th and 11th EDFs can be committed only under specific conditions set out in the Internal Agreements.

36.NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE

REVENUE

EUR million

Note

2022

2021

Revenue from non-exchange transactions

3.1

18

27

Revenue from exchange transactions

3.2

80

48

Total

98

75

36.1.REVENUE FROM NON-EXCHANGE TRANSACTIONS

Revenue from non-exchange transactions relates to transactions where the transferor provides resources to the recipient entity without the recipient entity providing approximately equal value directly in exchange. The heading mainly includes amounts received from the Commission during the year and recoveries of operational expenses.

EUR million

Note

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2022

2021

Recovery of expenses

-

(1)

9

10

17

8

Co-financing revenue

3.1.1

(22)

18

(4)

19

Total

(1)

(8)

28

18

27

The increase in the recovery from expenses revenue can be largely explained by an increase in the number of recovery orders issued in 2022 compared to 2021.

The decrease in the co-financing revenue is due to the decrease in the co-financing expense (see note 3.5).

Non-exchange revenue can be broken down by management mode as follows:

EUR million

2022

2021

Direct Management

Implemented by:

Commission

1

1

EU delegations

(3)

7

(2)

8

Indirect Management

Implemented by :

Third countries

13

27

Public law bodies

(3)

(13)

International organisations

7

3

Private law bodies with a public service mission

3

2

20

19

Total

18

27

37.Co-financing revenue

The co‑financing contributions received fulfil the criteria of revenues from non-exchange transactions under conditions and as such should not affect the statement of financial performance when received. The contributions remain under liabilities (see note 2.6.4 & 2.7.2) until the conditions attached to the donated funds are met, i.e. eligible expenses are incurred (see note 3.5). The corresponding amount is then recognised in the statement of financial performance as non-exchange revenue from co‑financing. Consequently, the effect on the economic result of the year is zero.

37.1.REVENUE FROM EXCHANGE TRANSACTIONS

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2022

2021

Financial revenue

-

-

2

1

3

(26)

Other revenue

-

3

8

66

77

74

Total

3

10

67

80

48

The EUR 3 million under the heading financial revenue mainly comprise accrued interest on unpaid recovery orders and financial revenue from financial assets held at fair value surplus and deficit (see note 2.1).

Other revenue relates mainly to foreign exchange gains. The corresponding foreign exchange losses are recorded under other expenses (see note 3.7).

EXPENSES

Included under this heading are expenses incurred in relation to operational activities.

37.2.EXPENSES IMPLEMENTED BY OTHER ENTITIES

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2022

2021

Technical assistance expenses

1

1

The amount of EUR 1 million comprises of technical assistance expenses incurred by several financial instruments.

37.3.AID INSTRUMENTS

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2022

2021

Programmable aid

41

1 266

1 307

1 244

Macro-economic support

4

4

7

Sectoral policy

(0)

(5)

Intra ACP projects

232

664

896

951

Emergency aid

1

21

96

118

6

Other Aid programmes

-

(1)

Institutional support

1

5

6

14

Contributions to Trust Funds

458

458

646

Total

5

295

2 489

2 789

2 864

The EDF operational expenditure covers various aid instruments and takes different forms, depending on how the money is paid out and managed.

In 2022, the decrease in operational expenditure by EUR 74 million was mainly driven by the decrease in expenses under the 11th EDF (EUR 2 644 million in 2021 to EUR 2 489 million in 2022). This decrease can be largely explained by the decrease in the contributions to the Trust Funds (see note 2.3). Despite this, expenses relating to emergency aid increased by EUR 112 million following the Council Decision to reuse funds from the 10th and 11th EDF to finance actions addressing food security crisis and economic shock in ACP countries resulting from Russia’s war against Ukraine. This also led to an increase in expenses under the 10th EDF from EUR 214 million in 2021 to EUR 295 million in 2022 (see note 2.2).

The changes in expenses under the 9th EDF are in line with the lifecycle of the EDF and is also related to the evolution of the number of open contracts. Many contracts were completed and closed under the 9th and previous EDF’s in 2022, which resulted in less expenses incurred under those EDFs.

37.4.CO-FINANCING EXPENSES

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2022

2021

Co-financing

(22)

18

(4)

19

Included under this heading are the expenses incurred on co-financing projects in 2022. It should be noted that the expenses incurred include estimated amounts related to the cut-off exercise (and consequently reversals of the estimated amounts related to last year).

The negative amount of co-financing expenses is mainly due to the reversal of last year’s closure bookings. In 2021 the estimated co-financing expenses were higher than that in 2022.

In order to better estimate the expenses, in 2022, the method of allocating expenses to the co-funding donors was improved by taking into account the recovery of unduly paid amounts. This led to a decrease in co-financing expenses to be recognised.

In line with the accounting rules on co-financing, the incurred amounts did not have any impact on the result of the year because they were recognised both in the co‑financing expenses and in the co-financing revenue (see also note 3.1.1).

AID INSTRUMENTS AND CO-FINANCING EXPENSES BY MANAGEMENT TYPE

EUR million

2022

2021

Direct Management

Implemented by:

Commission

70

168

EU executive agencies

6

4

Trust Funds

431

(515)

EU delegations

1 121

658

1 628

315

Indirect Management

Implemented by:

EIB and EIF

39

113

International organisations

(544)

1 053

Private law bodies with a public service mission

325

204

Public law bodies

99

212

Third countries

1 234

983

EU bodies with Public Private Partnership

4

3

1 157

2 568

Total

2 785

2 883

37.5.FINANCE COSTS

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2022

2021

Net impairment losses on loans and receivables

(2)

3

2

2

18

Loss on financial assets or liabilities at FVSD

2

2

1

Fee Subsidy

1

1

Impairment losses from financial guarantees

1

1

Total

-

(2)

3

4

6

20

At 31 December 2022, the net unrealised impairment loss relating to financial guarantee was EUR 1 million.

The EUR 2 million of financial expenses for financial assets at FVSD relate mainly to exchange differences, interest and fair value changes in particular for the ABC FUND and Boost AFRICA financial instruments.

The amount of EUR 1 million under the heading “fee subsidy” relates to expenses incurred under the Kulima financial instrument.

The negative amount under the 9th EDF for the heading “net impairement losses on loans and receivables” is mainly due to the reversal of last year’s closure bookings. In 2022 the estimated expenses on irrecoverable amounts arising from aging recovery orders (over 2 years), bankruptcies and waivers were higher than that in 2021.

37.6.OTHER EXPENSES

Included under this heading are expenses of administrative nature such as external non IT services, operating leasing expenses, communications and publications, training costs etc.

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

2022

2021

Administrative and IT expenses

56

56

98

Realised losses on trade debtors

2

1

1

4

7

Exchange losses

3

7

50

60

41

Total

5

8

107

119

145

The heading Administrative and IT expenses includes amounts that are based on the EDF internal agreement with the Commission to cover the administrative expenditure incurred by both the Headquarters and the Delegations in respect of managing the EDF programmes. The so called “support expenditure” relates mainly to expenses for preparation, follow-up, monitoring, and evaluation of projects as well as expenses for computer networks, technical assistance, financial management and forecasting, etc.

The decrease under this heading is mainly driven by the decrease in administrative and IT expenses from EUR 98 million in 2021 to EUR 56 million in 2022.

