integrated financial - european...

Step forward in transparency & accountability

In line with the highest international standards for transparency and accountability, the European Commission for the first time reports on the EU budget in an integrated package. It includes four reports providing detailed information on revenue, expenditure, management and performance.

The presentation of this package provides important input for the annual ‘Discharge procedure’ by which the European Parliament and the Member States in the Council hold the Commission accountable for its use of taxpayers’ money.

• The 2015 Annual Management and Performance Report provides detailed information on the results achieved by the EU budget and how it is managed.

• The Financial Report 2015 gives a full overview of the sources of EU revenue and the allocation of funds to Member States.

• The Communication on the Protection of the EU budget 2015 describes the actions taken by the European Commission and Member States to ensure the proper use of taxpayers’ money.

• The EU Annual Accounts 2015 contains financial information on the activities of the institutions, agencies and other bodies of the EU.

The European Commission manages annual expenditure of about EUR 140 billion across a wide range of areas. Around 80% of it is managed in cooperation with EU Member States. The EU budget is subject to strict controls in order to ensure the accountability on the way funds are spent and what added value have they created on the ground.

Kristalina Georgieva, Commission Vice-President for Budget and Human Resources, stated that “EU money belongs to our citizens and we owe it to them that every euro is well spent. We at the Commission are working to align the budget with priorities, to focus on results and to strengthen controls.”

Dischargeto the Commission

Votein the Parliament

Recommendationby the Council

The European Courtof Auditors audits

The Commissionreports

Conclusionsin annual report

Health

Jobs

Skills

Development

Naturalresources

Security

GrowthEducation

Inno

vatio

n

Ener

gy

New

Tec

hnol

ogie

s

EnvironmentCohesion

Hum

anita

rian

aid

Research

InfrastructureIntegrated Financial Reporting Package 2015

2014

-202

0 M

FF• The European Fund for Strategic Investment allowed, in its first year, about EUR 100 billion investment, thus boosting jobs and growth

• Funding in support of security, border control, addressing root causes of migration and integrating refugees was doubled to over EUR 10 billion for 2015-2016

• Over 350 000 migrants were rescued in the Mediterranean thanks to funding being tripled for Triton and Poseidon interventions as well as reinforcement of their staff

• More than EUR 2.5 billion have been allocated during 2015 and 2016 to Syria and Africa trust funds and to the Facility for Refugees in Turkey to address basic needs of refugees in their countries of origin or transit

• In 2014-2015, more than one million individuals took part in education actions under the new Erasmus+ programme

• The Galileo satellites deployment was accelerated: 12 satellites launched out of which nine in operation• Number of airports with European Geostationary Navigation Overlay Service (EGNOS) capability increasing

security of landing operations went up from 150 to 174 • Increased competiveness of the European agriculture allowed for a 6% rise in the export of agricultural

products despite the Russian ban• Humanitarian and development assistance strengthening health systems, resilience of livelihoods, access to

water in schools and economic support was provided to countries affected by Ebola for an overall amount of EUR 885 million. At the end of 2015, the affected countries were all on the path to being declared Ebola-free

• Over 800 000 of the most vulnerable people in the Ukraine received support in the form of shelter, food and health care

• Cultural and audio-visual operators from 38 countries were involved in cross-border projects supported by the Creative Europe programme.

2007

-201

3 M

FF• The Seventh Framework Programme for research and technological development had an estimated indirect economic effect of EUR 20 billion annually in additional GDP (0,15%) and supported 11 Nobel laureates

• 9 million citizens received training, improved skills or gained employment through the European Social Fund

• 825 000 jobs were created and 120 000 startups were helped thanks to the European Regional Development Fund

• The Guarantee Facility for Small and Medium Enterprises (SMEG) catalysed nearly EUR 21 billion SME financing for close to 400 000 SMEs

• Erasmus increased the employability advantage over non-mobile students by 45%. One out of two European graduates studying or training abroad benefited from Erasmus

• The Marie Skłodowska Curie Actions have enhanced the employability, career development opportunities and mobility of researchers in Europe and beyond. 95 % of fellows were in employment 2 years after the end of their fellowship

• The European Agricultural Fund for Rural Development supported 430 000 farm modernisation projects and provided start-up support to 165 000 young farmers

• Improvement of the environmental performance of EU farming expanded to 47 million ha, representing more than 25% of the EU-27 utilised agricultural area in 2013

• The LIFE programme for environment and climate action contributed to the reduction of more than 1 million tonnes of CO2 emissions per year.

