Explanatory Memorandum to COM(2020)288 - Consolidated annual accounts of the EU for the financial year 2019

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dossier COM(2020)288 - Consolidated annual accounts of the EU for the financial year 2019.
source COM(2020)288 EN
date 26-06-2020
EUROPEAN COMMISSION

Contents

1.

Brussels, 26.6.2020 COM(2020) 288 final


COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS

CONSOLIDATED ANNUAL ACCOUNTS OF THE EUROPEAN UNION FOR THE

FINANCIAL YEAR 2019

CONTENTS

2.

FOREWORD ............................................................................................... 2


EUROPEAN UNION POLITICAL AND FINANCIAL FRAMEWORK, GOVERNANCE

AND ACCOUNTABILITY ............................................................................... 3

NOTE ACCOMPANYING THE CONSOLIDATED ACCOUNTS ............................... 10

HIGHLIGHTS OF THE FINANCIAL YEAR 2019 ............................................... 11

CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES ............ 13

BALANCE SHEET ................................................................................... 15

STATEMENT OF FINANCIAL PERFORMANCE .............................................. 16

CASHFLOW STATEMENT ......................................................................... 17

STATEMENT OF CHANGES IN NET ASSETS ............................................... 18

NOTES TO THE FINANCIAL STATEMENTS ................................................. 19

FINANCIAL STATEMENT DISCUSSION AND ANALYSIS ................................... 96

BUDGETARY IMPLEMENTATION REPORTS AND EXPLANATORY NOTES ........... 110

GLOSSARY ............................................................................................ 162

LIST OF ABBREVIATIONS ........................................................................ 166

Annual accounts of the European Union 2019

FOREWORD

3.

It is my pleasure to present the 2019


annual accounts of the European Union. They provide a complete

overview of the EU finances and the

implementation of the EU budget for the last year, including

information on

contingent liabilities, financial commitments and other obligations of the Union. Reflecting the multiannual nature of the Union’s activities, they offer explanations of the key financial figures and their evolution. The consolidated annual accounts of the European Union are part of the

Commission’s integrated financial and

accountability reporting package and form an essential part of our highly developed system of financial accountability.

The EU budget proved once more that it means added value for citizens, companies and regions: despite its limited amount, representing around 2 % of all public spending in the Union, it complements national budgets and supports our common political priorities.

4.

The 2019 budget was the penultimate budget of the current multiannual financial framework (MFF). The implementation of almost all


programmes was at cruising speed, with the exception of new programmes, such as the European Defence Industrial Development

Programme (EDIDP), or actions for which the legislative process finished recently. The

implementation of the EU budget totalled EUR 178.8 billion in commitment appropriations, and EUR 159.1 billion in payment appropriations.

In line with the European Commission proposal of May 2018, a significant portion of the 2019 budget went to programmes to stimulate the creation of jobs, especially for young people, and to boost growth, strategic investments and convergence. The EU has also continued

supporting the efforts to effectively deal with the migration challenge, both inside and outside the EU.

Measures to support economic growth and reduce the economic gaps between regions amounted to nearly half of the funds committed. EU funding contributed EUR 12.4 billion to research and innovation under Horizon 2020, including in the field of high-performance

computing. The budget also proved in other areas that it is an investment in the future: it increased expenditure on education and training by 20 % for Erasmus+ as compared to 2018 and by 37 % for the Connecting Europe Facility, which fosters transport and digital infrastructure. Support for agriculture and rural areas remained stable at EUR 57.9 billion, contributing also to the fight against climate change and to the promotion of sustainable growth.

5.

The 2019 budget provided the necessary


flexibility to address the internal aspect of migration issues, with a total of EUR 1.2 billion support from the Asylum, Migration and

Integration Fund, along with EUR 533 million for border management and security from the Internal Security Fund. A total of EUR 5 million was also allocated to the creation of the new European Public Prosecutor’s Office, set up to prosecute crimes against the EU budget,

6.

including fraud, money laundering and


corruption.

7.

Even before the Coronavirus crisis the EU Budget 2019 showed the importance of a functioning multiannual financial framework


which provides the necessary means and

flexibility to act and to react to upcoming challenges. This flexibility will also play a role for the next multiannual financal framework, which is at the heart of the recovery plan for Europe.

8.

The consolidated annual accounts of the


European Union are produced in accordance with

International Public Sector Accounting

Standards. In order to uphold these standards, the Commission is consistently improving its rules and procedures, organisational structure and agility. Reporting consistently and

9.

effectively ensures legal compliance and


increases the accountability of EU spending. It helps to engage with citizens and with other stakeholders, and to maintain their confidence and trust in the European Union.

Johannes Hahn

Commissioner for Budget and Human Resources

Annual accounts of the European Union 2019

EUROPEAN UNION POLITICAL AND FINANCIAL FRAMEWORK, GOVERNANCE AND ACCOUNTABILITY

The European Union (EU) is a Union on which the Member States confer competences to attain objectives they have in common. The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.

1.

POLITICAL AND FINANCIAL FRAMEWORK

EU Treaties

The overarching objectives and principles that guide the Union and the European institutions are defined in the Treaties. The Union and the EU institutions may only act within the limits of the competences conferred by the Treaties so as to attain the objectives set out therein and must do this in accordance with the principles1 of subsidiarity and proportionality. To attain its objectives and carry out its policies, the Union provides itself with the necessary financial means. The Commission is responsible for promoting the general interest of the Union which includes executing the budget and managing programmes in cooperation with the Member States and in accordance with the principle of sound financial management.

The EU pursues the objectives established by the Treaty with a number of tools, one of which is the EU budget. Others are, for example, a common legislative framework or joint policy strategies.

Commission political priorities

10.

6 HEADLINE AMBITIONS


The political priorities of the Commission are defined in the political guidelines set by the President of the Commission. Under President von der Leyen, the Commission which took office on 1 December 2019 will focus on the following six headline ambitions:

11.

A European Green Deal


– Striving to be the first climate-neutral continent

12.

An economy that works for people


– Working for social fairness and prosperity

13.

A Europe fit for the digital age


– Empowering people with a new generation of technologies

14.

Promoting our European way of life


– Building a Union of equality in which we all have the same access to opportunities

15.

A stronger Europe in the world


– Europe to strive for more by strengthening our unique brand of responsible global leadership

16.

A new push for European democracy


– Nurturing, protecting and strengthening our democracy

Under the principle of subsidiarity, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States but can rather, by reason of the scale or effects, be better

Annual accounts of the European Union 2019

The previous Commission focused on ten priorities set by former President Jean-Claude Juncker and in line with Europe 2020, the EU’s long-term growth strategy at the time:

A new boost for jobs, growth and investment;

A connected digital single market; A resilient Energy Union with a forward-looking climate change policy;

A deeper and fairer internal market with a strengthened industrial base; A deeper and fairer Economic and Monetary Union (EMU);

17.

A balanced and progressive trade policy


to harness globalisation;

18.

An area of justice and fundamental


rights based on mutual trust;

Towards a new policy on migration;

Europe as a stronger global actor;

A Union of democratic change.

2030 Agenda for

Sustainable

Development

The 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals, adopted by the United Nations in September 2015, have given a new impetus to global efforts to achieve sustainable development. The EU played an important role in shaping the 2030 Agenda, reflecting the fact that sustainable development has long been at the heart of the European project. The Sustainable Development Goals are firmly anchored in the EU Treaties and mainstreamed in all the EU policies and initiatives. The EU budget plays an essential role in addressing many sustainability challenges including poverty, youth unemployment, health and well-being, climate change, loss of biodiversity, sustainable energy and migration.

Multiannual financial

framework and

spending programmes

The policies supported by the EU budget are implemented in accordance with the multiannual financial framework (MFF) and corresponding sectoral legislation defining spending programmes. These translate the EU’s political priorities into financial terms over a period long enough to be effective and to provide a coherent long-term perspective for beneficiaries of EU funds and co-financing national authorities. Maximum annual amounts (ceilings) are set for EU expenditure as a whole and for the main categories of expenditure (headings). The sum of the ceilings of all headings gives the total ceiling for commitment appropriations. The multiannual financial framework is adopted by unanimity indicating the agreement of all Member States to the objectives and the level of spending (maximum level of budget commitments and payments), with the consent of the European Parliament. The current MFF covers the period 2014-2020.

Interinstitutional agreement

19.

The multiannual financial framework is complemented by the


interinstitutional agreement2, which is a political agreement between the

20.

European Parliament, the Council and the Commission. The purpose of this


agreement, adopted in 2013 in accordance with Article 295 of the Treaty on

the Functioning of the European Union (TFEU), is to implement budgetary discipline, to improve the

functioning of the annual budgetary procedure and cooperation between the institutions on budgetary

matters, as well as to ensure sound financial management.

The annual budget is prepared by the Commission and usually agreed by mid-December by the European Parliament and the Council, based on the procedure of Article 314 TFEU. According to the principle of budgetary equilibrium, total revenue must equal total expenditure (payment appropriations) for a given financial year.

Annual budget

The main sources of funding of the EU are own resources revenues which are complemented by other revenues. There are three types of own resources: traditional own resources (such as custom duties and sugar levies), the own resource based on value added tax (VAT) and the own resource based on gross national income (GNI). Other revenues arising from the activities of the EU (e.g. competition fines) normally represent less than 10 % of total revenue. The overall amount of own resources needed to finance the budget is determined by total expenditure less other revenue. In the current MFF the total amount of own resources cannot exceed 1.20 % of the sum of gross national income (GNI) of the Member States.