The increase of foreign exchange losses is mostly due to the increase in unrealised losses from the revaluation of balances held in currencies at 31 December 2022.

38.CONTINGENT ASSETS & LIABILITIES AND OTHER SIGNIFICANT DISCLOSURES

38.1.CONTINGENT ASSETS

Contingent assets are possible assets that arise from past events, and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events that are not wholly within the control of the entity.

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Pre-financing guarantees

2

-

37

44

Performance guarantees

-

1

11

Retention guarantees

-

9

Total

2

38

63

Pre-financing guarantees are requested in certain cases from beneficiaries that are not Member States when making advance payments.

Performance guarantees are requested to ensure that beneficiaries of EDF funding meet the obligations of their contracts with the EDF.

Retention guarantees concern only works contracts. Typically, 10% of the interim payments to beneficiaries are withheld to ensure that the contractors fulfil their obligations. These withheld amounts are reflected as amounts payable. Subject to the approval of the contracting authority, the contractor may instead submit a retention guarantee which replaces the amounts withheld on interim payments. These received guarantees are disclosed as contingent assets.

For contracts managed under indirect management, the guarantees belong to a contracting authority other than the EDF and they are therefore not disclosed by the EDF.

38.2.CONTINGENT LIABILITIES

Contingent liabilities are either possible obligations that arise from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, or present obligations arising from past events where the outflow of resources is not probable or the amount cannot be measured reliably.

39.Guarantees given

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Guarantees given

(25)

(25)

(7)

The above table shows the extent of the exposure of the EDF to possible future payments linked to guarantees given to the EIB group or other financial institutions. The amounts are presented net of financial provisions or financial liabilities recognised for those programmes.

The amount of EUR 25 million comprise of guarantees under the following financial instruments: EUR 11 million under the EURITZ financial instrument, EUR 10 million under the KULIMA FUND and another 4 million under the ZAMBIA agriculture value chain facility.

40. Contingent liabilities relating to legal cases

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Pending legal cases

(11)

(7)

(18)

In 2022, 3 new legal cases were initiated against the European Commission.

Under this heading, EUR 11 million are contingent liabilities in connection with two actions under the EDF which are awaiting the oral hearing date or pending judgement of the nominated Arbitrator.

An amount of EUR 7 million relates to actions for damages currently being brought and which is pending the hearing date or pending judgement of the Brussels Court.

40.1.OTHER SIGNIFICANT DISCLOSURES

41.Outstanding commitments not yet expensed

The amount disclosed below is the budgetary RAL ('Reste à Liquider') less related amounts that have been included as expenses in the statement of financial performance. The budgetary RAL is an amount representing the commitments for which payments and/or de-commitments have not yet been made. This is the normal consequence of the existence of multiannual programmes.

EUR million

Eighth EDF

Ninth EDF

10th EDF

11th EDF

31.12.2022

31.12.2021

Outstanding commitments not yet expensed

16

349

4 487

4 853

6 355

The decrease in the RAL, is in line with the decrease in budgetary RAL which totalled EUR 6 459 million (2021: EUR 7 993 million), caused by the fewer number of individual commitments signed during the year.

42.FINANCIAL RISK MANAGEMENT

The following disclosures with regard to the financial risk management of the EDF relate to the treasury operations carried out by the Commission on behalf of the EDF in order to implement its resources.

42.1.RISK MANAGEMENT POLICIES AND HEDGING ACTIVITIES

The rules and principles for the management of the treasury operations are laid down in the 11th EDF Financial Regulation and in the Internal Agreement.

As a result of the above regulation, the following main principles apply:

(a)The EDF contributions are paid by Member States in special accounts opened with the bank of issue of each Member State or the financial institution designated by it. The amounts of the contributions shall remain in those special accounts until the payments of EDF need to be made.

(b)EDF contributions are paid by Member States in EUR, while the EDF's payments are denominated in EUR and in other currencies.

(c)Bank accounts opened by the Commission on behalf of the EDF may not be overdrawn.

In addition to the special accounts, other bank accounts are opened by the Commission in the name of the EDF, with financial institutions (central banks and commercial banks), for the purpose of executing payments and receiving receipts other than the Member State contributions to the budget.

Treasury and payment operations are highly automated and rely on modern information systems. Specific procedures are applied to guarantee system security and to ensure segregation of duties in line with the Financial Regulation, the Commission’s internal control standards, and audit principles.

A written set of guidelines and procedures regulate the management of the treasury and payment operations with the objective of limiting operational and financial risk and ensuring an adequate level of control. They cover the different areas of operation, and compliance with the guidelines and procedures is checked regularly.

42.2.CURRENCY RISK

Exposure of the EDF to currency risk at year-end – net position

EUR million

31.12.2022

31.12.2021

USD

EUR

Other

Total

USD

EUR

Total

Financial assets

Financial assets at amortised cost

6

6

Financial assets at FVSD*

14

42

9

65

8

30

39

Receivables**

6

4

10

8

8

Cash and cash equivalents

7

1 015

5

1 027

3

991

994

27

1 067

14

1 108

11

1 029

1 040

Financial liabilities

Financial guarantee liability

3

3

3

3

Total

27

1 069

14

1 110

11

1 029

1 040

* As of 2021, reclassification of financial assets (in the scope of updated EAR11)

** As of 2021, receivables exclude deferred charges and accrued income (no currency risk) and recoverables are not displayed (not in the scope of updated EAR11)

*** As of 2021, payables are no longer disclosed as they are not exposing the EDF to significant currency risk (as vast majority is in EUR)

All contributions are held in EUR, and other currencies are purchased only when they are needed for the execution of payments. As a result the EDF's treasury operations are not exposed to currency risk.

42.3.INTEREST RATE RISK

The EDF does not borrow money and consequently it is not exposed to interest rate risk.

Interest is accrued on balances it holds in its different banks accounts. The Commission, on behalf of the EDF, has therefore put in place measures to ensure that interest earned regularly reflects market interest rates as well as their possible fluctuation.

Contributions to the EDF budget are credited by each Member State to a special account opened with the financial institution designated by it. As the remuneration applied to some of these accounts may currently be negative, cash management procedures are in place to minimise balances kept on the accounts concerned. In addition, in accordance with Council Regulation (EU) 2016/888, any negative remuneration on these accounts is borne by the relevant Member State.

Overnight balances held in commercial bank accounts are remunerated on a daily basis. The remuneration of balances on such accounts is based on variable market rates to which a contractual margin (positive or negative) is applied. For most of the accounts, the interest calculation is linked to a market reference rate and is adjusted to reflect any fluctuations of this rate. As a result, no risk is taken by the EDF that its balances could be remunerated at rates lower than market rates.

42.4.CREDIT RISK (COUNTERPARTY RISK)

Maximum credit risk exposure:

For financial assets, the reported amounts are net carrying amounts and represent the EDFs' exposure to credit risk at the end of the reporting period.