Key achievements of the EU budget

#EUBudget4Resultseuropa.eu/!Dh43qk

http://europa.eu/!Dh43qk

Focus on performanceThe Annual Management and Performance Report presents detailed information on the management of the EU Budget in 2015 and the results achieved by the EU funds.

Addressing challenges with limited resources2015 was a challenging year. The EU had to react to unprecedented refugee flows, terrorist attacks and insecurity in Europe and its neighbourhood, financial instability in Greece and the economic impact of the Russian ban on exports. The available budgetary resources had to be stretched to their limits in order to address unforeseen situations without compromising key policies and priorities.

Thanks to flexibility and strict monitoring on spending and revenue it was possible to meet the additional needs without increasing the size of the EU Budget and continue delivering results, for example:

• funding in support to security, border control, addressing root causes of migration and integration of refugees was doubled to over EUR 10 billion for 2015-2016

• in its first year the European Fund for Strategic Investment (EFSI), backed by the EU budget, allowed financing of projects with a total value of investments of over EUR 100 billion thus boosting jobs and growth.

EUR 17.7 billionfrom EFSI

EUR 106.8 billionmobilised

Health

Jobs

Skills

Development

Naturalresources

Security

GrowthEducation

Inno

vati

on

Ener

gy

New

Tec

hnol

ogie

s

EnvironmentCohesion

Hum

anit

aria

n ai

d

Research

Infrastructure

Annual Management and Performance Report

INTEGRATED FINANCIAL REPORTING PACKAGE

EU Africa Trust Fund(2015-2020)

Syria, Lebanon, Jordanhelp (London pledge)

Facility for refugees in Syria

Trust fund for Syria

Reinforcement of border control, immigration and

security actions

Initial allocations

Numbers in EUR billion

1.8

0.50.2

0.65.2

TOTALEUR 10.6 billion

2.2

EU response to refugee flows

European Fund for Strategic Investment taking off

Key achievements of the EU budgetThe EU budget in 2015 contributed to the achievement of the political priorities of the Juncker Commission and of the objectives of Europe 2020’s jobs and growth strategy.

There was a strong focus on policies to boost competitiveness and economic convergence, to create growth and jobs and achieve concrete results.

Against the background of growing demands for investments, the focus shifted from spending to real economic and social impact. Delivering visible and tangible

results on the ground became an imperative. This approach is at the core of the ‘Budget Focused on Results’ (BFOR) strategy, launched in 2015 by Vice-President Georgieva.

2014

-202

0 M

FF

• The European Fund for Strategic Investment allowed, in its first year, about EUR 100 billion investment thus boosting jobs and growth

• Funding in support of security, border control, addressing root causes of migration and integration of refugees was doubled to over EUR 10 billion for 2015-2016

• Over 350 000 migrants were rescued in the Mediterranean thanks to funding being tripled for Triton and Poseidon interventions and reinforcement of their staff

• More than EUR 2.5 billion have been allocated during 2015 and 2016 to Syria and Africa trust funds and to the Facility for Refugees in Turkey to address basic needs of refugees in their countries of origin or transit

• In 2014-2015, more than one million individuals took part in education actions under the new Erasmus+ programme

