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Budget

4. Accountability

The main rules governing the spending of EU funds are contained in the financial regulation, agreed upon by the member states. A second set of rules, implementing rules, explains in detail how the financial regulation must be applied.

The ultimate responsibility for the implementation of the EU budget lies with the European Commission. However, roughly 80% of the funds is spent under shared management with the member states’ authorities.

The Commission must recover amounts unduly paid – whether by error or fraud. The European Anti-Fraud Office OLAF carries out investigations into potential cases of fraud.

EU budgeting is activity-based: the budget is divided into 31 policy areas.

On the Commission’s side, EU programmes and activities are managed by the staff of the directorates-general (departments), in liaison with the officials in the member states as necessary. In each department, one person (usually the Director-General) acts as the authorising officer, with final responsibility for the use of funds in his/her field of competence.

Audits are conducted both by internal auditors and by the external auditor (the European Court of Auditors). The Directors-General have to draw up a report each year, reviewing the work of their departments and commenting on the use made of the resources that were put at their disposal. These Annual Activity Reports are presented to the Members of the Commission and a report of them is transmitted to the budgetary authority, i.e. to the European Parliament and the Council of Ministers, by 15 June following each budget year.

Both the annual internal and external auditors' reports on the management of Union funds are sent to the European Parliament and to the Council of Ministers. The final assessment, called discharge procedure, is given by the Parliament after taking into account the Council’s recommendations. The Commission is obliged to take follow-up action on the conclusions reached and recommendations made under the discharge procedure by the European Parliament and Council of Ministers. Parliament, Council and the Court check on these follow-up actions.

In recent years, the EU has placed increasing emphasis on the sound management of common funds. As an example of this, in November 2008, Bulgaria lost €220 million of EU funds over its failure to tackle corruption and organised crime.