EUR million

31.12.2022

31.12.2021

Financial assets

Loans

6

1

Cash and cash equivalents

1 027

994

Exchange receivables*

11

8

Guarantees given

Financial guarantee contracts

12

8

Total at 31.12.2022

1 056

1 011

* Excluding deferred charges

Financial Instrument Loans: credit quality

EUR million

31.12.2022

Stage 1

Stage 2

Stage 3

POCI

Total

Credit rating

Premium and high grade

Upper medium grade

Lower medium grade

Non-investment grade and default grade

7

7

Gross carrying amount

7

7

Minus loss allowance

1

1

Net carrying amount

6

6

Cash and cash equivalents: credit quality

EUR million

31.12.2022

31.12.2021

Credit rating

Premium and high grade

724

751

Upper medium grade

299

241

Lower medium grade

4

2

Non-investment grade and default grade

Gross carrying amount

1 027

994

Minus loss allowance

-

-

Net carrying amount

1 027

994

Receivables: credit quality

EUR million

31.12.2022

Not due

Past due

Past due

Past due

Past due

Total

0-30 days

31-90 days

91 days - 1 year

> 1 year

Gross carrying amount

11

11

Minus loss allowance

Net carrying amount

11

11

Financial assets at FVSD: credit quality

In 2022 the financial assets at FVSD included in these financial statements relate to equity investments that are not subject to credit risk (see note 2.1).

42.5.LIQUIDITY RISK

Maturity analysis of financial liabilities by remaining contractual maturity

The finance liabilities and payables under this heading are disclosed by the carrying amounts from the Balance Sheet.

EUR million

< 1 year

1-5 years

> 5 years

Total

Financial liabilities at 31.12.2022

426

5

430

Financial liabilities at 31.12.2021

501

6

508

Budget principles applied to the EDF ensure that overall cash resources for the budgetary period are always sufficient for the execution of payments. Indeed the total Member States' contributions equal the overall amount of payment appropriations for the relevant budgetary period.

Member States contributions to EDF, however, are paid in three instalments per year, while payments are subject to seasonality.

In order to ensure that treasury resources are always sufficient to cover the payments to be executed in any given month, information on the treasury situation is regularly exchanged between the Commission's treasury and the relevant spending departments.

In addition to the above, in the context of the EDF's treasury operations, automated cash management tools ensure that sufficient liquidity is available on each of the EDF's bank accounts, on a daily basis.

43.RELATED PARTY DISCLOSURES

The related parties of the EDF are the Bêkou- and Africa EU Trust Funds and the European Commission. Transactions between these entities take place as part of the normal operations of the EDF and as this is the case, no specific disclosure requirements are necessary for these transactions in accordance with the EU accounting rules.

The EDF has no separate management since it is managed by the Commission. The entitlements of the key management of the EU, including the Commission, have been disclosed in the consolidated annual accounts of the European Union under heading 7.2 "Key management entitlements".

44.EVENTS AFTER THE BALANCE SHEET DATE

At the date of transmission of these accounts, no material issues had come to the attention of or were reported to the Accounting Officer of the EDF that would require separate disclosure under this section. The annual accounts and related notes were prepared using the most recently available information and this is reflected in the information presented above.

45.RECONCILIATION OF ECONOMIC RESULT AND BUDGET RESULT

The economic result of the year is calculated based on accrual accounting principles. The budget result is however based on cash accounting rules. As the economic result and the budget result both cover the same underlying operational transactions, it is a useful control to ensure that they are reconcilable. The table below shows this reconciliation, highlighting the key reconciling amounts, split between revenue and expenditure items. The notes to the table provide additional information on the nature of the key reconciling items.

EUR million

2022

2021

ECONOMIC RESULT OF THE YEAR

(2 813)

(2 974)

Revenue

Entitlements not affecting the budget result

(5)

Entitlements established in current year but not yet collected

(3)

 (6)

Entitlements established in previous years and collected in current year

19

20

Net effect of pre-financing

37

 13

Accrued revenue (net)

(82)

 (69)

Other

Expenses

Expenses of the current year not yet paid

16

111

Expenses of previous years paid in the current year

(408)

(741)

Net effect of pre-financing

244

(295)

Accrued expenses (net)

607

539

BUDGET RESULT OF THE YEAR

(2 387)

(3 401)

45.1.RECONCILING ITEMS - REVENUE

The budgetary revenue of a financial year corresponds to the revenue collected from entitlements established in the course of the year and amounts collected from entitlements established in previous years.

The entitlements not affecting the budget result are recorded in the economic result but from a budgetary perspective cannot be considered as revenues as the cashed amount is transferred to reserves and cannot be recommitted without a Council decision.

The entitlements established in the current year but not yet collected are to be deducted from the economic result for reconciliation purposes, as they do not form part of budgetary revenue. On the contrary, the entitlements established in previous years and collected in the current year must be added to the economic result for reconciliation purposes.

The net effect of pre-financing line refers to clearing of pre-financing with amounts recovered from the beneficiaries. These cash receipts represent budgetary revenue but have no impact on the economic result and must be thus added for reconciliation purposes.

The net accrued revenue mainly consists of accruals made for year-end cut-off purposes. Only the net effect, i.e. the accrued revenue of the current year less the reversal of accrued revenue of the previous year, is taken into consideration.

45.2.RECONCILING ITEMS – EXPENDITURE

Expenses of the current year not yet paid are to be added for reconciliation purposes as they are included in the economic result but do not form part of budgetary expenditure. On the contrary, the expenses of previous years paid in the current year must be deducted from the economic result for reconciliation purposes as they are part of the current year's budgetary expenditure but have either no effect on the economic result or they decrease the expenses in case of corrections.

The cash receipts from payment cancellations do not affect the economic result whereas they affect the budget result.

The net effect of pre-financing is the combination of the new pre-financing amounts paid in the current year (recognised as budgetary expenditure of the year) and the clearing of pre-financing paid in the current year or previous years through the acceptance of eligible costs. The latter represents an expense in accrual terms but not in the budgetary accounts since the payment of the initial pre-financing had already been considered as a budgetary expenditure at the time of its payment.

The net accrued expenses mainly consist of accruals made for year-end cut-off purposes, i.e. eligible expenses incurred by beneficiaries of EDF funds but not yet reported to the EDF. Only the net effect, i.e. the accrued expenses of the current year less the reversal of accrued expenses of the previous year, is taken into consideration.

FINANCIAL STATEMENTS OF THE EU TRUST FUNDS CONSOLIDATED IN EDF

FINANCIAL STATEMENTS OF THE BÊKOU EU TRUST FUND 2022

It should be noted that due to the rounding of figures into thousands of euros (kEUR), some financial data in the tables may appear not to add-up.



BACKGROUND INFORMATION 

General background on Union Trust Funds

Establishment

In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) 5 and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) 6 , the European Commission may establish Union trust funds for external actions (‘EU trust funds/EUTFs’). The Union trust funds are constituted under an agreement concluded with other donors for emergency and post-emergency actions necessary to react to a crisis, or for thematic actions.

Union trust funds are established by the European Commission by a decision after consultation or approval of the European Parliament and the Council. This decision includes the constitutive agreement with other donors.

Union trust funds are only established and implemented subject to the following conditions:

There is added value of the Union intervention: the objectives of Union trust funds, in particular by reason of their scale or potential effects, may be better achieved at Union level than at national level and the use of the existing financing instruments would not be sufficient to achieve policy objectives of the Union;

Union trust funds bring clear political visibility for the Union and managerial advantages as well as better control by the Union of risks and disbursements of the Union and other donors’ contributions;

Union trust funds do not duplicate other existing funding channels or similar instruments without providing any additionality;

The objectives of Union trust funds are aligned with the objectives of the Union instrument or budgetary item from which they are funded.