Management modes

Annual accounts of the European Union 2019

The EU budget is implemented in three management modes which determine how the money is paid out and managed:

Shared management: the vast proportion of the budget is managed under a system of shared management by the Commission in cooperation with the Member States, notably in the areas of structural funds and agriculture.

Direct management: the Commission also manages programmes itself and can delegate the implementation of specific programmes to executive agencies.

Indirect management: Expenditure decisions can also be indirectly managed via other bodies within or outside the EU. The Financial Regulation and/or delegation agreements define the necessary control and reporting mechanisms by these entities and the supervision by the Commission where budget implementation tasks are entrusted to national agencies, the European Investment Bank Group, third countries, international organisations (e.g. the World Bank or the United Nations) and other entities (e.g. EU decentralised agencies, Joint Undertakings).

Financial Regulation

The Financial Regulation (FR) 3 applicable to the general budget is a central act in the regulatory architecture of the EU´s finances. It defines in detail the financial rules applicable to the execution of the EU budget and the roles of the different actors involved in ensuring that the money is used soundly and

achieves the objectives set.

2. GOVERNANCE AND ACCOUNTABILITY

2.1. INSTITUTIONAL STRUCTURE

The EU has an institutional framework which aims to promote its values, advance its objectives, serve its interests, those of its citizens and those of the Member States, and ensure the consistency, effectiveness and continuity of its policies and actions. The organisational structure consists of institutions, agencies and other EU bodies, which are included in the EU consolidated accounts as far as the consolidation criteria as set out in the Financial Regulation and the applicable accounting rules are met (please refer to note 9 for the list of entities included in the scope of consolidation).

The European Parliament, jointly with the Council, exercises legislative and budgetary functions. The Commission is politically accountable to the European Parliament. The Council also carries out policy-making and coordinating functions within the general political direction and priorities of the Union set by the European Council.

The Commission is responsible for planning, preparing and proposing legislation; for managing EU policies, including the monitoring of implementation of EU legislation and ensuring its enforcement; for allocating EU funding and managing financing programmes; and for representing the EU internationally.

The Commission implements the budget, in large part in cooperation with the Member States4. Together, they ensure that the appropriations are used in accordance with the principles of sound financial management. Regulations lay down the control and audit obligations of the Member States when they share the implementation of the budget and the resulting responsibilities. They also lay down the responsibilities and detailed rules for each of the EU’s institution as concerns their own expenditure.

21.

Regulation (EU, Euratom) No 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the



3

Annual accounts of the European Union 2019

2.2. THE COMMISSION'S GOVERNANCE STRUCTURE

The Commission has a unique governance system, with a clear distinction between political and administrative oversight structures and well-defined lines of responsibility and financial accountability5.

The Commission's internal functioning is based on a number of key principles underpinning good governance: clear roles and responsibilities, a strong commitment to performance management and compliance with the legal framework, clear accountability mechanisms, a high quality and inclusive regulatory framework, openness and transparency, and high standards of ethical behaviour.

The Commission performs its functions under the leadership of the College of Commissioners, which sets priorities and takes overall political responsibility for the work of the Commission. The President decides on the internal organisation of the Commission, ensuring that it acts consistently, efficiently and as a collegiate body. The internal arrangements create a structure of robust controls and management tools which allow the College of Commissioners to take political responsibility for the work of the Commission, namely the decisions it takes as well as for coordinating, executive and management functions, as laid down in the Treaties.

The College delegates the operational implementation of the budget and finanical management to the Directors-General and Heads of Service who lead the administrative structure of the Commission6. This decentralised approach creates an administrative culture that encourages civil servants to take responsibility for activities over which they have control and requires them to provide assurance as concerns the activities for which they are accountable.

The central services support the Directors-General and Heads of Service in the exercise of their responsibilities. In particular, the Corporate Management Board provides coordination, oversight, advice and strategic orientations on corporate management issues, in areas including the management of financial and human resources, risk management, performance management, IT governance, cyber- and physical security, business continuity, communication and information management.7

This governance system is based on the Treaties and has evolved over time to adapt to a changing environment and to remain in line with best practice as set out in relevant international standards8. The further streamlining and strengthening of the arrangements introduced in 20189 took into account audit work by the European Court of Auditors10 and the Commission’s Internal Audit Service. As required by the Financial Regulation (Article 247), the Annual Management and Performance Report for the EU budget includes information on the key governance arrangements in the Commission.

2.3. PERFORMANCE FRAMEWORK OF THE EU BUDGET

Implementing robust performance frameworks is essential for ensuring a strong focus on results, European level added value and the sound management of EU programmes. The performance framework for the EU budget is highly developed, and ranks higher than that of any individual country assessed by the Organisation for Economic Co-operation and Development (OECD) in its standard index of performance budgeting frameworks.

The EU budget performance framework reports on several types and levels of strategic goals, objectives and indicators. It also takes account of the complementarity and mainstreaming of policies (such as addressing climate change or gender equality) and programmes and the key role of the Member States in implementing the EU budget.

22.

For more details see Communication to the Commission from President Juncker and First Vice-President


Timmermans: Governance in the European Commission, C(2017) 6915 final of 11 October 2017, URL:

https://ec.europa.eu/info/sites/info/files/c_2017_6915_final_en.pdf.

As a result, the term European Commission is used to denote both the institution – the College – formed by the

23.

Members of the Commission, and its administration managed by the Directors-General of its departments (and


heads of other administrative structures such as services, offices and executive agencies).

See Commission Decision of 21 November 2018 on the Corporate Management Board, C (2018) 7706 final.

E.g. the Commission’s internal control principles are based on the COSO Internal Control principles.

https://ec.europa.eu/info/publications/governance-in-the-commission_en. For more details see Communication to

the Commission C(2018)7704 ‘Streamlining and strengthening corporate governance within the European

5

6

Annual accounts of the European Union 2019

• Objectives, indicators and targets are included in the programmes' legal bases and every year the Commission reports on them through the programme statements that accompany the draft budget. The latter provide the information necessary for understanding the execution of programmes and measuring their performance; this includes the long-term financial commitments under the multiannual financial framework, programme performance baselines (starting points for policy action), targets (to be achieved at the end of the multi-annual programming period), and intermediate milestones.

• To ensure resources are allocated to priorities and that every action brings high performance and added value, the Commission promotes a performance culture. Moreover, over the past years it has developed an approach that promotes a better balance between compliance and performance.

• The Annual Management and Performance Report for the EU budget provides a comprehensive overview on the performance, management and protection of the EU budget. It explains how the EU budget supports the European Union’s political priorities, the results achieved with the EU budget, and the role the Commission plays in ensuring and promoting the highest standards of budgetary and financial management.

These elements place the budget authority in a strong position to factor in performance information during the annual budgetary procedure.

2.4. THE COMMISSION’S FINANCIAL MANAGEMENT

In the Commission, the roles and responsibilities in financial management are clearly defined (e.g. in the Financial Regulation and the Internal Rules11) and applied accordingly. As authorising officers by delegation, the Commission’s Directors-General and Heads of Service are responsible for the sound financial management of EU resources, compliance with the provisions of the Financial Regulation, risk management and establishing an appropriate internal control framework.

The responsibility of the Authorising Officers covers the entire management process, from determining what needs to be done to achieve the policy objectives set by the institution to managing the activities from both an operational and a sound financial management standpoint. Tasks can further be delegated to Directors, Heads of Unit and others, who thereby become Authorising Officers by Sub-Delegation. Each authorising officer by delegation may rely on one or two directors in charge of risk management and internal control to oversee and monitor the implementation of internal control systems.

The Commission’s central services provide guidance and advice and promote best practices, including through the work of the Corporate Management Board.

The Financial Regulation requires each authorising officer to prepare an annual activity report (‘AAR’) on what has been achieved and on internal control and financial management during the year. The AAR includes a declaration that resources have been used based on the principles of sound financial management and that control procedures are in place which provide the necessary guarantees concerning the legality and regularity of the underlying transactions. At Commission level, the Annual Management and Performance Report for the EU budget is the main instrument through which the College of Commissioners assumes political responsibility for the financial management of the EU budget.

The Accounting Officer of the Commission is centrally responsible for treasury management, recovery procedures, laying down accounting rules based on International Public Sector Accounting Standards and methods, validating accounting systems and the preparation of the Commission's and consolidated annual accounts of the EU. Furthermore, the Accounting Officer is required to sign the annual accounts declaring that they present fairly, in all material aspects, the financial position, the results of the operations and the cash flows of the Union. The annual accounts are adopted by the College of Commissioners. The Accounting Officer is an independent function and bears a major responsibility as regards financial reporting in the Commission.

Annual accounts of the European Union 2019

The Internal Auditor of the Commission is likewise a centralised and independent function and provides independent advice, opinions and recommendations on the quality and functioning of internal control systems inside the Commission, EU agencies and other autonomous bodies.

The Audit Progress Committee ensures the independence of the Internal Auditor and monitors the quality of internal audit work and the follow-up given by the Commission to internal and external audit recommendations, as well as to the European Court of Auditors’ discharge-related findings and recommendations on the reliability of the annual consolidated EU accounts. The advisory role of the committee contributes to the overall further improvement of the Commission’s effectiveness and efficiency in achieving its goals and facilitates the College’s oversight of the Commission’s governance, risk management, and internal control practices.