• The Galileo satellites deployment was accelerated: 12 satellites launched out of which nine in operation• Number of airports with European Geostationary Navigation Overlay Service (EGNOS) capability increasing

security of landing operations went up from 150 to 174 • Increased competiveness of the European agriculture allowed for a 6% rise in the export of agricultural

products despite the Russian ban• Humanitarian and development assistance strengthening health systems, resilience of livelihoods, access to

water in schools and economic support was provided to countries affected by Ebola for an overall amount of EUR 885 million. At the end of 2015, the affected countries were all on the path to being declared Ebola-free

• Over 800 000 of the most vulnerable people in the Ukraine received support in the form of shelter, food and health care

• Cultural and audio-visual operators from 38 countries were involved in cross-border projects supported by the Creative Europe programme.

2007

-201

3 M

FF

• The Seventh Framework Programme for research and technological development had an estimated indirect economic effect of EUR 20 billion annually in additional GDP (0,15%) and supported 11 Nobel laureates

• 9 million citizens received training, improved skills or gained employment through the European Social Fund

• 825 000 jobs were created and 120 000 startups were helped thanks to the European Regional Development Fund

• The Guarantee Facility for Small and Medium Enterprises (SMEG) catalysed nearly EUR 21 billion SME financing for close to 400 000 SMEs

• Erasmus increased the employability advantage over non-mobile students by 45%. One out of two European graduates studying or training abroad benefited from Erasmus

• The Marie Skłodowska Curie Actions have enhanced the employability, career development opportunities and mobility of researchers in Europe and beyond. 95 % of fellows were in employment 2 years after the end of their fellowship

• The European Agricultural Fund for Rural Development supported 430 000 farm modernisation projects and provided start-up support to 165 000 young farmers

• Improvement of the environmental performance of EU farming expanded to 47 million ha, representing more than 25% of the EU-27 utilised agricultural area in 2013

• The LIFE programme for environment and climate action contributed to the reduction of more than 1 million tonnes of CO2 emissions per year.



EU RevenueThe bulk of the EU funding comes from ‘own resources’, which are funds that belong to the EU but are collected on its behalf by Member States:

• traditional own resources (TOR), including custom duties and sugar levies;

• a participation in the national collection of the value added tax (VAT); and

• the GNI own resource, which serves as the balancing resource: based on national contributions depending on the relative wealth of each Member State, it finances all spending not covered by other sources of revenue.

EU budget for more than 500 million European citizensThis report shows the size and share of the own resources – main source of EU revenue: fromcustom duties and sugar levies, VAT and gross national income (GNI)-based nationalcontributions. It provides also a full picture of spending, per policy areas and per Member State.

Jobs

Skills

Development

Naturalresources

Education

Inno

vati

on

Ener

gy

New

Tec

hnol

ogie

s

Cohesion

Hum

anit

aria

n ai

d

Research

Financial Report 2015

INTEGRATED REPORTING PACKAGE 2016

EU Revenue 2015

EU Expenditure

In 2015 the biggest share of the EU budget was spent on groth and jobs followed by the Common Agricultural Policy.

The EU budget is always in balance and can never run a deficit: budgeted revenue always matches expenditure.

11%6%

36%

6%

40%

Other

GNI own resource

Surplus from previous year

VAT own resource

TOR

68.8%

12.4%

12.8%

5%1%

Health

Jobs

Skills

Development

Naturalresources

Security

GrowthEducation

Inno

vati

on

Ener

gy

New

Tec

hnol

ogie

s

EnvironmentCohesion

Hum

anit

aria

n ai

d

Research

Infrastructure

INTEGRATED FINANCIAL REPORTING PACKAGE

Financial Report 2015

Expenditure by Member StateIn total, 94 % of the EU budget was invested in projects implemented in the EU and beyond, while only 6% goes on administration.

The chart below shows the amounts allocated to each country from the budget as a percentage of their GNI. This gives an indication of the relative importance of EU expenditure for each country.

Key role of EU funding in public investmentCohesion Policy funding is a vital source of public investment, particularly for less wealthy countries or

those countries that faced challenges to maintain the investment levels due to economic crisis.