Current EU Trust Funds

To date, the Commission has set up four EUTFs:

·The EUTF BÊKOU, whose objective is to support all aspects of the Central African Republic's exit from crisis and its reconstruction efforts. Established on 15 July 2014;

·The EUTF MADAD, a European Union Regional Trust Fund in response to the Syrian crisis. Established on 15 December 2014;

·The EUTF AFRICA, a European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa. Established on 12 November 2015;

·The EUTF COLOMBIA, which supports the implementation of the peace agreement in the early recovery and stabilisation post conflict. Established on 12 December 2016.

Mission

The EUTF Bêkou, was established, with the aim of promoting the stabilisation and reconstruction of the Central African Republic (CAR). Its main objective, as set out in the Constitutive Agreement, is “to provide consistent, targeted aid for the resilience of vulnerable groups and support for all aspects of the Central African Republic's exit from the crisis and reconstruction, to coordinate actions over the short, medium and long term and to help neighbouring countries cope with the consequences of the crisis”.

Main operational activities

The Union trust fund pools together resources from different donors to finance programmes on the basis of agreed objectives. Since its creation in July 2014, the EUTF Bêkou has adopted 22 programmes and has reached more than 2.5 million beneficiaries. The programmes are to assist the Central African Republic (CAR) and its population in the aftermath of the 2013 crisis. More specifically, the EUTF Bêkou aims to ensure access to basic services (mainly health, water and sanitation), support economic recovery and job creation, and promote social cohesion and reconciliation.

Governance

The management of the EUTF Bêkou is ensured by the European Commission, which also acts as the secretariat of its two governing bodies – the Trust Fund Board and the Operational Board. The Trust Fund Board and the Operational Committee of the EUTF Bêkou are composed of representatives of the donors, of the Commission, of the European Parliament, a representative of the Central African Republic’s authorities and observers. The rules for the composition of the board and its internal rules are laid down in the constitutive agreement of the Union trust fund.

The main task of the Board is to establish and review the overall strategy of the trust fund. The Operational Board is responsible for the selection of the actions financed by the Fund and supervises their implementation. It also approves the annual accounts and the annual reports on the activities financed by the trust fund.

Sources of financing

The EUTF Bêkou is financed through contributions from donors.

Annual accounts

Basis for preparation

The legal framework and the deadlines for the preparation of the annual accounts are set by the “Agreement establishing the European Union trust fund for the Central African Republic, “The Bêkou EU Trust Fund”, and its internal rules” (‘Constitutive Agreement’). As per this Constitutive Agreement, the annual accounts are prepared in accordance with the rules adopted by the Accounting Officer of the Commission (EU Accounting Rules, EAR), which are based on internationally accepted accounting standards for the public sector (IPSAS).

Accounting Officer

The Accounting Officer of the Commission serves as the Accounting Officer of the Union trust funds. The Accounting Officer is responsible for laying down accounting procedures and chart of accounts common to all Union trust funds. The Commission’s Internal Auditor, OLAF and the Court of Auditors exercise the same powers over Union trust funds as they do in respect of other actions carried out by the Commission. The Union trust funds are also subject to an independent external audit every year.

Composition of the annual accounts

The annual accounts cover the period from 1 January to 31 December and comprise the financial statements and the reports on the implementation of the budget. While the financial statements and the complementary notes are prepared on an accrual accounting basis, the budget implementation reports are primarily based on movements of cash.

Process from provisional accounts to discharge

The annual accounts are subject to independent external audit. The provisional annual accounts prepared by the Accounting Officer are transmitted, by the 15th of February of the following year, to the Operational Committee who then transmits them to the audit company selected by the entity following a tender procedure. Following the audit, the Accounting Officer prepares the final annual accounts and submits them to the Operational Committee for approval (Article 8.3.4(c)).

The annual accounts of the EUTF Bêkou are consolidated in the annual accounts of the European Developement Fund.

Operational highlights

Achievements of the year

The EU launched its first ever Trust Fund (EUTF), named Bêkou (meaning hope in the Sango language), in July 2014 to assist the Central African Republic (CAR) and its population in the aftermath of the 2013 crisis. The EUTF Bêkou aims to ensure access to basic services (mainly health and water and sanitation), support rural development and economic recovery, and promote reconciliation. Since its creation, the EUTF Bêkou has financed 22 programmes and has reached more than half of the country’s population.

The security situation in CAR remained tense in 2022, although the intensity of armed action decreased in comparison to 2021. Disinformation and hate speech have kept spreading. The presence and the action of the Wagner Group in the country remains a concern for the EU – the group being under EU restrictive measures since December 2021. In addition, in the context of a proliferation of armed groups and militias, the peace process in the CAR remains deadlocked, despite the organisation of a “Republican Dialogue” in March. The year 2022 was also marked by the rise of political tensions around President Touadéra's proposed amendment to the Constitution, which would allow him to run for a third term. On the socio-economic side, basic item prices have been rising sharply in 2022 and the country has been going through a serious fuel crisis since June with important shortages. Rising food and energy prices in CAR have, as across the continent, been affected and exacerbated by the consequences of the war in Ukraine. The budgetary situation of the state is critical, and the adoption by the government of the crypto-currency as a legal tender raises concerns. In this extremely volatile context, around 3.1 million people, or 63% of the Central African population, were in urgent need of humanitarian assistance in 2022 according to United Nations Office for the Coordination of Humanitarian Affairs (OCHA).

Humanitarian access continues to face significant obstacles, notably due to insecurity, limitations on movement in the country, physical constraints of the environment (quality of roads, floods, etc.) and violence perpetrated against humanitarian personnel. During the first six months of the year, access improved slightly, mainly due to the lifting of certain administrative constraints on entering the country following the relaxation of COVID-19 measures. The shortage of fuel in the second half of the year affected the movement of implementing partners and EU staff in and into the country. It hampered the delivery of humanitarian aid and worsened the critical situation of vulnerable populations in dire need of this.

An exceptional event worth mentioning due to its influence on the work of the EU in CAR, including the Trust Fund, was a fire on the night of 18 December 2022 ravaging the premises of the EU Delegation. Luckily, it did not cause any human casualties, but it caused significant material damage.

Key achievements in specific focus areas

Key achievements of 2022 presented below reflect the main specific objectives/areas of intervention of the Trust Fund.

In the area of access to services, Trust Fund Bêkou continued its support to Health and WASH (Water, Sanitation and Hygiene) sectors. Under Health, it funded 408,398 medical or preventive consultations and health interventions, mainly curative (63%) and maternal and child health consultations (15%). EUTF Projects also supported the rehabilitation and building of medical infrastructure and training of personnel and community relays. In the field of WASH, due to EUTF Bêkou’s support, 104,597 Central Africans benefitted from improved access to a source of drinking water or sanitation facilities, 119 boreholes were rehabilitated or constructed, while behavioural change and sustainability of actions were reinforced, through training of 20 repair artisans and sensitization of 31,021 individuals on hygiene & sanitation.

In the area of social cohesion, most of the activities implemented with EUTF Bêkou’s support aimed to empower women and to combat gender-based violence (GBV), as well as to strengthen the media in the country. 3,243 survivors of GBV received either psychosocial or medical assistance or other support depending on their needs. Thus, 4,985 support services were provided to survivors in 2022. In addition, 50,415 Central Africans directly benefitted from peacebuilding and conflict prevention interventions, mainly awareness-raising workshops related to the fight against GBV. EUTF Bêkou has also continued its work with national and community radio stations, providing technical and financial support to 19 radio stations, enabling the production and diffusion of broadcasts related to reconciliation and social cohesion.