2.5. FINANCIAL REPORTING

Reporting on the EU budget is delivered through the Integrated Financial and Accountability

Reporting package which brings together comprehensive information on the implementation, performance, results, financial management and protection of the EU budget. This comprises the consolidated annual accounts of the EU, the Annual Management and Performance Report for the EU budget (which includes an evaluation on the Union’s finances based on the results achieved), the annual report on internal audits carried out, a long-term forecast of future inflows and outflows covering the next five years and the report on the follow-up to the discharge. The Integrated Financial and Accountability Reporting package provides the public with a comprehensive view of the financial and operational situation of the EU budget each year.

The consolidated annual accounts of the EU provide financial information on the activities of the institutions, agencies and other bodies of the EU from both an accrual accounting and budgetary perspective. These accounts do not encompass the annual accounts of Member States.

The consolidated annual accounts of the EU consist of two separate but linked parts:

• the consolidated financial statements; and

• the reports on implementation of the budget, which provide an aggregated record of budget implementation.

In addition, the consolidated annual accounts of the EU are accompanied by a Financial Statement Discussion and Analysis (FSDA), which summarises significant changes and trends in the financial statements and explains significant risks and uncertainties the EU has faced and needs to address in future.

Reporting and Accountability in the Commission:

Integrated Financial & Accountability Reporting Article 247 FR

• Consolidated Annual Accounts of the EU

• Annual Management and Performance Report for the EU budget (incl. reporting on the evaluation of the EU finances)

Annual internal audit report

A long-term forecast of future in- and outflows for five years

Report on the follow up to the discharge

Other reports

Communication package at the occasion of the State of the Union address

General Report on the activities of the EU

Annual Activity Reports of the Directorates-General

Report on Budgetary and Financial Management


Annual accounts of the European Union 2019

2.6. EXTERNAL AUDIT AND DISCHARGE PROCEDURE

In line with the principles of sound financial management, funds must be managed in an effective, efficient and economic manner. An accountability framework based on comprehensive reporting, external audit and political control exists to provide reasonable assurance that EU funds are spent well in a proper manner.

Every year the European Court of Auditors, based on a systematic and thorough approach, examines the reliability of the accounts, whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management and the qualitative aspects of budgeting, including the performance dimension, have been sound. The publication of the annual report of the European Court of Auditors is the starting point for the discharge procedure. The auditors also prepare special reports on specific spending or policy areas, or on budgetary or management issues.

The European Parliament decides, after a recommendation by the Council, on whether or not to provide its final approval, known as ‘granting discharge’, on the way the Commission implemented the EU budget in a given year. The annual discharge procedure ensures that the Commission is held politically accountable for the implementation of the EU budget.

The decision on the discharge is also based on the Commission’s integrated financial and accountability reporting, on hearings of Commissioners and on the replies provided to written questions addressed to the Commission.

Annual accounts of the European Union 2019

NOTE ACCOMPANYING THE CONSOLIDATED ACCOUNTS

The consolidated annual accounts of the European Union for the year 2019 have been prepared on the basis of the information presented by the institutions and bodies under Article 246 i of the Financial Regulation applicable to the general budget of the European Union. I hereby declare that they were prepared in accordance with Title XIII of this Financial Regulation and with the accounting principles, rules and methods set out in the notes to the financial statements.

I have obtained from the accounting officers of these institutions and bodies, who certified its reliability, all the information necessary for the production of the accounts that show the European Union's assets and liabilities and the budgetary implementation.

I hereby certify that based on this information, and on such checks as I deemed necessary to sign off the accounts of the European Commission, I have a reasonable assurance that the accounts present fairly, in all material aspects, the financial position, the results of the operations and the cashflows of the European Union.

24.

Rosa ALDEA BUSQUETS


Accounting Officer of the Commission

18 June 2020

Annual accounts of the European Union 2019

HIGHLIGHTS OF THE FINANCIAL YEAR 2019

25.

Implementation of the 2019 Union budget


The EU budget has an important role to support the delivery of the Union's policies and priorities. Despite its limited amount, representing around 2% of all public spending in the Union, it complements national budgets and has a clear focus on investment and additionality. It is a key tool among the wide set of European-level policy and regulatory instruments, to implement policy priorities which all EU members have agreed upon, translated into a Multiannual Financial Framework containing the different programmes and maximum expenditure ceilings.

The EU budget for 2019, adopted on 12 December 2018, confirms that the EU is directing money to where the needs are. In 2019, and in line with the European Commission proposal of May 2018, the biggest part of the EU budget went to stimulate the creation of jobs, especially for young people, and to boost growth, strategic investments and convergence. The EU has also continued supporting the efforts to effectively deal with the migration challenge, both inside and outside the EU.

The 2019 adopted budget contributed to the strength and resilience of the European economy and to promoting solidarity and security both within and beyond its borders. The 2019 budget was the penultimate budget of the current multiannual financial framework (MFF). The implementation of almost all programmes was at cruising speed, with the exception of new programmes, such as the European Defence Industrial Development Programme (EDIDP), or actions for which the legislative process finished recently.

The implementation of the EU budget in 2019 totalled EUR 178.8 billion in commitment appropriations, and EUR 159.1 billion in payment appropriations. This implementation can be considered satisfactory, with only minor adjustments made throughout the year. After amounts carried over to 2020, the implementation reached 99.4% of commitment appropriations and 99.5% of payment appropriations.

Measures to support economic growth and reduce the economic gaps between regions amounted to nearly half of the funds committed. EU funding contributed EUR 12.4 billion to research and innovation under Horizon 2020, including in the field of high-performance computing. The budget increased for education and training (20% more for Erasmus+ than in 2018) and transport and digital infrastructure (37% more for the Connecting Europe Facility). Support for agriculture and rural areas remained stable at EUR 57.9 billion, contributing also to the fight against climate change and to the promotion of sustainable growth.

The 2019 budget provided the necessary flexibility to address the internal aspect of migration issues, with a total of EUR 1.2 billion support from the Asylum, Migration and Integration Fund, along with EUR 533 million for border management and security from the Internal Security Fund. A total of EUR 5 million was also allocated to the creation of the new European Public Prosecutor’s Office, set up to prosecute crimes against the EU budget, including fraud, money laundering and corruption.

26.

Financial Statements - highlights


Balance sheet

• Under Property, Plant and Equipment, the four satellites launched in 2018 successfully passed the in-orbit testing in 2019. They have been added to the operational constellation in 2019, bringing it up to 26 satellites - see note 2.2.

• Available for Sale financial assets increased by EUR 3.0 billion, due to the continued funding of the EFSI & EFSD guarantee funds, as well as Horizon 2020 Financial Instruments. Loans decreased by EUR 1.3 billion following the repayment of BOP loans by Romania and Latvia, offset somewhat by new MFA loans granted - see note 2.4.

• Pre-financing (i.e. advances paid to beneficiaries of EU funds) increased slightly by EUR 1.5 billion


Annual accounts of the European Union 2019

• Overall the total Receivables & Recoverables amounts remained at a similar level to last year, being EUR 24.0 billion - see note 2.6.

• A fall in the long-term interest rate used to value employee benefit obligations (the so-called discount rate), becoming negative for the first time, led to a significant increase in the year-end liability, an increase of EUR 17.2 billion - see note 2.9.

• The repayment of BOP borrowings of EUR 1.5 billion drove the decrease in financial liabilities, somewhat offset by new borrowings linked to MFA loans granted - see note 2.11.

• Payables and accruals remained at a similar level to 2018, EUR 94.1 billion in total - see notes 2.12 and 2.13.

27.

Statement of Financial Performance


• On the revenue side there were EUR 3.0 billion higher GNI revenue following adjustments made for past amounts (mostly for years 2012 to 2017) as GNI bases were updated with real data. Fines income was EUR 4.3 billion in 2019 - see note 3.1/3.4.

• Expenses incurred under shared management increased by EUR 4.8 billion, led by better implementation of programmes under ERDF & Cohesion fund as the current MFF advances - see note 3.9.

28.

Contingent Liabilities


• Budgetary guarantees increased by EUR 2.7 billion due to the signing of new EFSI and ELM operations in 2019 that are guaranteed by the EU budget - see note 4.1.1.

Annual accounts of the European Union 2019

29.

EUROPEAN UNION FINANCIAL YEAR 2019


CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up.

Annual accounts of the European Union 2019

CONTENTS

30.

BALANCE SHEET .............................................................................................. 15


STATEMENT OF FINANCIAL PERFORMANCE ......................................................... 16

CASHFLOW STATEMENT ................................................................................... 17

STATEMENT OF CHANGES IN NET ASSETS .......................................................... 18

NOTES TO THE FINANCIAL STATEMENTS ............................................................ 19

31.

1. SIGNIFICANT ACCOUNTING POLICIES ..................................................... 20


32.

2. NOTES TO THE BALANCE SHEET ............................................................. 35


33.

3. NOTES TO THE STATEMENT OF FINANCIAL PERFORMANCE ........................ 63


34.

4. CONTINGENT LIABILITIES AND ASSETS .................................................. 70


35.

5. BUDGETARY AND LEGAL COMMITMENTS ................................................. 74


36.

6. FINANCIAL RISK MANAGEMENT .............................................................. 78


37.