2 500

5 000

7 500

10 000

12 500

0

FR ES PL IT DE UK CZ BE RO EL HU SK BG PT NL IE AT LU DK SE FI LV SI LT HR EE CY MT

15 000

17 500

20 000

0%

2%

3%

4%

5%

6%

7%

8%

9%

Negative reserve

Administration

Special instruments Security and citizenshipThe EU as a global playerCompetitiveness

Natural resources Compensations Cohesion % of GNI

#EUBudget4Results

Expenditure by Member State in 2015 (million EUR)

Share of EU funds in government expenditure of Member States

EU27 HU LT SK LV MT PL EE BG CZ PT RO SL EL CY ES IT HR DE FI FR BE UK SE AT IE NL DK LX

60%

50%

40%

30%

20%

10%

0%

europa.eu/!Dh43qk


Preventive and corrective mechanisms to protect taxpayers’ moneyThe Commission gives the highest priority to ensuring that the EU budget is well-managed and that all the necessary measures are in place to protect taxpayers’ money. This Communication describes the preventive and corrective actions taken by the Commission and Member States to protect the EU budget from illegal or irregular expenditure.

Health

Jobs

Skills

Development

Naturalresources

Security

GrowthEducation

Inno

vatio

n

Ener

gy

New

Tec

hnol

ogie

s

EnvironmentCohesion

Hum

anita

rian

aid

Research

InfrastructureCommunication on protection of the EU budget 2015

INTEGRATED FINANCIAL REPORTING PACKAGE 2015

Financial corrections and recoveries There are different types of safeguards in place to prevent, detect and rectify incorrect expenditure:

• Preventive measures: controls before payments, interruptions and suspensions of payments. The Commission focuses more and more on measures which prevent irregular expenditure and help avoid such irregularities recurring in the future.

• Corrective measures: used when preventive measures have not been effective. These concern primarily financial corrections imposed on with Member States and, to a lesser extent, recoveries from recipients of EU payments.

In 2015, the total financial corrections and recoveries implemented amounted to almost EUR 3.9 billion, which is equivalent to 2.7% of payments made.

The primary objective of financial corrections and recoveries is to ensure that only expenditure in accordance with the legal framework is financed by the EU budget. They arise following the supervision and checks made by both the Commission and also, in the case of shared management, Member States on the eligibility of expenditure funded by the EU budget. Most corrections are done after payments are made, although many are also done before.

Financial corrections and recoveries leading to reimbursement to the EU budget are characteristic for agriculture and rural development as well as direct and indirect management. For Cohesion Policy however, such ‘net’ corrections were the exception, until the 2014-2020 programming period. It was due to the different legal framework and budget management types, which allowed Member States to replace the projects of ineligible expenditure with alternatives.3.9 billion

EURin financial corrections and recoveries implemented in 2015

Errors do not always reflect fraud, inefficiency or waste. They are an estimate of money which should not have been paid out because it was not fully used in accordance with EU rules.

Amounts at risk at closure

The 2015 financial year is the first for which the European Commission presents an outlook of the amounts at risk at closure, i.e. a consolidated estimation of errors remaining after all corrective measures have been implemented at the end of the programmes.

This approach reflects the fact that the control cycle is multiannual and stretches to more than 1 year of funding and implementation of projects. The amount at risk at closure in 2015 was between 0.8% and 1.3% for the different policy areas:

The Communication on the Protection of EU Budget illustrates the successful efforts made by the European Commission to prevent, detect and correct errors. In

a fully transparent manner it presents all the information available on amounts which were identified as being wrongly used and which were therefore corrected, including by reimbursement to the EU budget. This shows that effective control systems are already in place to make sure that taxpayers’ money is spent correctly and according to the rules. The Commission is confident that the level of error can continue on a downward trend with the cooperation of Member States further building on lessons learned.

