Commission proposes to further reinforce key rules for EU budget management

This article is brought to you in association with the European Commission.

The Commission has today proposed targeted adjustments to the European Union’s financial rules, known as the Financial Regulation.

The main objective of the proposal is to align existing rules with the current long-term budget 2021-2027, and make further improvements to the already existing very high standards of EU financial rules, in view of developing an even more transparent, better protected and more agile budget.

Commissioner Johannes Hahn, in charge of Budget and Administration, said: “Today’s proposal seeks to grant certainty to EU funds’ recipients, while making the budget more responsive at times of crises and making budget management digital by default. Recent experiences have taught us that being prepared to address the unexpected makes a difference for all. I look forward to constructive discussions with the European Parliament and Member States in the Council in view of putting this rules into place promptly, and to the benefit of all.”

The main elements of today’s proposal seek to secure:

Increased transparency of the EU budget, by:

• improving public information on the EU budget use and on the recipients of EU funding through an improved public database covering all methods of budget implementation,
• reinforcing the effectiveness of control and audits with the mandatory collection of data on the recipients of EU funding including their beneficial owners,
• using an integrated IT system for data-mining and risk-scoring in all methods of EU budget implementation to identify risks of irregularities, fraud, conflicts of interest, amongst others.

A better protected EU budget, by:

• strengthening the Commission’s early detection and exclusion system, thus being able to identify EU funding recipients that are in breach of EU rules, and to exclude them from funding,
• broadening the scope of this system to the shared management of budget implementation (where the Commission implements the budget together with the EU Member States), e.g. for funding from the European Regional Development Fund or under the Recovery and Resilience Facility,
• updating the definition of conflict of interests, which gives grounds to reject participants from award procedures should conflict of interests be detected,
• increasing efficiency and quality of controls and audits through digitalisation and the use of emerging technologies, in line with the Commission’s commitment to digital practices.

A more agile EU budget, by

• providing a clear legal framework for procurement in crisis situations, for example by enabling the EU institutions to procure on behalf of the EU Member States or to act as a central purchasing body,
• adding a new budget implementation instrument to ensure that the Commission can contribute to global initiatives (i.e. multi-donor activities, which involve pooling funds supporting global goals in areas such as climate change, education, fight against AIDS, tuberculosis and malaria).

Next steps

Today’s proposal will now be subject to negotiations by the European Parliament and EU Member States in the Council in view of a swift adoption. The Commission will work hand in hand with these two institutions to ensure that EU funds applicants and recipients can start benefiting from the new rules as soon as possible. 

Background

The Financial Regulation sets out key rules for budget management, how EU funding is provided to beneficiaries, and how the EU institutions manage their own finances. It 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.  

In 2018, the EU financial rules went through a major revision, to bring them in line with the previous long-term budget 2014-2020 and to prepare for the 2021-2027 Multiannual Financial Framework. The 2018 Financial Regulation incorporated the previous Rules of Application into a “single rule book” allowing all general financial rules to be included in the Financial Regulation.

However, following the adoption of the 2021-2027 Multiannual Financial Framework and Union spending programmes, a further amendment was deemed necessary.

To that end, a public consultation was carried out in July-October 2021 and its feedback was carefully considered. Most of this feedback is duly reflected in today’s Commission proposal.