7. RELATED PARTY DISCLOSURES .............................................................. 90


38.

8. EVENTS AFTER THE BALANCE SHEET DATE .............................................. 92


39.

9. SCOPE OF CONSOLIDATION ................................................................... 94


Annual accounts of the European Union 2019

BALANCE SHEET

NON-CURRENT ASSETS

Intangible assets

Property, plant and equipment

Investments accounted for using the equity method

Financial assets

Pre-financing

Exchange receivables and non-exchange recoverables

CURRENT ASSETS

Financial assets

Pre-financing

Exchange receivables and non-exchange recoverables

Inventories

Cash and cash equivalents

TOTAL ASSETS

EUR million

40.

31.12.2019 31.12.2018


2.1515446
2.211 38011 185
2.3591591
2.466 71465 231
2.526 24026 006
2.63 607

109 047

4 514
416
103 875
2.44 168
2.525 20623 968
2.620 36724 248
2.76873
2.819 74518 113

69 900 178 947

70 570 174 444

NON-CURRENT LIABILITIES

Pension and other employee benefits

Provisions

Financial liabilities

CURRENT LIABILITIES

Provisions

Financial liabilities

Payables

Accrued charges and deferred income

TOTAL LIABILITIES

2.9(97 659)(80 456)
2.10(3 710)(3 281)
2.11(53 071)

(154 440)

(1 116)
(53 289)
(137 025)
2.10(852)
2.11(1 446)(2 617)
2.12(27 241)(32 227)
2.13(67 227)(63 186)

(97 030) (251 470)

(98 882) (235 907)

NET ASSETS

(72 523) (61 463)

Reserves

Amounts to be called from Member States*

NET ASSETS

2.14 2.15

5 037 (77 560)

(72 523)

4 961 (66 424)

(61 463)

The European Parliament adopted a budget on 4 December 2019 which provides for the payment of the Union's short-term liabilities from own resources to be collected by, or called up from, the Member States in 2020. Additionally, under Article 83 of the Staff Regulations (Council Regulation 259/68 of 29 February 1968 as amended), the Member States shall jointly guarantee the liability for pensions.

41.

Note



Annual accounts of the European Union 2019

STATEMENT OF FINANCIAL PERFORMANCE

REVENUE

Revenue from non-exchange transactions

GNI resources

Traditional own resources

VAT resources

Fines

Recovery of expenses

Other

Revenue from exchange transactions

Financial revenue Other

Total Revenue

EXPENSES

Implemented by Member States

European Agricultural Guarantee Fund

European Agricultural Fund for Rural Development and

other rural development instruments

European Regional Development Fund and Cohesion Fund

European Social Fund

Other Implemented by the Commission, executive agencies and trust funds

Implemented by other EU agencies and bodies Implemented by third countries and international organisations

Implemented by other entities Staff and pension costs Finance costs Other expenses

Total Expenses

ECONOMIC RESULT OF THE YEAR

3.7 3.8

3.9

42.

2019


157 174

1 817 1 298

3 116

160 289

(155 493) 4 796

EUR million 2018

3.1108 820105 780
3.221 23522 767
3.318 12817 624
3.44 2916 740
3.52 6272 215
3.62 0723 312

158 438

3 115 1 379

4 494

162 932

(43 951)(43 527)
(13 541)(13 149)
(35 178)(30 230)
(11 218)(11 935)
(2 608)(2 826)
3.10(18 942)(17 551)
3.11(3 131)(3 396)
3.11(4 085)(4 016)
3.11(2 875)(3 569)
3.12(11 366)(10 929)
3.13(1 491)(1 677)
3.14(7 109)(6 208)

(149 014) 13 918

Annual accounts of the European Union 2019

CASHFLOW STATEMENT

Economic result of the year

Operating activities

Amortisation

Depreciation

(Increase)/decrease in loans

(Increase)/decrease in pre-financing

(Increase)/decrease in exchange receivables and non-exchange

recoverables

(Increase)/decrease in inventories

Increase/(decrease) in pension and other employee benefits

Increase/(decrease) in provisions

Increase/(decrease) in financial liabilities

Increase/(decrease) in payables

Increase/(decrease) in accrued charges and deferred income

Prior year budgetary surplus taken as non-cash revenue

Remeasurement of employee benefits liability (non-cash movement not

included in statement of financial performance)

Other non-cash movements

Investing activities

(Increase)/decrease in intangible assets and property, plant and

equipment

(Increase)/decrease in investments accounted for using the equity

method

(Increase)/decrease in available for sale financial assets

(Increase)/decrease in financial assets at fair value through surplus or

deficit

NET CASHFLOW

Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at year-end

EUR million
20192018
4 79613 918
107104
1 022998
1 2551 041
(1 472)(947)
691(12 299)
5222
17 2037 334
693594
(1 389)(1 007)
(4 985)(6 821)
4 041(716)
(1 803)(556)
(14 164)(4 396)
111(71)
(1 392)(1 583)
(1)(9)
(2 964)(1 811)
(121)7
1 633(5 998)
1 633(5 998)
18 11324 111
19 74518 113

Annual accounts of the European Union 2019

STATEMENT OF CHANGES IN NET ASSETS

43.

Amounts to be called from Member States Accumulated Surplus/(Deficit)


BALANCE AS AT 31.12.2017

Movement in Guarantee Fund reserve

Fair value movements

Remeasurements in employee benefits liabilities

Other

2017 budget result credited to Member States Economic result of the year

BALANCE AS AT 31.12.2018

Movement in Guarantee Fund reserve

Fair value movements

Remeasurements in employee benefits liabilities

Other

2018 budget result credited to Member States Economic result of the year

BALANCE AS AT 31.12.2019

44.

Other reserves Fair value reserve


EUR million

45.

Net Assets


(75 234)4 598278(70 359)
(186)186--
--(47)(47)
(4 396)--(4 396)
30(54)-(24)
(556)--(556)
13 918--13 918
(66 424)4 730231(61 463)
(21)21--
--160160
(14 164)--(14 164)
56(105)-(49)
(1 803)--(1 803)
4 796--4 796
(77 560)4 646391(72 523)


Annual accounts of the European Union 2019

NOTES TO THE FINANCIAL STATEMENTS

Annual accounts of the European Union 2019

1. SIGNIFICANT ACCOUNTING POLICIES 1.1. LEGAL BASIS AND ACCOUNTING RULES

The accounts of the EU are kept in accordance with Regulation (EU, Euratom) No 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 July 2018, p.

1) hereinafter referred to as the ‘Financial Regulation’ (FR).

In accordance with article 80 of the Financial Regulation, the EU prepares its financial statements on the basis of accrual-based accounting rules that are based on International Public Sector Accounting Standards (IPSAS). These accounting rules, adopted by the Accounting Officer of the Commission, have to be applied by all the institutions and EU bodies falling within the scope of consolidation in order to ensure the internal consistency of the EU consolidated accounts.

46.

Application of new and amended European Union Accounting Rules (EAR)


New EAR which are effective for annual periods beginning on or after 1 January 2019

The following new EAR, adopted by the Accounting Officer of the Commission, became mandatorily effective for annual periods beginning on or after 1 January 2019:

• EAR 20 ‘Public Sector Combinations’, which is based on IPSAS 40 ‘Public Sector Combinations’, establishes the requirements for classifying, recognising and measuring public sector combinations, i.e. the bringing together of separate operations into one public sector entity.

The standard distinguishes beween two types of public sector combinations: amalgamations and acquisitions. An amalgamation is a public sector combination in which either no party to the combination gains control on one or more operations, or, in case one party to the combination does gain control, there is evidence that the combination has the economic substance of an amalgamation (the standard provides several indicators relating to the consideration and the decision-making process to allow for that assessment). An acquisition is a public sector combination in which one party to the combination gains control of one or more operations and there is evidence that the combination is not an amalgamation.

Public sector combinations which are classified as an amalgamation are accounted for by appliyng the modified pooling-of-interests method, which requires that the resulting entity shall recognise the identifiable assets, liabilities and any non-controllling interests subject to the combination at their carrying amount with a corresponding increase or decrease in net assets (i.e. without giving rise to goodwill).

Public sector combinations which are classified as acquisitions are accounted for by applying the acquisition method, which requires that the identifiable assets acquired and liabilities assumed are recognised at their acquisition-date fair-values, and any non-controlling interest in the acquired operation is recognised at the proportionate share of the acquired operations’ identifiable net assets. Unlike an amalgamation an acquisition gives rise to goodwill (measured as the excess of the consideration transferred and any non-controlling interest over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed).

The standard foresees distinct disclosure requirements in order to enable the users of the EU financial statements to evaluate the nature and financial effects of an amalgamation or acquisition, as well as the financial effects of adjustments recognised in the current reporting period relating to such transactions that occurred during the period or previous reporting periods.

Since there were no public sector combinations during the reporting period the new standard has no effect on the 2019 financial statements.

47.

New EAR adopted but not yet effective at 31 December 2019


Annual accounts of the European Union 2019

1.2. ACCOUNTING PRINCIPLES

The objective of financial statements is to provide information about the financial position, performance and cashflows of an entity that is useful to a wide range of users. For the EU as a public sector entity, the objectives are more specifically to provide information useful for decision-making, and to demonstrate the accountability of the entity for the resources entrusted to it. It is with these goals in mind that the present document has been drawn up.