In the area of supporting economic and productive sectors’ recovery, EUTF Bêkou assisted both productive and subsistence-oriented agriculture, supporting agricultural groups and smallholders, fostering job creation (both labour-intensive work, vocational training, development of income-generating activities) and facilitating access to financial services for small businesses and individuals. For example, 2,733 Central Africans benefitted from skills development through entrepreneurial, financial, or vocational training. A further 2,188 individuals benefitted from easier access to financial services through village savings and loans associations.

Budget and budget implementation

By the end of 2022, the contributions to EUTF Bêkou amounted to over EUR 310 million, as in the previous year 2021. The Trust fund finalised the commitment and contracting of all received contributions on 31 December 2021, with the exception of funds reserved for monitoring, evaluation, audit and communication that can still be contracted after this date.

All certified contributions from the EU budget, Member States, and other donors were paid for a total amount of more than EUR 267 million with the exception of EUR 43 million from the EDF that still needs to be paid, this to reduce the negative interest on the treasury.

In terms of contracts, the EUTF Bêkou signed 10 new contracts including 6 contracts of expenditures verification/audit and 4 contracts concerning programmes evaluation and communication activities, for a total amount of a little more than EUR 1.241 million 7 .

Last but not least, more than EUR 30 million was paid in 2022; total disbursements have reached more than EUR 263 million since the creation of the EUTF Bêkou.

Impact of the activities in the financial statements

In the financial statements, the impact of the above mentioned activities is most visible when looking at:

·Operating expenses: decreased by kEUR 25 770 as a result of the winding down of the Trust Fund and a consequent decrease in the number of open contracts;

·Pre-financing: decreased by kEUR 811 due to the fact that the clearing of the pre‑financing for ongoing or ended projects was higher than the amounts of new pre-financing stemming from new contracts signed in 2022: in 2022 only 10 contracts were signed relating to audit, evaluation and communication activities for an amount of kEUR 1 241; 

·The significantly lower number of open contracts at the end of 2022 caused by the winding down of the Trust Fund resulted in a substantial decrease of accrued charges by kEUR 12 239;

·Financial liabilities: increased by kEUR 9 385 mainly due to the fact that the cashed contributions from the donors were higher than the net expenses allocated to donors.

BALANCE SHEET

EUR '000

Note

31.12.2022

31.12.2021

NON-CURRENT ASSETS

Pre-financing

2.1

336

214

336

214

CURRENT ASSETS

Pre-financing

2.1

10 829

11 762

Exchange receivables and non-exchange recoverables

2.2

3 595

4 446

Cash and cash equivalents

2.3

4 316

3 792

18 740

20 000

TOTAL ASSETS

19 076

20 214

NON-CURRENT LIABILITIES

Financial liabilities

2.4

(12 552)

(3 167)

(12 552)

(3 167)

CURRENT LIABILITIES

Payables

2.5

(4 563)

(2 847)

Accrued charges

2.6

(1 961)

(14 200)

(6 524)

(17 047)

TOTAL LIABILITIES

(19 076)

(20 214)

NET ASSETS

STATEMENT OF FINANCIAL PERFORMANCE

EUR '000

Note

2022

2021

REVENUE

Revenue from non-exchange transactions

Revenue from donations

3.1

21 504

46 995

Recovery of expenses

3.2

42

21 546

46 995

Revenue from exchange transactions

Financial revenue

3.3

40

40

Total revenue

21 586

46 995

EXPENSES

Operating expenses

3.4

(20 251)

(46 021)

Finance costs

3.5

(12)

(48)

Other expenses

3.6

(1 323)

(925)

Total expenses

(21 586)

(46 995)

ECONOMIC RESULT OF THE YEAR

CASHFLOW STATEMENT

EUR '000

2022

2021

Economic result of the year

(Increase)/decrease in pre-financing

811

5 924

(Increase)/decrease in exchange receivables and non-exchange recoverables

851

894

Increase/(decrease) in financial liabilities

9 385

(14 671)

Increase/(decrease) in payables

1 716

2 052

Increase/(decrease) in accrued charges

(12 240)

2 254

NET CASHFLOW

524

(3 547)

Net increase/(decrease) in cash and cash equivalents

524

(3 547)

Cash and cash equivalents at the beginning of the year

3 792

7 339

Cash and cash equivalents at year-end

4 316

3 792

 

FINANCIAL STATEMENTS OF THE EUTF AFRICA 2022

It should be noted that due to the rounding of figures into thousands of euros (kEUR), some financial data in the tables may appear not to add-up.

BACKGROUND INFORMATION ON THE EUTF AFRICA

General background on Union Trust Funds

Establishment

In accordance with Articles 234 and 235 of the Financial Regulation applicable to the general budget of the Union (EU FR) 8 and Article 35 of the Financial Regulation applicable to the 11th European Development Fund (EDF FR) 9 , the European Commission may establish Union trust funds for external actions (‘EU trust funds/EUTFs’). The Union trust funds are constituted under an agreement concluded with other donors for emergency and post-emergency actions necessary to react to a crisis, or for thematic actions.

Union trust funds are established by the European Commission by a decision after consultation or approval of the European Parliament and the Council. This decision includes the constitutive agreement with other donors.

Union trust funds are only established and implemented subject to the following conditions:

There is added value of the Union intervention: the objectives of Union trust funds, in particular by reason of their scale or potential effects, may be better achieved at Union level than at national level and the use of the existing financing instruments would not be sufficient to achieve policy objectives of the Union;

Union trust funds bring clear political visibility for the Union and managerial advantages as well as better control by the Union of risks and disbursements of the Union and other donors’ contributions;

Union trust funds do not duplicate other existing funding channels or similar instruments without providing any additionality;

The objectives of Union trust funds are aligned with the objectives of the Union instrument or budgetary item from which they are funded.

Current EU Trust Funds

To date, the Commission has set up four EUTFs:

·The EUTF BÊKOU, whose objective is to support all aspects of the Central African Republic's exit from crisis and its reconstruction efforts. Established on 15 July 2014;

·The EUTF MADAD, a European Union Regional Trust Fund in response to the Syrian crisis. Established on 15 December 2014;

·The EUTF AFRICA, a European Union Emergency Trust Fund for stability and addressing root causes of irregular migration and displaced persons in Africa. Established on 12 November 2015;

·The EUTF COLOMBIA, which supports the implementation of the peace agreement in the early recovery and stabilisation post conflict. Established on 12 December 2016.

Mission

The main objectives of the EUTF Africa are to support all aspects of stability and contribute to better migration management as well as addressing the root causes of destabilisation, forced displacement and irregular migration, in particular by promoting resilience, economic and equal opportunities, security and development and addressing human rights abuses.

Main operational activities

The Union trust fund pools together resources from different donors to finance an action on the basis of agreed objectives. EUTF Africa operates in three main geographic areas, namely the Sahel region and Lake Chad area, the Horn of Africa and the North of Africa. The neighbouring countries of the eligible countries may benefit, on a case by case basis, from the trust fund's projects. The trust fund is established for a limited period, in order to provide a short and medium-term response to the challenges of the regions.

