Changes from plenary report to adopted text

RemovedEXPLANATORY STATEMENT

RemovedThe Financial Regulation has a particularly important role for EU finances and the functioning of the Union in general. It is meant to be the ‘single rulebook’ laying down the principles and general financial rules for establishing and implementing the EU budget and controlling EU finances. Its current version entered into force into 2018 after a major revision.

RemovedWith the entry into force of the 2021-27 multiannual financial framework (MFF), the Financial Regulation needs to be aligned to the MFF so that all general financial rules are included in the singe rulebook. On 24 November 2021, Parliament adopted a reslution on the revision of the Financial Regulation in view of the entry into force of the 2021-2027 multiannual financial framework, laying down its views on what such a revision should address.

RemovedOn 16 May 2022, the Commission published its proposal for the revision, in the form of a recast. The proposal is targeted to the MFF alignment and to specific improvements and simplifications that mostly build on the lessons learned from the COVID-19 pandemic and focus on crisis management, the protection of EU financial interests, and simplification.

RemovedThe rapporteurs welcome the Commission proposal as a step in the right direction towards a better management of EU finances. However, they believe that the proposal falls far short of what is necessary and possible to achieve in order to ensure better democratic accountability for a modern EU budget, via increased parliamentary oversight, digitalisation, and mainstreaming of important EU policies, as clearly set out in Parliament’s resolution of 24 November 2021.

RemovedThe rapporteurs propose therefore a number of amendments that, while keeping the revision targeted to its main objectives, improve the Commission proposal in several aspects in line with the views expressed by Parliament. The main amendments proposed are briefly described below.

Removed External assigned revenue. Parliament has repeatedly expressed concern that the number and scope of off-budget instruments have grown significantly in the past decade, with NextGenerationEU (NGEU) taking this practice to the next level. These developments put at risk central budgetary principles and pose a serious challenge to Parliament’s ability to fulfil its decision-making, scrutiny and discharge functions and, more generally, to the transparency of the EU budget. In a joint declaration included in the MFF package, the three Institution agreed that the provisions on the external assigned revenue would be assessed and, as appropriate, revised.

RemovedThe rapporteurs welcome that the Commission proposed to have an annex, forming an integral part of the budget, setting out the budget lines for which assigned revenue is foreseen and the estimated amount. They propose that the information included in that annex be broken down into the specific categories of assigned revenue. In addition, the future activation of assigned revenue provided for in a basic act (as was for instance the case for NGEU) should in general be subject to a decision of the budgetary authority. Finally, it should be made explicit that the audits of the Court of Auditors and Parliament’s discharge decision include assigned revenue.

Removed Borrowing and lending. The above-mentioned joint declaration by the three Institutions also included a commitment to assess, and as appropriate revise, the provisions on reporting on borrowing and lending operations. Parliament has long called for the full ‘budgetisation’ of these operations, and asked to be able to scrutinise and authorise them.

RemovedThe Commission proposal only includes the codification of existing practices, by means of a comprehensive overview of borrowing and lending operations to be annexed to the draft budget. For a start, the rapporteurs propose to specify the minimum content of that document better, and to make sure that it also includes the underlying data and explains the methodology used by the Commission to estimate the interest due.

RemovedMore importantly, the recently adopted Regulation 2022/2434 of 6 December 2022 amended the Financial Regulation by introducing a diversified funding strategy as a general borrowing method, based on a flexible pooling of funding instruments, so that the Commission can borrow for different initiatives into the same ‘pot’ at the best market conditions. The adopted changes must be reflected in the recast, and provide in addition the occasion to introduce a much needed form of oversight of the Commission’s borrowing and lending operations, in the form of a yearly ‘debt ceiling’ that the budgetary authority can set (and if necessary revise) in the context of the annual budgetary procedure.

Removed Union values. The rapporteurs welcome the inclusion in the proposal of the compliance with the Rule of law Conditionality Regulation (EU, Euratom) 2020/2092 as a general principle. They propose to include the respect of fundamental rights as a general principle as well.

Removed Tracking and mainstreaming of EU policies. The rapporteurs propose to clarify the application of the do no significant harm principle proposed by the Commission. In addition, they propose that the principle of social conditionality be applied horizontally to EU funding, following its inclusion in the new CAP 2021-27, and that concise and proportionate performance indicators are introduced to monitor the impact of Union spending on gender equality, as well as to track spending on climate change mitigation and adaptation and the protection of biodiversity, all without imposing excessive administrative burden.

Removed Decommitments. The rapporteurs propose that the re-use of decommitted appropriations as a result of full or partial non-implementation of projects should be extended to include all appropriations. By analogy with what is already the case in external action pursuant to the NDICI Regulation, decommitments should be automatically kept in the budget.

Removed Trust funds. The rapporteurs introduce amendments to guarantee an appropriate role of Parliament in the setting up, supervision and scrutiny of trust funds. Parliament and Council should be empowered to approve trust funds for emergency and post-emergency actions as they do for trust funds for thematic actions, but within a short defined timeframe to preserve the emergency character of the actions.

Removed Tracking EU funds via digital tools. Parliament has repeatedly stressed the importance of knowing how EU funds are spent and who truly benefits from them in order to protect the financial interests of the EU and to detect fraud, corruption and conflicts of interest, and expressed concern that data for identifying economic operators and their beneficial owners is not easily accessible.

RemovedThe rapporteurs welcome the Commission proposal to improve the Arachne IT system for data-mining and risk-scoring, to make it compulsory and to extend it to direct management, as a much needed first step. They propose to go much further with the compulsory centralisation of information within a single integrated interoperable reporting and monitoring system to be set up by the Commission, allowing for the electronic recording and storage of data on the recipients of Union funding, also in an aggregated format, including their beneficial owners and allowing for the regular making of those data available for data-mining and risk-scoring.

RemovedThe rapporteurs’ proposed amendments set out several details of the new system, as regards inter alia interoperability and real-time automatic exchange of data with relevant systems and databases, and setting out precise actions and measures to achieve the necessary high quality of data. Moreover, the indicators used by the system should be reliable, objective and limited to what is necessary for risk assessment, and be reflected to the highest degree possible in the exclusion criteria of the EDES system in order to improve the efficiency of EDES.

RemovedFinally, the rapporteurs believe that the transition period proposed by the Commission before the use of the new system is made mandatory is disproportionately long and propose to bring the date of application of the system forward, while still providing sufficient time for the development and adoption of the system.

RemovedOther amendments are proposed, inter alia to align the Financial Regulation to the recently adopted Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market, to streamline the management of the common provisioning fund, to improve oversight on forms of Union contribution with financing not linked to costs, to introduce a provision to avoid ‘gold-plating’ resulting into excessive administrative burden, and to improve the provisions in relation to the EPPO, Union delegation in third countries and Parliament’s liaison offices, and building projects financed through loans. The amendment adopted as part of Parliament's mandate for inter-institutional negotiations on the stand-alone proposal to revise the Financial Regulation as regards competition fines is also included for coherence.

RemovedThe rapporteurs believe that the amendments proposed are key to a fruitful revision of this central legislative tool that increases transparency, accountability and democratic scrutiny and improves the implementation of the EU budget.

RemovedAmendments to parts of the proposal which remain unchanged ('white parts') were necessary for pressing reasons relating to the internal logic of the text or because the amendments are inextricably linked to other admissible amendments.

RemovedIn line with Rule 110(3) of EP Rules of Procedure, there is an inextricable link between the amendments adopted in BUDG/CONT in this procedure.

Removed09.03.2023