Framework financial regulation for decentralised regulatory agencies

SUMMARY OF:

Delegated Regulation (EU) 2019/715 on the framework financial regulation for the bodies set up under the TFEU and Euratom Treaty and referred to in Article 70 of Regulation (EU, Euratom) 2018/1046

WHAT IS THE AIM OF THE REGULATION?

It lays down the essential financial rules for the European Union (EU) bodies referred to in Article 70 of Regulation (EU, Euratom) 2018/1046 — see summary. These bodies are mostly decentralised agencies* (also referred as regulatory agencies) set up under the EU treaties, and have legal personality and receive EU funds. In order to fall under this European Commission delegated regulation, the regulation of the European Parliament and of the Council of the European Union setting up the EU body in question must refer to Article 70 of the financial regulation.
Each such EU body must adopt its own financial rules in line with the Commission Delegated Regulation (EU) 2019/715. It may only depart from the rules of the delegated regulation because of its specific needs and if it has received prior consent from the Commission.

KEY POINTS

Each EU body falling under this Commission delegated regulation must respect the following budgetary principles.

Unity and budgetary accuracy:
- each financial year, the body’s budget must forecast and authorise all revenue and expenditure necessary for its work;
- all revenue and expenditure must be booked to a budget line;
- no expenditure can be greater than the amount authorised in the budget.
Annuality:
- the budget’s financial year runs from 1 January to 31 December;
- specific rules cover the treatment of commitment* and payment* appropriations;
- if the budget has not been adopted by the beginning of the financial year, monthly payments are capped at one twelfth of the corresponding sums in the previous year’s budget.
Equilibrium:
- revenue and payment appropriations must be in balance;
- the body may not raise loans within its budget;
- unspent finance received from the EU budget should be repaid to the Commission.
Unit of account:
- the budget is drawn up and implemented in euro, as is the presentation of the accounts;
- rules state how other currencies are to be converted into euro.
Universality:
- total revenue must cover total payments;
- all revenue and expenditure must be entered in full without any adjustment against each other;
- specific rules apply to revenue, depending on whether it is generated externally or internally.
Specification:
- appropriations are earmarked for specific purposes by budgetary title, chapter, article and line;
- the director may transfer appropriations from one budget title or chapter to another, subject to certain conditions.
Sound financial management and performance:
- payments must respect the principles of economy, efficiency and effectiveness;
- payments focus on performance, based on objectives for programmes and activities, and indicators to measure progress made;
- benchmarking includes a review of the efficiency of the body’s horizontal services and a cost–benefit analysis of sharing or transferring services to another body or the Commission;
- programmes and activities involving significant spending are subject to ex ante (based on forecast) and ex post (based on final outcome) evaluations.
Internal control of budget implementation:
- applies at all management levels;
- aims to achieve reasonable assurance of:
  - effectiveness, efficiency and economy of operations,
  - reliability of reporting,
  - safeguard of assets and information,
  - prevention, detection, correction and follow-up of fraud and irregularities,
  - adequate management of risks of underlying transactions.
Transparency:
- a summary of the body’s budget, and any amending budget, is published in the Official Journal of the European Union within 3 months of adoption;
- the body publishes on its website the budget, establishment plan and details of staff numbers and seconded national experts, and transmits the information to the European Parliament, Council, European Court of Auditors and Commission within 4 weeks of adoption;
- the body provides details on its website of the recipients of EU funding;
- in the context of conflicts of interest, the body publishes annually on its website the management board members’ declarations of interest.

Rules on establishing and structuring the budget state.

The body sends the Commission, the European Parliament and the Council a draft single programming document by 31 January every year. This contains information ranging from work programmes and budgetary estimates to building policy details.
The Commission, after input from the European Parliament and the Council, adopts the draft budget. This becomes definitive once the overall EU budget is adopted.
The body’s budget must contain separate revenue and expenditure statements and details on staff numbers.

The regulation states that:

the duties of the authorising and accounting officers are segregated and mutually exclusive, with each having the necessary resources to carry out their duties;
the director performs the authorising officer’s duties, which include:
- implementing revenue and expenditure according to the principle of sound financial management,
- putting in place the organisational structure and internal controls,
- applying ex ante and possibly ex post controls,
- using paper-based or electronic systems to keep original budgetary supporting documents for at least 5 years,
- reporting to the management board by submitting a detailed consolidated annual activity report;
the management board appoints an independent accounting officer, responsible for:
- properly implementing payments, collecting revenue and recovering amounts due,
- preparing, presenting and keeping the accounts,
- laying down and validating the accounting systems, including those of the authorising officer, when appropriate.

The following expenditure rules apply:

every item must be committed, validated, authorised and paid;
budgetary commitments fall into one of three categories:
- individual, when the recipient and amount are known,
- global, if either the recipient or amount is not known,
- provisional, to cover routine administrative expenditure when either the amount or final payee is unknown;
commitments are subject to time limits;
payments require proof that the relevant action complies with the contract.

The EU body must have an internal audit function. The Commission’s internal auditor carries out this role by:

advising on risks, the quality of management and control systems and possible improvements;
assessing the effectiveness of internal management, control and audit systems and departmental performance in implementing programmes;
enjoying full and unlimited access to all necessary information and complete independence in their work.

The EU body’s financial contributions must help achieve an EU policy objective with specific results. These can range from the reimbursement of eligible costs to flat-rate financing.

The EU body must inform the Commission without delay of cases of presumed fraud or other financial irregularities, any completed or ongoing investigations by the European Public Prosecutor’s Office or European Anti-Fraud Office and any audits or controls by the Court of Auditors and the Internal Audit Service, without endangering the investigations’ confidentiality.

Annual accounting rules require the EU body to provide its financial statements, budget implementation reports and supporting documents.

The Court of Auditors, an independent external auditor, the Commission, Council and European Parliament all examine how the budget was implemented before Members of the European Parliament approve, or reject, the annual accounts (known as ‘the discharge procedure’).

Commission staff and the Court of Auditors have access to the EU body’s sites, premises and data to carry out audits. The European Anti-Fraud Office may conduct investigations, on-the-spot checks and inspections.

The regulation repeals Delegated Regulation (EU) No 1271/2013, which provided the former financial regulation framework.

FROM WHEN DOES THE REGULATION APPLY?

It entered into force on 11 May 2019 but it has applied retroactively since 1 January 2019, apart from Article 32 (single programming document) and Article 48 (consolidated annual activity report), which have applied since 1 January 2020.

BACKGROUND

Regulation (EU, Euratom) 2018/1046 is the EU’s financial regulation. Its Article 70 sets out the basic budgetary principles for certain EU bodies.
For further information, see:
- Financial Regulation applicable to the general budget of the Union — publication (European Commission).

KEY TERMS

Decentralised/regulatory agencies. EU bodies set up under the Treaty on the Functioning of the European Union (TFEU) and the Euratom Treaty and which have legal personality and receive contributions charged to the budget. They are entrusted with specific budgetary tasks to contribute to the implementation of EU policies and support the decision-making process by pooling specialist expertise. They may take over technical, regulatory and supervisory functions.

They differ from one to the other, both in terms of size and purpose, but they share a basic structure and similar ways of operating.

Commitment appropriations. Pledges to pay, provided certain conditions are fulfilled.

Payment appropriations. Expenditure from commitments in the current, or preceding, financial years.

MAIN DOCUMENT

Commission Delegated Regulation (EU) 2019/715 of 18 December 2018 on the framework financial regulation for the bodies set up under the TFEU and Euratom Treaty and referred to in Article 70 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (OJ L 122, 10.5.2019, pp. 1–38).

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