Governance

The management of the EUTF Africa is ensured by the European Commission, which also acts as the secretariat of its two governing bodies – the Trust Fund Board and the Operational Board. The Trust Fund Board and the Operational Committee of the EUTF Africa are composed of representatives of the donors and of the Commission, as well as representatives of non-contributing EU Member States, authorities of eligible countries' and regional organisations as observers. The rules for the composition of the board and its internal rules are laid down in the constitutive agreement of the Union trust fund.

The main task of the Board is to establish and review the overall strategy of the trust fund. The Operational Board is responsible for the selection of the actions financed by the Fund and supervises their implementation. It also approves the annual accounts and the annual reports on the activities financed by the trust fund.

Sources of financing

The EUTF Africa is financed through contributions from donors. Annual accounts

Basis for preparation

The legal framework and the deadlines for the preparation of the annual accounts are set by the ‘Agreement establishing the European Union emergency trust fund for stability and addressing root causes of irregular migration and displaced persons in Africa and its internal rules’ (‘Constitutive Agreement’). As per this Constitutive Agreement, the annual accounts are prepared in accordance with the rules adopted by the Accounting Officer of the Commission (EU Accounting Rules, EAR), which are based on internationally accepted accounting standards for the public sector (IPSAS).

Accounting Officer

Based on the Constitutive Agreement, the Accounting Officer of the Commission serves as the Accounting Officer of the Trust Fund.

Composition of the annual accounts

The annual accounts cover the period from 1 January to 31 December and comprise the financial statements and the reports on the implementation of the budget. While the financial statements and the complementary notes are prepared on an accrual accounting basis, the budget implementation reports are primarily based on movements of cash.

Process from provisional accounts to discharge

The annual accounts are subject to independent external audit. The provisional annual accounts prepared by the Accounting Officer are transmitted, by the 15th of February of the following year, to the Operational Committee who then transmits them to the audit company selected by the entity following a tender procedure. Following the audit, the Accounting Officer prepares the final annual accounts and submits them to the Operational Committee for approval.

The annual accounts of the EUTF Africa are consolidated in the annual accounts of the European Development Fund.

Operational highlights

Achievements of the year

In line with the end of the contracting period on 31 December 2021, as of January 2022 the EUTF for Africa will not fund new financial commitments or budgetary top-ups. Financial commitments related to administrative activities such as audits, evaluations, monitoring and communication activities are the only ones that can be contracted. The EUTF Africa programmes will continue being implemented up to end 2025.

In the course of 2022, the EUTF Africa further demonstrated that it is a swift and effective implementation tool, facilitating policy dialogue with African partner countries, applying innovative approaches, and producing tangible results across the three regions (Sahel and Lake Chad, Horn of Africa and North of Africa).

The EUTF Africa further consolidated its achievements in partnership with EU Member States development agencies, UN organisations, NGOs and partner countries. In line with the end date of contractualisation of the Trust Fund at the end of 2021, the total amount of approved operational programmes has remained the same as in 2021 (EUR 4 935.1 million). At the end of 2022 and since the beginning of the Trust Fund, 248 programmes have been approved. By the end of 2022, cumulative operational payments had reached approximately EUR 4 176 million.

In 2022, the EUTF Africa continued to support stability, and to address migration and forced displacement challenges, including their root causes, and opportunities, in close cooperation with African partners in the Sahel and Lake Chad, Horn of Africa and North of Africa regions. This support includes the fight against smuggling of migrants and trafficking in human beings, and the support to voluntary return to, and sustainable reintegration of migrants in, their country of origin.

During the past year, the overall pledge for the EUTF Africa remained the same as in 2021, amounting to over EUR 5 061.7 million, of which EUR 623.2 million by EU Member States and other donors (United Kingdom, Norway and Switzerland).

Accountability and transparency have been ensured through regular communication activities including updates on the EUTF Africa website, publishing posts on social media and organising communication events. As in previous years, the Monitoring and Learning System (MLS) reports (available on the EUTF Africa website) on the Sahel and Lake Chad and the Horn of Africa continued to show the tangible results achieved by the EUTF Africa in different areas of work. The Monitoring & Learning system of the North of Africa region was taken over by a different implementing partner at the end of 2021. It delivered its first annual report presenting cumulative results in the region to report progresses against the set of Trust Fund common output indicators.

In the course of 2022, countries of the three regions faced rising food and energy prices and migration flows triggered by a combination of socio-political and economic factors exacerbated by the growing effects of climate change. While the impact of the COVID-19 pandemic was still tangible, the Russian aggression on Ukraine has led to a surge in food and fuel import costs. This economic inflation combined with severe droughts, floods and local conflicts negatively impacted the economy, food security and in turm migration and mobility within the continent.

The security situation of the Sahel and Lake Chad region remained of concern with high levels of violence and intercommunal tensions in addition to unstable political situation (in particular in Mali, Burkina Faso and Chad). The rise of commodity and food prices combined with severe droughts, floods, and conflicts have plunged the Sahel and Lake Chad region in its worst food crisis in over a decade. As of June 2022, an estimated 38 million people might be suffering from hunger in West Africa. In parallel, internal displacement continued to increase with 4.6 million people being displaced or refugees in Burkina Faso, Mali, Niger, Chad and Mauritania in the first semester of 2022 (up from 4.2 million in December 2021). The total funding approved in the Sahel and Lake Chad region since the beginning of the EUTF for Africa amounts to EUR 2 217.8 million.

In the Horn of Africa region, drought and environmental degradation exacerbated by skyrocketing food and fuel prices, led to a food security crisis notably in Ethiopia, Kenya and Somalia with about 20 million people struggling to survive and an estimated 55 million people in the whole region currently facing food insecurity. Floods have also significantly contributed to displacement, notably in Sudan and South Sudan. While persisting instability and conflicts further worsened the situation in the region, encouraging political developments took place: in Ethiopia with the signing of a cessation of hostilities agreement, in Kenya with a relative calm general election, and in Sudan with the signing of a Framework Agreement towards the formation of a transitional Government. The funding approved in the Horn of Africa region since the beginning of the EUTF for Africa amounts to EUR 1 810 million.

In the North of Africa region, food and energy scarcity, combined with the destabilising impact of the Russian aggression on Ukraine and the still tangible economic and social impact of COVID-19, exacerbated by the growing effects of climate change, formed a ‘stress nexus’ that affected countries in the region. North African countries are countries of origin, transit and destination for migration. On the Central Mediterranean route, over 90 000 migrants and refugees arrived in Europe in 2022 departing mainly from Libya and Tunisia, and originating primarily from Egypt, Tunisia, and Bangladesh. This represents an increase of over 50% in comparison to 2021 and an increase in migrants from Asia and North Africa. Since the beginning of the EUTF for Africa a total of funding EUR 907.3 million has been approved in the North of Africa region.

Budget and budget implementation

In 2022, no new programmes or budgetary top-ups took place in either of the three regions of the EUTF for Africa, in line with the end of the contracting period on 31 December 2021.

The total amount committed for operational and administrative expenditure since the beginning of the EUTF for Africa amounted to EUR 5 056.31 million, considering the total committed deducted from the decommitted amount.

34 new contracts for an amount of 3.32 million were contracted in 2022, considering net committed amount and no de-commitments, compared to EUR 112 million in 2021. These contracts were only related to administrative activities (audit, evaluation, communication, monitoring) as operational programmes or activities cannot be funded any longer since January 2022.