The overall considerations (or accounting principles) to be followed when preparing the financial statements are laid down in EU accounting rule 1 ‘Financial Statements’ and are the same as those described in IPSAS 1: fair presentation, accrual basis, going concern, consistency of presentation, materiality, aggregation, offsetting and comparative information.

The qualitative characteristics of financial reporting are relevance, faithful representation (reliability), understandability, timeliness, comparability and verifiability.

1.3. CONSOLIDATION

48.

Scope of consolidation


The consolidated financial statements of the EU comprise all significant controlled entities, joint arrangements and associates. The complete list of consolidated entities can be found in note 9. It now comprises 52 controlled entities and 1 associate. Among the controlled entities are the EU institutions (including the Commission, but not the European Central Bank) and the EU agencies (except those of the former 2nd pillar, i.e. the Common and Foreign Security Policy). The European Coal and Steel Community in Liquidation (ECSC i.L.) is also considered as a controlled entity. The EU’s only associate is the European Investment Fund (EIF).

Entities falling under the scope of consolidation but immaterial to the EU consolidated financial statements as a whole need not be consolidated or accounted for using the equity method where to do so would result in excessive time or cost to the EU. Those entities are referred to as ‘Minor entities’ and are separately listed in note 9. In 2019, 7 entities have been classified as such minor entities.

49.

Controlled entities


In order to determine the scope of consolidation the control concept is applied. Controlled entities are entities for which the EU is exposed, or has right, to variable benefits from its involvement and has the ability to affect the nature and amount of those benefits through its power over the other entity. This power must be presently exercisable and must relate to the relevant activities of the entity. Controlled entities are fully consolidated. The consolidation begins at the first date on which control exists, and ends when such control no longer exists.

The most common indicators of control within the EU are: creation of the entity through founding treaties or secondary legislation, financing of the entity from the EU budget, the existence of voting rights in the governing bodies, audit by the European Court of Auditors and discharge by the European Parliament. An individual assessment for each entity is made in order to decide whether one or all of the criteria listed above are sufficient to result in control.

All material inter-entity transactions and balances between EU controlled entities are eliminated, while unrealised gains and losses on such transactions are not material and so have not been eliminated.

50.

Joint Arrangements


A joint arrangement is an agreement of which the EU and one or more parties have joint control. Joint control is the agreed sharing of control of an arrangement by way of a binding arrangement, which exists only when decisions about the relevant activities require the unanimous consent of parties sharing control. Joint agreements can be either joint ventures or joint operations. A joint venture is a joint arrangement that is structured through a separate vehicle and whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Participations in joint ventures are accounted for using the equity method (see note 1.5.4). A joint operation is a joint arrangement

Annual accounts of the European Union 2019

recognising in the EU’s financial statements its assets and liabilities, revenue and expense, as well as its share of assets, liabilities, revenue and expense jointly held or incurred.

51.

Associates


Associates are entities over which the EU has, directly or indirectly, significant influence but not exclusive or joint control. It is presumed that significant influence exists if the EU holds directly or indirectly 20 % or more of the voting rights. Participations in associates are accounted for using the equity method (see note 1.5.4).

52.

Non-consolidated entities the funds of which are managed by the Commission


The funds of the Joint Sickness Insurance Scheme for staff of the EU, the European Development Fund and the Participants Guarantee Fund are managed by the Commission on their behalf. However, since these entities are not controlled by the EU, they are not consolidated in its financial statements.

1.4. BASIS OF PREPARATION

Financial statements 31 December.

53.

are presented annually. The accounting year begins on 1 January and ends on


54.

1.4.1. Currency and basis for conversion


Functional and reporting currency

The financial statements are presented in millions of euros, unless stated otherwise, the euro being the EU’s functional currency.

55.

Transactions and balances


Foreign currency transactions are translated into euros using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of financial performance. Translation differences on non-monetary financial instruments classified as available for sale financial assets are included in the fair value reserve.

Different conversion methods apply to property, plant and equipment and intangible assets, which retain their value in euros at the rate that applied at the date when they were purchased.

Year-end balances of monetary assets and liabilities denominated in foreign currencies are converted into euros on the basis of the European Central Bank (ECB) exchange rates applying on 31 December:

56.

Euro exchange rates


Currency31.12.2019
BGN1.9558
CZK25.4080
DKK7.4715
GBP0.8508
HRK7.4395
HUF330.5300

57.

31.12.2018 Currency


1.9558 PLN

58.

31.12.2019 31.12.2018


25.7240 RON

7.4673 SEK

0.8945 CHF

7.4125 JPY

320.9800 USD

4.2568

4.783

10.4468

1.0854

121.9400

1.1234

4.3014

4.6635

10.2548

1.1269

125.8500

1.145

59.

1.4.2. Use of estimates


In accordance with IPSAS and generally accepted accounting principles, the financial statements necessarily include amounts based on estimates and assumptions by management based on the most


Annual accounts of the European Union 2019

financial instruments, accrued revenue and charges, provisions, degree of impairment of intangible assets and property, plant and equipment, net realisable value of inventories, contingent assets and liabilities. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known, if the change affects the period only, or that period and future periods, if the change affects both.

1.5. BALANCE SHEET

60.

1.5.1. Intangible assets


An intangible asset is an identifiable non-monetary asset without physical substance. An asset is identifiable if it is either separable (i.e. it is capable of being separated or divided from the entity, e.g. by being sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so), or arises from binding arrangements (including rights from contracts or other legal rights), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations).

Acquired intangible assets are stated at historical cost less accumulated amortisation and impairment losses. Internally developed intangible assets are capitalised when the relevant criteria of the EU Accounting Rules are met and the expenses relate solely to the development phase of the asset. The capitalisable costs include all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Costs associated with research activities, non-capitalisable development costs and maintenance costs are recognised as expenses as incurred.

Intangible assets are amortised on a straight-line basis over their estimated useful lives (3 to 11 years). The estimated useful lives of intangible assets depend on their specific economic lifetime or legal lifetime determined by an agreement.

61.

1.5.2. Property, plant and equipment


All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition, construction or transfer of the asset.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the EU and its cost can be measured reliably. Repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred.

Land is not depreciated as it is deemed to have an indefinite useful life. Assets under construction are not depreciated, as these assets are not yet available for use. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives, as follows:

62.

Type of asset Straight line depreciation rate


Buildings

Space assets

Plant and equipment

Furniture and vehicles

Computer hardware

Other

4 % to 10 %
8 % to 25 %
10 % to 25 %
10 % to 25 %
25 % to 33 %
10 % to 33 %

Gains or losses on disposals are determined by comparing proceeds less selling expenses with the carrying amount of the disposed asset and are included in the statement of financial performance.

Annual accounts of the European Union 2019

63.

Leases


A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. Leases are classified as either finance leases or operating leases.

Finance leases are leases where substantially all the risks and rewards incidental to ownership are transferred to the lessee. When entering a finance lease as a lessee, the assets acquired under the finance lease are recognised as assets and the associated lease obligations as liabilities as from the commencement of the lease term. The assets and liabilities are recognised at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Over the period of the lease term, the assets held under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. The minimum lease payments are apportioned between the finance charge (the interest element) and the reduction of the outstanding liability (the capital element). The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability, which is presented as current/non-current, as applicable. Contingent rents are charged as expenses in the period in which they are incurred.

An operating lease is a lease other than a finance lease, i.e. a lease where the lessor retains substantially all the risks and rewards incidental to ownership of an asset. When entering an operating lease as a lessee, the operating lease payments are recognised as an expense in the statement of financial performance on a straight-line basis over the lease term with neither a leased asset nor a leasing liability presented in the statement of financial position.

64.

1.5.3. Impairment of non-financial assets


An impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset's future economic benefits or service potential through amortisation or depreciation (as applicable). Assets that have an indefinite useful life are not subject to amortisation/depreciation and are tested annually for impairment. Assets that are subject to amortisation/depreciation are tested for impairment whenever there is an indication at the reporting date that an asset may be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable (service) amount. The recoverable (service) amount is the higher of an asset’s fair value less costs to sell and its value in use.

Intangible assets and property, plant and equipment residual values and useful lives are reviewed, and adjusted if appropriate, at least once per year. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly.

65.

1.5.4. Investments accounted for using the equity method


Participations in associates and joint ventures

Investments accounted for using the equity method are initially recognised at cost, with the initial carrying amount subsequently being increased or decreased to recognise further contributions, the EU’s share of the surplus or deficit of the investee, any impairments and dividends. The initial cost together with all movements give the carrying amount of the investment in the financial statements at the balance sheet date. The EU’s share of the investee’s surplus or deficit is recognised in the statement of financial performance, and its share of investee’s movements in equity is recognised in the reserves within net assets. Distributions received from the investment reduce the carrying amount of the asset.

If the EU's share of deficits of an investment accounted for using the equity method equals or exceeds its interest in the investment, the EU discontinues recognising its share of further losses (‘unrecognised losses’). After the EU’s interest is reduced to zero, additional losses are provided for and a liability is recognised only to the extent that the EU has incurred legal or constructive obligation or made payments on behalf of the entity.

If there are indications of impairment, a write-down to the lower recoverable amount is necessary. The recoverable amount is determined as described under note 1.5.3. If the reason for impairment ceases to

Annual accounts of the European Union 2019

In cases where the EU holds 20 % or more of an investment capital fund, it does not seek to exert significant influence. Such funds are therefore treated as financial instruments and categorised as available for sale financial assets.

