Financial rules governing the EU budget (financial regulation)

KEY POINTS

The regulation sets out key rules on managing the EU budget, how EU funding is provided to beneficiaries and how the EU institutions manage their own finances. It also sets out rules on how the EU institutions procure works, supplies and services, award grants and prizes, and make use of financial instruments or budgetary guarantees.

Making the EU budget more transparent

To ensure the budget is managed openly and gains public trust, the regulation focuses on several key areas:

• improving the level of public information by introducing an enhanced public database to give more detailed information about how the EU budget is used and who receives EU funding;
• strengthening controls, monitoring and audits by making it mandatory to gather data on those who receive funding, including those who stand to benefit most from funding decisions, to ensure better accountability;
• managing risk by using an integrated IT system for data mining and risk scoring across all EU budget implementation methods to identify possible irregularities, fraud, conflicts of interest or other issues.

Protecting the EU budget

The regulation introduces measures to safeguard the budget more effectively, including:

• an early detection and exclusion system that strengthens the ability of the European Commission to identify funding recipients who breach EU rules and exclude them from further funding;
• expanding the scope of the detection system to include shared management of budget implementation, such as funding from the European Regional Development Fund or the Recovery and Resilience Facility;
• updating the rules on conflict of interest by redefining conflict of interest to allow for participants to be excluded from funding if such conflicts are detected;
• better digital controls that use digital technologies to boost the quality and efficiency of controls and audits through digitalisation and emerging technologies, in line with the Commission’s commitment to digital practices.

Making the EU budget more agile

To make the budget more responsive in crisis situations, the regulation introduces:

• a simplified framework for procurement in crisis situations, establishing clear and more flexible legal guidelines;
• the possibility for EU institutions to act on behalf of EU Member States or as wholesalers, even in the absence of a crisis;
• a new budget implementation tool to allow the Commission to contribute to global initiatives, which are multi-donor pooled funds to address global challenges such as climate change, education and combating diseases like AIDS (acquired immune deficiency syndrome), tuberculosis and malaria.