The payments in the reporting period reached EUR 442 million, which was EUR 306 million lower than in 2021 (EUR 748 million). Payments are lower in 2022, due to several projects reaching the end of their implementation period; they are in line with the trends of the annual forecast.

In 2022, the total budget implementation in terms of available commitment appropriations used by commitments reached 99% (including recoveries and de-committed amounts).

In 2022, the COVID-19 pandemic continued to have an impact on the countries benefitting from the EUTF Africa, though not as severely as in 2021. The funding re-oriented in 2021 and 2020 to provide the necessary response to the pandemic continued being used to address the negative economic and social consequences of COVID-19, including prevention activities or socioeconomic mitigation measures.

Since the onset of Russian aggression on Ukraine global food and commodity prices have rapidly increased, seriously affecting African countries. For most African countries that are vastly dependent on food and fuel imports, the impact of rising global commodity prices on national budgets as well as on domestic food, energy, and consumer prices is critical. The economic inflation affected the implementation of EUTF projects, lessening the purchasing power of partners and beneficiaries, having a significant effect on interventions providing social transfers (in-kind or cash activities) to mention one example.

Impact of the activities in the financial statements

In the financial statements, the impact of the above mentioned activities is most visible when looking at:

·Pre-financing: decreased by kEUR 173 980 due to the fact that the clearing of the pre-financing with expenses incurred for ongoing or ended projects was higher than the amounts of new pre‑financing stemming from new contracts signed in 2022. In 2022, only 30 contracts were signed, relating to administrative activities: audit, evaluation, communication and monitoring for an amount of EUR 2.69 million;

·Financial liabilities: decreased by kEUR 190 739 mainly due to the fact that contributions cashed in the year were not sufficient to cover the net expenses allocated to the donors. This led to a decrease in the cash and cash equivalents;

·Operating expenses: decreased by kEUR 265 746 as a result of the winding down of the Trust Fund. 2022 marked the first year following the end of the contracting period, which led to a decrease in the number of open contracts and thus to a decrease in expenses.



BALANCE SHEET

EUR '000

Note

31.12.2022

31.12.2021

NON-CURRENT ASSETS

Financial Assets

2.1

1 943

Pre-financing

2.2

14 927

55 305

16 870

55 305

CURRENT ASSETS

Pre-financing

2.2

304 055

437 657

Exchange receivables and non-exchange recoverables

2.3

35 914

45 339

Cash and cash equivalents

2.4

157 587

179 759

497 556

662 755

TOTAL ASSETS

514 426

718 061

NON-CURRENT LIABILITIES

Financial liabilities

2.5

(334 791)

(525 530)

(334 791)

(525 530)

CURRENT LIABILITIES

Payables

2.6

(30 975)

(53 143)

Accrued charges

2.7

(148 660)

(139 388)

(179 635)

(192 531)

TOTAL LIABILITIES

(514 426)

(718 061)

NET ASSETS

STATEMENT OF FINANCIAL PERFORMANCE

EUR '000

Note

2022

2021

REVENUE

Revenue from non-exchange transactions

Revenue from donations

3.1

605 739

871 456

Recovery of expenses

3.2

754

16

606 493

871 472

Revenue from exchange transactions

Financial revenue

3.3

251

131

Other exchange revenue

3.4

18 902

16 340

19 152

16 471

Total revenue

625 645

887 943

EXPENSES

Operating expenses

3.5

(590 545)

(856 291)

Finance cost

3.6

(643)

(550)

Other expenses

3.7

(34 457)

(31 103)

Total expenses

(625 645)

(887 943)

ECONOMIC RESULT OF THE YEAR

CASHFLOW STATEMENT

EUR '000

2022

2021

Economic result of the year

Operating activities

(Increase)/decrease in pre-financing

173 980

159 078

(Increase)/decrease in exchange receivables and non-exchange recoverables

9 425

(38 992)

Increase/(decrease) in financial liabilities

(190 739)

(20 849)

Increase/(decrease) in payables

(22 168)

7 765

Increase/(decrease) in accrued charges

9 272

14 786

Investing activities

Increase/decrease in non-derviative financial assets at fair value through surplus or deficit

(1 943)

NET CASHFLOW

(22 172)

121 788

Net increase/(decrease) in cash and cash equivalents

(22 172)

121 788

Cash and cash equivalents at the beginning of the year

179 759

57 971

Cash and cash equivalents at year-end

157 587

179 759

CONSOLIDATED FINANCIAL STATEMENTS OF THE EDF AND THE EU TRUST FUNDS

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables may appear not to add-up.

CONSOLIDATED BALANCE SHEET

EUR million

31.12.2022

31.12.2021

NON-CURRENT ASSETS

Financial assets

69

39

Pre-financing

503

726

Exchange receivables

7

4

580

770

CURRENT ASSETS

Financial assets

3

Pre-financing

1 711

1 902

Exchange receivables and non-exchange recoverables

66

85

Cash and cash equivalents

1 189

1 177

2 970

3 164

TOTAL ASSETS

3 550

3 934

NON-CURRENT LIABILITIES

Financial liabilities

(101)

(154)

(101)

(154)

CURRENT LIABILITIES

Payables

(462)

(557)

Accrued charges and deferred income

(1 282)

(1 162)

(1 744)

(1 719)

TOTAL LIABILITIES

(1 845)

(1 873)

NET ASSETS

1 705

2 061

FUNDS & RESERVES

Called fund capital - active EDFs

65 100

62 643

Called fund capital from closed EDFs carried forward

2 252

2 252

Economic result carried forward from previous years

(62 834)

(59 860)

Economic result of the year

(2 813)

(2 974)

NET ASSETS

1 705

2 061

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE

EUR million

2022

2021

REVENUE

Revenue from non-exchange transactions

Recovery activities

19

27

Revenue from trust funds donations

169

272

188

300

Revenue from exchange transactions

Financial revenue

3

(25)

Other revenue

96

90

99

64

Total Revenue

287

364

EXPENSES

Aid instruments

(2 331)

(2 218)

Expenses implemented by other entities

(1)

Expenses implemented by trust funds

(611)

(902)

Co-financing expenses

4

(19)

Finance costs

(7)

(21)

Other expenses

(155)

(178)

Total Expenses

(3 100)

(3 338)

ECONOMIC RESULT OF THE YEAR

(2 813)

(2 974)

CONSOLIDATED CASH FLOW STATEMENT

EUR million

2022

2021

Economic result of the year

(2 813)

(2 974)

Operating activities

Capital increase - contributions

2 458

3 657

(Increase)/decrease in trust funds contributions

(0)

(Increase)/decrease in pre-financing

414

266

(Increase)/decrease in exchange receivables and non-exchange recoverables

16

66

Increase/(decrease) in provisions

1

0

Increase/(decrease) in financial liabilities

(54)

(19)

Increase/(decrease) in payables

(96)

(104)

Increase/(decrease) in accrued charges and deferred income

120

(502)

Other non-cash movements

-

Investing activities

(Increase)/decrease in available for sale financial assets

(33)

(7)

NET CASHFLOW

12

384

Net increase/(decrease) in cash and cash equivalents

12

384

Cash and cash equivalents at the beginning of the year

1 177

793

Cash and cash equivalents at year-end

1 189

1 177

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

EUR million

Fund capital - active EDFs (A)

Uncalled funds - active EDFs (B)

Called fund capital - active EDFs (C) = (A)-(B)

Cumulative Reserves (D)