Associates and joint ventures classified as minor entities (see note 1.3) are not accounted for under the equity method. EU contributions to those entities are accounted for as an expense of the period.

66.

1.5.5. Financial assets


Classification

The EU classifies their financial assets in the categories ‘financial assets at fair value through surplus or deficit’, ‘loans and receivables’, ‘held-to-maturity investments’ and ‘available for sale financial assets’. The classification of financial instruments is determined at initial recognition and re-evaluated at each balance sheet date.

(i) Financial assets at fair value through surplus or deficit

A financial asset is classified in the category ‘fair value through surplus or deficit’ if acquired principally for the purpose of being sold in the short term, or if so designated by the entity. Derivatives are also presented in this category. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the EU provides money, goods or services directly to a debtor with no intention of trading the receivable, or in case the EU is subrogated to the rights of the original lender following a payment made by the EU under a guarantee contract. Payments due within 12 months of the balance sheet date are classified as current assets. Payments due after 12 months from the balance sheet date are classified as non-current assets. Loans and receivables include term deposits with the original maturity above three months.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the EU has the positive intention and ability to hold to maturity. During this financial year, the EU did not hold any investments in this category.

(iv) Available for sale financial assets

Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are classified as either current or non-current assets, depending on the period of time the EU expects to hold them. Investments in entities that are neither consolidated nor accounted for using the equity method and other equity-type investments (e.g. Risk Capital Operations) are also classified as available for sale financial assets.

67.

Initial recognition and measurement


Purchases and sales of financial assets classified as ‘at fair value through surplus or deficit, ‘held-to-maturity’ or ‘available for sale’ are recognised on their trade-date – the date on which the EU commits to purchase or sell the asset. Cash equivalents and loans are recognised when cash is deposited in a financial institution or advanced to borrowers. Financial instruments are initially recognised at fair value. For all financial assets not carried at fair value through surplus or deficit, transactions costs are added to the fair value at initial recognition. Financial assets carried at fair value through surplus or deficit are initially recognised at fair value and transaction costs are expensed in the statement of financial performance.

The fair value of a financial asset on initial recognition is normally the transaction price (i.e. the fair value of the consideration received), unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique

Annual accounts of the European Union 2019

granted, its fair value can be estimated as the present value of all future cash receipts discounted using the prevailing market rate of interest for a similar instrument with a similar credit rating.

Loans granted are measured at their nominal amount, which is considered to be the fair value of the loan. The reasoning for this is as follows:

• The ‘market environment’ for EU lending is very specific and different from the capital market used to issue commercial or government bonds. As lenders in these markets have the opportunity to choose alternative investments, the opportunity possibility is factored into market prices. However, this opportunity for alternative investments does not exist for the EU, which is not allowed to invest money on the capital markets; it only borrows funds for the purpose of lending at the same rate. This means that there is no alternative lending or investment option available to the EU for the sums borrowed. Thus, there is no opportunity cost and therefore no basis of comparison with market rates. In fact, the EU lending operation itself represents the market. Essentially, since the opportunity cost ‘option’ is not applicable, the market price does not fairly reflect the substance of the EU lending transactions. Therefore, it is not appropriate to determine the fair value of EU lending with reference to commercial or government bonds.

• Furthermore, as there is no active market or similar transactions to compare with, the interest rate to be used by the EU for fair valuing its lending operations under the EFSM, BOP and other such loans, should be the interest rate charged.

• In addition, for these loans, there are compensating effects between loans and borrowings due to their back-to-back character. Thus, the effective interest for the loan equals the effective interest rate for the related borrowings. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance.

Financial instruments are derecognised when the rights to receive cashflows from the investments have expired or the EU has transferred substantially all risks and rewards of ownership to another party.

68.

Subsequent measurement


a) Financial assets at fair value through surplus or deficit are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the ‘financial instruments at fair value through surplus or deficit’ category are included in the statement of financial performance in the period in which they arise.

b) Loans and receivables are carried at amortised cost using the effective interest method. In the case of loans granted on borrowed funds, the same effective interest rate is applied to both the loans and borrowings since these loans have the characteristics of ‘back-to-back operations’ and the differences between the loan and the borrowing conditions and amounts are not material. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance.

c) Held to maturity assets are carried at amortised cost using the effective interest method. The EU currently holds no held to maturity investments.

d) Available for sale financial assets are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available for sale financial assets are recognised in the fair value reserve, except for translation differences on monetary assets, which are recognised in the statement of financial performance. When assets classified as available for sale financial assets are derecognised or impaired, the cumulative fair value adjustments previously recognised in the fair value reserve are recognised in the statement of financial performance. Interest on available for sale financial assets calculated using the effective interest method is recognised in the statement of financial performance. Dividends on available for sale equity instruments are recognised when the EU’s right to receive payment is established.

The fair values of quoted investments in active markets are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities and over-the-counter derivatives), the EU establishes a fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cashflow analysis, option pricing models and other valuation techniques commonly used by market participants.

Annual accounts of the European Union 2019

Investments in Venture Capital Funds, classified as available for sale financial assets, which do not have a quoted market price in an active market are valued at the attributable net asset value, which is considered as an equivalent of their fair value.

In cases where the fair value of investments in equity instruments that do not have a quoted market price in an active market cannot be reliably measured, these investments are valued at cost less impairment losses.

69.

Impairment of financial assets


A financial asset is impaired and a loss is recognised if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event (or events) has an impact on the estimated future cashflows of the financial asset that can be reliably estimated. The EU assesses at each reporting date whether there is objective evidence that a financial asset is impaired.

(a) Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cashflows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the statement of financial performance. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cashflows of a collateralised financial asset reflects the cashflows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the statement of financial performance.

(b) Assets carried at fair value

In the case of equity investments classified as available for sale financial assets, a significant or permanent (prolonged) decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the statement of financial performance – is removed from reserves and recognised in the statement of financial performance. Impairment losses recognised in the statement of financial performance on equity instruments are not reversed through the statement of financial performance. If, in a subsequent period, the fair value of a debt instrument classified as available for sale financial asset increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the statement of financial performance.

70.

1.5.6. Inventories


Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other directly attributable costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. When inventories are held for distribution at no charge or for a nominal charge, they are measured at the lower of cost and current replacement cost. Current replacement cost is the cost the EU would incur to acquire the asset on the reporting date.

71.

1.5.7. Pre-financing amounts


Pre-financing is a payment intended to provide the beneficiary with a cash advance, i.e. a float. It may be split into a number of payments over a period defined in the particular contract, decision, agreement or

Annual accounts of the European Union 2019

have the obligation to return the pre-financing advance to the EU. As the EU retains control over the prefinancing and is entitled to a refund for the ineligible part, the amount is presented as an asset.

Pre-financing is initially recognised on the balance sheet when cash is transferred to the recipient. It is measured at the amount of the consideration given. In subsequent periods pre-financing is measured at the amount initially recognised on the balance sheet less the eligible expenses (including estimated amounts where necessary) incurred during the period.

Interest on pre-financing is recognised as it is earned in accordance with the provisions of the relevant agreement. An estimate of the accrued interest revenue, based on the most reliable information, is made at the year-end and included in the balance sheet.

Other advances to Member States which originate from reimbursement by the EU of amounts paid as advances by the Member States to their beneficiaries (including ‘financial instruments under shared management’) are recognised as assets and presented under the heading ‘Pre-financing’. Other advances to Member States are subsequently measured at the amount initially recognised on the balance sheet less a best estimate of the eligible expenses incurred by final beneficiaries, calculated on the basis of reasonable and supportable assumptions.

The EU contributions to the trust funds of the European Development Fund or other unconsolidated entities are also classified as pre-financing since their purpose is to give a float to the trust fund to allow it to finance specific actions defined under the trust fund’s objectives. The EU contributions to trust funds are measured at the initial amount of the EU contribution less eligible expenses, including estimated amounts where necessary, incurred by the trust fund during the reporting period and allocated to the EU contribution in accordance with the underlying agreement.

72.

1.5.8. Exchange receivables and non-exchange recoverables


The EU Accounting Rules require a separate presentation of exchange and non-exchange transactions. To distinguish between the two categories, the term ‘receivables’ is reserved for exchange transactions, whereas for ‘non-exchange transactions’, i.e. when the EU receives value from another entity without directly giving approximately equal value in exchange, the term ‘recoverables’ is used (e.g. recoverables from Member States related to own resources).

Receivables from exchange transactions meet the definition of financial instruments and are thus classified as loans and receivables and measured accordingly (see note 1.5.5). The financial instruments notes disclosures concerning receivables from exchange transactions include accrued revenue and deferred charges from exchange transactions, as they are not material. A general write-down based on past experience is made for outstanding recovery orders not already subject to a specific write-down.

Recoverables from non-exchange transactions are carried at fair value as at the date of acquisition (adjusted for interest and penalties) less write-down for impairment. A write-down for impairment of recoverables from non-exchange transactions is established when there is objective evidence that the EU will not be able to collect all amounts due according to the original terms of recoverables from non-exchange transactions. The amount of the write-down is the difference between the asset’s carrying amount and the recoverable amount. The amount of the write-down is recognised in the statement of financial performance. A general write-down, based on past experience, is also made for outstanding recovery orders not already subject to a specific write-down. See note 1.5.14 concerning the treatment of accrued revenue at year-end. Amounts displayed and disclosed as recoverables from non-exchanges transactions are not financial instruments, as they do not arise from a contract that would give rise to a financial liability or equity instrument. However, in the notes to the financial statements recoverables from non-exchange transactions are disclosed together with receivables from exchange transactions where appropriate.