Outlook at closure regarding 2015 expenditure

Area Total relevant expenditure in 2015

Estimated amount at riSk at payment in relation to 2015 expenditure

Estimated future corrections Estimated amount at risk at closure taking into account future corrections

Lowest value Highest value Lowest value Highest value Lowest value Highest value

Agriculture 57 677 1 167 1 066 101

Cohesion 54 284 1 545 2 702 874 1 435 672 1 267

External relations 9 713 281 62 219

Research 12 482 259 290 127 132 163

Other internal policies 3 488 32 38 11 21 27

Administration 5 683 19 22 1 18 21

Total 143 328 3 303 4 500 2 141 2 702 1 162 1 798


Expenditure in 2015, along with estimated amount at risk for 2015 payments and estimated future correctionsfor 2015 payment (EUR million)


EU accounts comply with international standardsThe Commission is the steward of the EU budget and has a duty to report to Member States in the Council, to the European Parliament and to EU citizens on how it has carried out this responsibility. The accounting officer is responsible for presenting the financial situation for the year in a clear and understandable way that allows comparison with the budget and between financial years. This is why the EU accounts are prepared in accordance with international standards and checked by an independent auditor, the European Court of Auditors, who publishes its opinion and findings in a public report.

This report is available online to citizens and is discussed by the Parliament and the Council.

The EU Annual Accounts enable the Council and the European Parliament to keep the management of taxpayers’ money under democratic control. They provide financial information on the activities of the institutions, agencies and other bodies of the EU and comprise two main elements:

• financial statements of the EU, based on International Public Sector Accounting Standards;

• results of the implementation of the EU budget during the year: budgetary accounts.

6%

37%

14%

7%

3%

1%

26%6%

Loans

Available for sale financial assets

Pre-financing

Other advances to Member States

Receivable and recoverables

Cash and cash equivalents

Property, plant & equipment

Other

The main assets of the EU are loans given to Member States and advances (pre-financing) given to beneficiaries of EU funds - primarily Member States.

EU assets

An accurate vision of the situation of EU finances to ensure full accountability of expenditure

The EU Annual Accounts contain financial information on the activities of the institutions, agencies and other bodies of the EU. The accounts are produced in accordance with best practice and international accounting standards and provide a comprehensive view of the revenue and expenditure of the EU, together with its assets and liabilities. Since 2007 the Commission has received a clean bill of health for the EU accounts.

Health

Jobs

Skills

Development

Naturalresources

Security

GrowthEducation

Inno

vatio

n

Ener

gy

New

Tec

hnol

ogie

s

EnvironmentCohesion

Hum

anita

rian

aid

Research

InfrastructureEU Annual Accounts 2015


#EUBudget4Results

Financial statements

The financial statements show the financial position of the EU at the end of the year. For 2015 the EU’s assets totalled EUR 154 billion and the liabilities of EUR 226 billion. 45% of the EU’s liabilities concern amounts to be paid to EU beneficiaries in 2016 — mostly Member States. The largest amounts relate to reimbursements which should be paid under cohesion policy and agricultural policies. Borrowings of EUR 57 billion are made solely to fund the loans given.

The financial statements also provide information on the 2015 revenue, EUR 143 billion, and expenses, EUR 156 billion. According to the rules of accrual accounting all costs incurred and revenue earned during the year must be reflected in that year. Therefore, some payment obligations must be accounted for in the current year even though they will be paid from the budget of the following year(s). That is why

in the financial statements the costs are generally higher than revenue for a given year (and also why liabilities are higher than assets).

For example, shared management expenses in 2015, amounting to EUR 112 billion representing about 80% of the EU budget, are split as follows.

Budgetary Accounts

The budgetary accounts show how the budget was implemented during the year on a cash basis and include the budget result of the year. The budget result is essentially the difference between the payments made and the cash received during the year. The result is always a surplus since expenditure can never exceed revenue, which is thus different to the financial statements. The surplus is always handed back to Member States.