Called fund capital from closed EDFs carried forward (E)

Fair value reserve (F)

Total Net Assets (C)+(D)+(E)+(F)

BALANCE AS AT 31.12.2020

73 041

14 055

58 986

(59 854)

2 252

(5)

1 379

Impact of revised EAR 11

(5)

5

Balances as at 01.01.2021

73 041

14 055

58 986

(59 860)

2 252

-

1 379

Capital increase - contributions

(43)

(3 700)

3 657

3 657

Economic result of the year

(2 974)

(2 974)

BALANCE AS AT 31.12.2021

72 998

10 355

62 643

(62 834)

2 252

2 061

Capital increase - contributions

(43)

(2 500)

2 457

2 457

Economic result of the year

(2 813)

(2 813)

BALANCE AS AT 31.12.2022

72 955

7 855

65 100

(65 647)

2 252

1 705

EDF REPORT ON FINANCIAL IMPLEMENTATION



CONTENTS

1.    BACKGROUND    

1.1.    Previous EDFs    

1.2.    10th and 11th EDF    

2.    FINANCIAL IMPLEMENTATION    

2.1.    Financial outturn    

2.2.    Revenue    

2.3.    Operational Expenditure and specific programmes    

3.    GLOSSARY    



BACKGROUND

Launched in 1959, the European Development Fund is the main instrument for providing EU aid for development cooperation to the African, Caribbean and Pacific (ACP) States and Overseas Countries and Territories (OCTs). Its primary objective is to reduce and ultimately eradicate poverty.

The EDF is established by an Internal Agreement of the Representatives of the Member States and managed by a specific committee. The EDF resources are "ad hoc" contributions from the EU Member States, who decide on an overall amount that will be allocated to the fund (over a period of five years). In addition to these contributions, it is also possible for Member States to enter into co-financing arrangements or to make voluntary financial contributions to the EDF. The European Commission is responsible for the financial implementation of the operations carried out with EDF resources. The European Investment Bank manages the Investment Facility.

The EDF is a fund operating based on multiannuality. Each EDF is concluded for a period of around five years and it is governed by its own Financial Regulation, which requires the preparation of financial statements for each individual EDF. Accordingly, financial statements are prepared separately for each EDF in respect of the part that is managed by the Commission.

The Internal Agreement establishing the last EDF, the 11th EDF (2014-2020), came into force on 1 March 2015. As of 2021, the cooperation with the ACP countries is included in the Neighbourhood, Development and International Cooperation Instrument (NDICI). However, the ongoing projects, funded under the EDF, will continue their implementation, under the respective EDF legal basis.

This report is produced in accordance with Article 39 of the Financial Regulation of 11th EDF 10 . It provides information on the revenue and expenditure operations of the EDF, with the focus on important events that had a significant impact on financial implementation of year 2020.

Given that there are no ongoing operations under previous EDFs 11 , this report includes figures only for the 10th and 11th EDF.

Previous EDFs

6TH AND 7TH EDF

The 6th EDF was closed in 2006 and the 7th EDF was closed in 2008. In 2019, the Commission closed the remaining outstanding transactions of the 8th EDF projects.

In accordance with article 1(2)(b) of the Internal Agreement of the 9th EDF, balances and decommitments of previous EDFs have been transferred to the 9th EDF.

8TH AND 9TH EDF

The year 2021 marked the financial and operational closure of the 8th EDF for a total amount of expenditure of EUR 10 374 million. The Commission announced the closure of the 8th EDF to the Member States in the Communication that was presented to the Council in October 2021.

All 8th EDF activities have been completed, all checks and controls have been performed, and all contracts and financial decisions are closed in the EDF accounts. All recovery orders, which were still open after the operational closure, were cashed or waived with the exception of 10 recovery orders (including 6 litigation cases followed by the Legal Service). In line with the Commission’s Decision C(2003)19044, these 10 ROs were transferred to the 9th EDF.

The closure of the 9th EDF is progressing well. There are still 19 contracts open, out of which 12 concern actions in Southern Sudan (Council decision 2011/315/EU). These were decided after the 9th EDF sunset clause and should, in principle, be closed by 2024.

From 2015 to 2022, the Commission carried out three refunds of 8th/9thEDF credits for a total amount of EUR 1 868.6 12 million. A balance of EUR 43 million was refunded in January 2023 in the context of the payment of the 1st instalment of MS contributions to the EDF.

10th and 11th EDF

The ACP-EC Partnership Agreement was signed on 23 June 2000 in Cotonou by the Member States of the European Community and the States of Africa, the Caribbean and the Pacific (ACP States). It entered into force on 1 April 2003 (establishing the 9th EDF). The Cotonou Agreement was amended twice, firstly by the agreement signed in Luxembourg on 25 June 2005 (establishing the 10th EDF), secondly by the agreement signed in Ouagadougou on 22 June 2010 (establishing the 11th EDF).

The EU Council Decision of 27 November 2001 (2001/822/EC) on the association of the overseas countries and territories (OCT) with the European Union entered into force on 2 December 2001. This Decision was amended on 19 March 2007 (Decision 2007/249/EC).

The Internal Agreement on the financing of Community aid under the multi-annual financial framework for the period 2014-2020 in accordance with the revised Cotonou Agreement, adopted by the Representatives of the Governments of the Member States of the European Community on August 2013, entered into force on March 2015.

Under the Cotonou Agreement, for the second period (2008-2013), the 10th EDF has an overall budget of EUR 22 682 million. Of this amount:

·EUR 21 966 million were allocated to the ACP countries; 

·EUR 286 million to the OCT; and

·EUR 430 million to the Commission as support expenditure for programming and implementation of the EDF.

The amount for the ACP countries is divided accordingly:

·EUR 17 766 million to national and regional indicative programmes;

·EUR 2 700 million to intra-ACP and intra-regional cooperation; and

·EUR 1 500 million to Investment Facilities.

Notably, an increased share of the budget is devoted to regional programmes, thereby emphasising the importance of regional economic integration as the basic framework for national and local development. An innovation in the 10th EDF was the creation of ‘incentive amounts’ for each country.

Under the Cotonou Agreement, the third period (2014-2020) of Community aid to the ACP States and OCTs is funded by the 11th EDF for an amount of EUR 30 506 million, of which:

·EUR 29 089 million is allocated to the ACP countries in accordance with Article 1.2(a) and Article 2(d) of the Internal Agreement, of which EUR 27 955 million is managed by the European Commission;

·EUR 364.5 million is allocated to the OCTs in accordance with Article 1.2(a) and Article 3.1 of the Internal Agreement, of which EUR 359.5 million is managed by the European Commission; and

·EUR 1 052.5 million is for the Commission to finance the costs arising from the programming and implementation of 11th EDF resources, in accordance with Article 1.2(a) of the Internal Agreement.



FINANCIAL IMPLEMENTATION

FINANCIAL OUTTURN

EVOLUTION OF 10th EDF APPROPRIATIONS

 

 

 

 

 

 

10th EDF
EVOLUTION OF APPROPRIATIONS: 31 December 2022

ANALYSIS OF CREDITS PER INSTRUMENT

 

 

 

 

 

(EUR million)

INSTRUMENT

INITIAL APPROPRIATION

INCREASES/DECREASES IN CUMULATIVE RESOURCES AT 31 DECEMBER 2021

INCREASE OR DECREASE IN RESOURCES IN 2022

Note