73.

1.5.9. Cash and cash equivalents


Cash and cash equivalents are financial instruments and include cash at hand, deposits held at call or at short notice with banks and other short-term highly liquid investments with original maturities of three months or less.

Annual accounts of the European Union 2019 1.5.10. Employee benefits

The EU provides a set of benefits (emoluments and social security) to employees. For accounting purposes these have to be classified into short-term and post-employment benefits.

74.

Short-term employee benefits


Short-term employee benefits are those benefits due to be settled before twelve months after the end of the reporting period in which employees rendered the service, such as salaries, annual and paid sick leaves, and other short-term allowances. Short-term employee benefits are recognised as an expense when the related service is provided. A liability is recognised for the amount expected to be paid if the EU has a present legal or constructive obligation to pay as a result of past service provided by the employee and the obligation can be estimated reliably.

75.

Post-employment benefits


The EU grants a set of post-employment benefits to employees, which include retirement, invalidity and survival pensions provided under the Pension Scheme of the European Officials (PSEO), as well as medical coverage provided under the Joint Sickness Insurance Scheme (JSIS) (see note 2.9). These benefits are provided under a single plan – although split in two schemes – and they must be treated similarly so as to give a fair presentation of the situation and reflect the economic reality:

i. Pension Scheme of European Officials (PSEO): The benefits granted under this notionally funded12

scheme relate to seniority, invalidity and survival, as well as, family allowances, death before retirement to those employees that work or worked in the EU Institutions, Agencies and other EU bodies or are survivors of deceased officials or pensioners. Staff contribute one third of the expected cost of these benefits from their salaries.

76.

ii. Joint Sickness Insurance Scheme (JSIS): Under this scheme, the EU provides health coverage for


staff of the European Commission, Institutions, Agencies and other EU bodies through the reimbursement of medical expenses. The benefits granted to the ‘inactives’ of this scheme (i.e. pensioners, orphans, etc.) are classified as post-employment benefits.

The EU also provides post-employment benefits to members of the EU institutions via separate pension schemes. These are shown under the heading ‘Other retirement benefit schemes’. Under these schemes the EU provides pension benefits to members of the Commission, Court of Justice and General Court, Court of Auditors, Council, European Parliament, Ombudsman, Data Protection Supervisor, Civil Service Tribunal. The EU provides health coverage to the members of the EU Institutions via the JSIS.

The above post-employment benefits qualify as defined benefit obligations of the EU and are calculated at each reporting date by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligation is performed annually using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

The post-employment benefits provided to EU staff are incorporated in a single plan comprising both a pension scheme (PSEO) and a sickness insurance scheme (JSIS), with the right to coverage under the JSIS scheme being dependent on having acquired the right to coverage under the PSEO scheme. Under the terms of this single plan, as set out in the Staff Regulation, certain entitlements, such as the right to a deferred and reduced pension under the PSEO scheme, are acquired after 10 years of service. However, the entitlements acquired under the single plan by the employee’s subsequent service are materially higher than those initial entitlements as reflected by subsequent annually accrued pension rights.

The PSEO is a notional (virtual) fund with defined benefits in which staff’s contributions serve to finance their future pensions. Although there is no actual investment fund, the amount that would have been collected by such a fund is considered to have been invested in the Member States’ long-term bonds and is reflected in the pension

12

Annual accounts of the European Union 2019

Therefore, in order to depict the economic substance of the underlying transaction required by the faithful representation qualitative characteristic of financial reporting as outlined in both EAR 1 and the IPSAS Conceptual Framework, the service cost incurred is accrued on a straight-line basis over staff’s estimated active service period, i.e. the period from the date when service by the employee first leads to benefits under the plan (whether or not the benefits are conditional on further service) until the date when further service by the employee will lead to no material amount of further benefits under the plan, other than from further salary increases. This approach is applied consistently to the benefits provided for under the single plan.

Remeasurements of the net defined benefit liability comprise actuarial gains and losses and the return on plan assets, and are recognised immediately in net assets.

The EU recognises the net interest expense (income) and other expenses related to the defined benefit plans in the statement of financial performance within the caption ‘staff and pension costs’.

When benefits provided are changed or curtailed, the resulting change in benefits that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of financial performance. Gains and losses on settlement are recognised when the settlement occurs. Past service cost is recognised immediately in the statement of financial performance, unless the changes are conditional on the employees remaining in service for a specified period of time.

77.

1.5.11. Provisions


Provisions are recognised when the EU has a present legal or constructive obligation towards third parties as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses. The amount of the provision is the best estimate of the expenses expected to be required to settle the present obligation at the reporting date. Where the provision involves a large number of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities (‘expected value’ method).

Provisions for onerous contracts are measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.

78.

1.5.12. Financial liabilities


Financial liabilities are classified as financial liabilities at fair value through surplus or deficit, financial liabilities carried at amortised cost or as financial guarantee liabilities.

Borrowings are composed of borrowings from credit institutions and debts evidenced by certificates. They are recognised initially at fair value, being their issue proceeds (fair value of consideration received) net of transaction costs incurred, then subsequently carried at amortised cost using the effective interest method; any difference between proceeds, net of transaction costs, and the redemption value is recognised in the statement of financial performance over the period of the borrowings using the effective interest method. In the case of loans granted on borrowed funds, the effective interest method may not be applied to loans and borrowings, based on materiality considerations. The transaction costs incurred by the EU and then recharged to the beneficiary of the loan are directly recognised in the statement of financial performance.

Financial liabilities categorised at fair value through surplus or deficit include derivatives where fair value is negative. They follow the same accounting treatment as financial assets at fair value through surplus or deficit, see note 1.5.5.

Financial guarantee liabilities are initially recognised at fair value, being the premium received. Subsequently, financial guarantee liabilities are measured at the higher of the best estimate of the expenses expected to be required to settle the financial guarantee liability and the amount initially recognised less, when appropriate, cumulative amortisation. The EU recognises a financial guarantee liability when it receives consideration for granting of the guarantee, that is at market terms, or when the fair value of the guarantee can be measured reliably. In case no active market for a directly equivalent guarantee contract exists, the EU discloses the guarantee given as a contingent liability (see note 1.7.2)

Annual accounts of the European Union 2019

Financial liabilities are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date.

EU trust funds that are considered as part of the Commission’s operational activities are accounted for in the Commission accounts and further consolidated in the EU annual accounts. Therefore, contributions from other donors to the EU trust funds fulfil the criteria of revenues from non-exchange transactions under conditions and they are presented as financial liabilities until the conditions attached to the contributions transferred are met, i.e. eligible costs are incurred by the trust fund. The trust fund is required to finance specific projects and return remaining funds at the time of winding-up. At the balance sheet date the outstanding contribution liabilities are measured at contributions received less the expenses incurred by the trust fund, including estimated amounts when necessary. For reporting purposes the net expenses are allocated to the contributions of other donors in proportion to net contributions paid as at 31 December. This allocation of contributions is only indicative. When the trust fund is wound up the actual split of remaining resources will be decided by the trust fund board.

79.

1.5.13. Payables


A significant amount of the payables of the EU are unpaid cost claims from beneficiaries of grants or other EU funding (non-exchange transactions). They are recorded as payables for the requested amount when the cost claim is received. Upon verification and acceptance of the eligible costs, the payables are valued at the accepted and eligible amount.

Payables arising from the purchase of goods and services are recognised at invoice reception for the original amount and corresponding expenses are entered in the accounts when the supplies or services are delivered and accepted by the EU.

80.

1.5.14. Accrued and deferred revenue and charges


Transactions and events are recognised in the financial statements in the period to which they relate. At year-end, if an invoice is not yet issued but the service has been rendered, the supplies have been delivered by the EU or a contractual agreement exists (e.g. by reference to a treaty), an accrued revenue will be recognised in the financial statements. In addition, at year-end, if an invoice is issued but the services have not yet been rendered or the goods supplied have not yet been delivered, the revenue will be deferred and recognised in the subsequent accounting period.

Expenses are also accounted for in the period to which they relate. At the end of the accounting period, accrued expenses are recognised based on an estimated amount of the transfer obligation of the period. The calculation of accrued expenses is done in accordance with detailed operational and practical guidelines issued by the Commission which aim at ensuring that the financial statements provide a faithful representation of the economic and other phenomena they purport to represent. By analogy, if payment has been made in advance for services or goods that have not yet been received, the expense will be deferred and recognised in the subsequent accounting period.

1.6. STATEMENT OF FINANCIAL PERFORMANCE

81.

1.6.1. Revenue


REVENUE FROM NON-EXCHANGE TRANSACTIONS

The vast majority of the EU’s revenue relates to non-exchange transactions:

82.

GNI based resources and VAT resources


Revenue is recognised for the period for which the Commission sends out a call for funds to the Member States claiming their contribution. They are measured at their ‘called amount’. As VAT and GNI resources are based on estimates of the data for the budgetary year concerned, they may be revised as changes occur until the final data are issued by the Member States. The effect of a change in estimate is included when determining the net surplus or deficit for the period in which the change occurred.