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

20122011 2013 2014 2015

Budget surplus as % of revenue

European Social Fund

Other

European RegionalDevelopment Fund and

Cohesion Fund

European Agricultural Fund for RuralDevelopment and other RuralDevelopment Instruments

European AgriculturalGuarantee Fund

9%

2%

34%

40%

15%

europa.eu/!Dh43qk

Shared management expenses 2015

Budget surplus as % of revenue


Multiannual nature

The EU budget, unlike national budgets, has a multiannual nature and is based on a multiannual financial framework (MFF). The MFF is an expression of long term EU political priorities as it determines how much the EU may spend over a period of seven years: in total and in different areas.

The MFF 2014-20 allows the European Union to invest around EUR 1 trillion which is about 1% of EU GNI. It is divided into six categories with a clear focus on supporting economic growth and job creation. About 94% is invested in various programmes in the EU and beyond, while only 6% goes on administration.

What was the EU Budget 2015 spent on?

The 2015 EU budget set the total of annual payments at EUR 141 billion. Most of the money was invested in projects for economic growth, jobs, competitiveness, cohesion and agriculture. Funding for education, training, small- and

medium-sized enterprises and research was increased, as well as the amounts invested in global action, security, EU neighbourhood and humanitarian aid.

Sustainable growth: natural resources 38.9 %

Competitiveness for growth and jobs 13.1 %

Global Europe 6.1 %

Security and citizenship 1.6 %

Administration 6.4 %

Smart and inclusive growth 47 %

Economic, social and territorial cohesion 33.9 %

Focu

s o

n growth and job creation

MFF 2014-2020 Overview

Health

Jobs

Skills

Development

Naturalresources

Security

GrowthEducation

Inno

vatio

n

Ener

gy

New

Tec

hnol

ogie

s

EnvironmentCohesion

Hum

anita

rian

aid

Research

InfrastructureKey features of the EU Budget


Who decides on the budget?The MFF is proposed by the European Commission and must be adopted unanimously by the Member States in the Council after obtaining the consent of the European Parliament. The current MFF will be reviewed before the end of 2016 taking account of the economic situation and the latest macroeconomic forecasts.

The decision-making procedure for each annual EU budget is similar to most national budgets as it is decided by European citizens’ democratically elected representatives in the Council and the European Parliament.

Who executes the budget?80% of the EU annual budget, invested in cohesion policy and agriculture, is managed by the Member States in so-called shared management. The European Commission has an important supervisory function, but the Member States are the ones primarily responsible.

The European Commission or one of its agencies directly manages other EU programmes. This involves selecting contractors, awarding grants, transferring funds and monitoring activities.

How do we know if the EU Budget was spent according to the rules and delivered results?The EU budget is under constant tight scrutiny. Each Member State is required to provide detailed information on how it uses the funds. The Commission takes the overall political responsibility, presents EU accounts, reports annually on the implementation of the budget and results achieved. The Commission is held accountable on the use of EU taxpayers’ money through the ‘Discharge procedure’.

The European Court of Auditors (‘ECA’) audits these accounts each year in order to provide an opinion on their reliability. The ECA has given a clean opinion on all the

accounts prepared by the Commission since 2007.

The European Parliament and the Council scrutinise the management of EU funds on the basis of various reports from the Commission and the Court. The ´Discharge procedure´ is finalised with a vote of the European Parliament to grant the discharge to the Commission (i.e. releases the Commission of its responsibilities in managing the budget of that year). The entire process is fully transparent to the public and enables European citizens to follow how the money from the EU Budget is managed and invested.

The Commission proposes a draft budget

Agreement reached

Annual budget approved

The Member States in the Council examine the draft and express opinion

The European Parliament examines the draft and expresses opinion

NEGOTIATIONS }{

Dischargeto the Commission

Votein the Parliament

Recommendationby the Council

The European Courtof Auditors audits

The Commissionreports

Conclusionsin Annual report



integrated financial - european...

Documents