New financial rules governing the EU budget (financial regulation)

SUMMARY OF:

Regulation (EU, Euratom) 2018/1046 — the financial rules applicable to the EU’s general budget

WHAT IS THE AIM OF THE REGULATION?

The regulation updates and simplifies the rules for drawing up and implementing the EU budget.
It reduces the overall number of rules by half, making them more concise and easier to apply. The former Rules of Application are now merged with the financial regulation into a single set of rules.
The changes make the whole procedure more user-friendly for both recipients and managers of EU funding.

KEY POINTS

The new EU financial regulation:

replaces previous complex rules and procedures with a single rule book allowing for easier access to EU funding, simpler implementation and a sharper focus on results;
helps applicants for EU funding by
- reducing the amount of information required to apply for EU funding
- allowing the information and evidence to be provided only once and reused
- using simplified forms of grants, such as lump-sum, flat rate and unit costs
- focusing funding more on results rather than on actual costs;
facilitates a single audit approach to avoid duplication and multiple controls by
- reusing information already available to EU institutions, managing authorities and other bodies
- cross-reliance on existing audits, carried out by independent auditors and respecting internationally accepted principles, and on assessments by the European Commission itself and by other entities including national authorities and trusted partners such as the United Nations and the World Bank;
strengthens measures against fraud by
- targeting controls and audits on potentially suspicious projects; safeguarding against tax avoidance and money laundering by preventing the use of shell companies* established in tax havens
- extending conflict of interest rules to EU countries’ authorities which receive EU funding
- voluntary disclosure of stakeholders’ identity.

Annual budgetary deadlines (in practice, the European Parliament, the Council and the Commission try to present the documents earlier to smoothe the procedure)

By 1 July: each EU institution sends its estimated revenue and expenditure for the coming year to the Commission.
By 1 September: the Commission submits the draft budget to the European Parliament and the Council.
By 1 October: the Council submits its opinion on the draft budget to the European Parliament.
By 18 December: the Council and the European Parliament agree on the coming year’s budget.

Delegated acts

The Commission has adopted two delegated acts based on the financial regulation:

Regulation (EU) 2019/715 lays down a framework financial regulation for the EU bodies referred to in Article 70 of the financial regulation (mainly the decentralised agencies);
Regulation (EU) 2019/887 contains a model financial regulation for public-private partnership bodies referred to in Article 71 of the financial regulation.

These delegated acts replace previous regulations for these bodies.

The new rules strengthen the governance of these bodies, for example with respect to avoiding conflicts of interest. All bodies concerned must adopt financial rules based on these two delegated acts. They may only depart from them where their specific needs so require and after prior consent of the Commission.

FROM WHEN DOES THE REGULATION APPLY?

Most of the new rules have applied since 2 August 2018. Any exceptions are listed in Article 282 of the regulation.

BACKGROUND

The EU’s annual budget forecasts and authorises all revenue and expenditure for the EU for the coming financial year (1 January to 31 December). Revenue and expenditure must be in balance.
Wide-ranging internal and external controls are designed to prevent and correct any financial errors or fraud. Offenders face financial penalties. The identity of recipients of EU funds is publicly available.
For more information, see:
- Modern and simpler — the new EU financial rules take effect today (European Commission).

KEY TERMS

Shell companies: companies, often without active business operations or significant assets. Although this type of company is not necessarily illegal, shell companies are sometimes used for the purposes of tax evasion, tax avoidance, and money laundering, or to achieve a specific goal such as anonymity.

MAIN DOCUMENT

Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30.7.2018, pp. 1-222)