Annual accounts of the European Union 2019

83.

Traditional own resources


Recoverables from non-exchange transactions and related revenues are recognised when the relevant monthly ‘A’ statements (including duties collected and amounts due that are guaranteed and not contested) are received from the Member States. At the reporting date, revenue collected by the Member States for the period but not yet paid to the Commission is estimated and recognised as accrued revenue. The quarterly ‘B’ statements (including duties neither collected nor guaranteed, as well as guaranteed amounts that have been contested by the debtor) received from the Member States are recognised as revenue less the collection costs to which they are entitled. In addition, a value reduction is recognised for the amount of the estimated recovery gap.

84.

Fines


Revenue from fines is recognised when the EU’s decision imposing a fine has been taken and it is officially notified to the addressee. After the decision to impose a fine, the undertakings have two months from the date of notification:

85.

a) either to accept the decision, in which case they must pay the fine within the time limit laid down and the amount is definitively collected by the EU; or


b) not to accept the decision, in which case they lodge an appeal under EU law.

Even if appealed, the fine must be paid within the time limit of three months laid down as the appeal does not have suspensory effect (Article 278 TFEU). The cash received is used to clear the recoverable. However, subject to the agreement of the Commission’s Accounting Officer, the undertaking may present a bank guarantee for the amount instead. In that case the fine remains as a recoverable. If neither cash nor a guarantee is received and there are doubts about the undertaking’s solvency, a value reduction on the entitlement is recognised.

In case the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is disclosed as a contingent liability, or, if it appears probable that the General Court may not rule in favour of the EU, a provision is recognised to cover this risk. If a guarantee had been given instead, the outstanding recoverable is written down as required.

The accumulated interest received by the Commission on the bank accounts where received payments are deposited is recognised as revenue, and any contingent liability is increased accordingly.

Since 2010, all provisionally cashed fines are managed by the Commission in a specifically created fund (BUFI) and invested in financial instruments.

86.

REVENUE FROM EXCHANGE TRANSACTIONS


Revenue from the sale of goods and services is recognised when the significant risk and rewards of ownership of the goods are transferred to the purchaser. Revenue associated with a transaction involving the provision of services is recognised by reference to the stage of completion of the transaction at the reporting date.

87.

Interest revenue and expense


Interest revenue and expense are recognised in the statement of financial performance using the effective interest method. This is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest revenue or interest expense over the relevant period. When calculating the effective interest rate, the EU estimates cashflows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest revenue is recognised using the rate of interest to discount the future cashflows for the purpose of measuring the impairment loss.

Annual accounts of the European Union 2019

88.

Revenue from dividends


Revenue from dividends and similar distributions is recognised when the right to receive payment is established.

89.

1.6.2. Expenses


Expenses from non-exchange transactions account for the majority of the EU’s expenses. They relate to transfers to beneficiaries and can be of three types: entitlements, transfers under agreement and discretionary grants, contributions and donations.

Transfers are recognised as expenses in the period during which the events giving rise to the transfer occurred, as long as the nature of the transfer is allowed by regulation (Financial Regulation, Staff Regulations, or other regulation) or an agreement has been signed authorising the transfer, any eligibility criteria have been met by the beneficiary, and a reasonable estimate of the amount can be made.

When a request for payment or cost claim is received and meets the recognition criteria, it is recognised as an expense for the eligible amount. At year-end, incurred eligible expenses due to the beneficiaries but not yet reported are estimated and recorded as accrued expenses.

Expenses from exchange transactions arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the EU. They are valued at their original invoice amount. Furthermore, at the balance sheet date expenses related to the service delivered during the period for which an invoice has not yet been received or accepted are estimated and recognised in the statement of financial performance.

1.7. CONTINGENT ASSETS AND LIABILITIES

90.

1.7.1. Contingent assets


A contingent asset is a possible asset that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.

91.

1.7.2. Contingent liabilities


A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the EU, or a present obligation that arises from past events but is not recognised either because it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation, or in the rare circumstances where the amount of the obligation cannot be measured with sufficient reliability. A contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefits or service potential is remote.

1.8. CASHFLOW STATEMENT

Cashflow information is used to provide a basis for assessing the ability of the EU to generate cash and cash equivalents, and its needs to utilise those cashflows.

The cashflow statement is prepared using the indirect method. This means that the economic result for the financial year is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of revenue or expense associated with investing cashflows.

Cashflows arising from transactions in a foreign currency are recorded in the EU’s reporting currency

Annual accounts of the European Union 2019

The cashflow statement reports cashflows during the period classified by operating and investing activities (the EU does not have financing activities).

Operating activities are the activities of the EU that are not investing activities. These are the majority of the activities performed. Loans granted to beneficiaries (and the related borrowings, when applicable) are not considered as investing (or financing) activities as they are part of the general objectives and thus daily operations of the EU.

Investing activities are the acquisition and disposal of intangible assets and property, plant and equipment and of other investments which are not included in cash equivalents. Investing activities do not include loans granted to beneficiaries. The objective is to show the real investments made by the EU.

Annual accounts of the European Union 2019

2. NOTES TO THE BALANCE SHEET

ASSETS

2.1. INTANGIBLE ASSETS

EUR million

Gross carrying amount at 31.12.2018 1 073

Additions 178

Disposals (20)

Transfer between asset categories 0

Other changes (1)

Gross carrying amount at 31.12.2019 1 230

Accumulated amortisation at 31.12.2018 (627)

Amortisation charge for the year (107)

Amortisation written back 0

Disposals 19

Transfer between asset categories 0

Other changes 0

Accumulated amortisation at 31.12.2019 (715)

Net carrying amount at 31.12.2019 515

Net carrying amount at 31.12.2018 446

The above amounts relate primarily to computer software.

2.2. PROPERTY, PLANT AND EQUIPMENT

The space assets category covers operational fixed assets related to the two EU space programmes: the Global Navigation Satellite Systems (GNSS), i.e. Galileo and EGNOS, and the Copernicus European Earth observation programme, while assets of the space systems which are not yet operational are included under the assets under construction heading.

For Galileo, the four satellites launched in 2018 successfully passed the in-orbit testing.They have been added to the operational constellation in 2019 bringing the total to 26 satellites. The Galileo operational fixed assets, covering both satellites and ground installations, amounted to EUR 2 489 million at 31 December 2019, net of accumulated depreciation (2018: EUR 2 410 million). The remaining assets under construction total EUR 1 361 million (2018: EUR 1 324 million). The development of the Galileo system will continue until the system reaches its full operational capacity. When completed, the Galileo constellation will comprise 30 satellites (including 6 spare satellites).

Regarding Copernicus, no new satellites became operational in 2019. The total value of Copernicus operational fixed assets is EUR 1 153 million (2018: EUR 1 455 million), net of accumulated depreciation. A further EUR 1 453 million related to Copernicus satellites is recognised as assets under construction (2018: EUR 1 207 million).

Fixed assets related to the European Geostationary Navigation Overlay System (EGNOS) ground infrastructure of EUR 37 million (2018: EUR 52 million) are also included under the Space assets heading. In addition, EGNOS assets under construction amount to EUR 238 million (2018: EUR 130 million).

The assets related to the EU space programmes are being built with the assistance of the European Space Agency (ESA).

Property, plant and equipment

Annual accounts of the European Union 2019

EUR million

Gross carrying amount at 31.12.2018

Additions

Disposals

Transfer between asset categories

Other changes

Gross carrying amount at 31.12.2019

Accumulated depreciation at 31.12.2018

Depreciation charge for the year

Depreciation written back

Disposals

Transfer between asset categories

Other changes

Accumulated depreciation at 31.12.2019

NET CARRYING AMOUNT AT 31.12.2019

NET CARRYING AMOUNT AT 31.12.2018

Land and BuildingsSpace assetsPlant and EquipmentFurniture and VehiclesComputer HardwareOtherFinance leasesAssets under constructionTotal
5 6265 2596412706343272 6203 19918 575
11710241460211189411 306
(1)(0)(117)(28)(58)(29)(3)-(236)
154411(7)377(98)(477)0
(0)-0(0)0(0)-(10)(10)
5 8955 6805422596443252 6383 65319 635
(3 279)(1 342)(540)(198)(521)(255)(1 257)(7 390)
(190)(659)(31)(17)(64)(27)(94)(1 083)
0-397140(0)61
10671743263157
(35)-7(2)(5)035(0)
--0

(457)
(0)

(194)
0

(533)
(0)

(255)
(1 313)0
(3 503)(2 001)(8 255)
2 3923 6798565110701 3253 65311 380
2 3473 91710172113721 3633 19911 185


Annual accounts of the European Union 2019

2.3. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

The participation of the EU, represented by the Commission, in the European Investment Fund (EIF) is treated as an associate using the equity method of accounting. The EIF is the EU's financial institution specialising in providing risk capital and guarantees to Small and Medium-sized Entities (SMEs). The EIF is located in Luxembourg and operates as a private-public partnership, whose members are the European Investment Bank (EIB), the EU and a group of financial institutions. At 31 December 2019, the EU held 29.7 % of ownership interests in the EIF (2018: 29.7 %) and 29.7 % of the voting rights (2018: 29.7 %). In accordance with its statutes, the EIF is required to allocate at least 20 % of its annual net result to a statutory reserve, until the aggregate reserve amounts to 10 % of subscribed capital. This reserve is not available for distribution.

EUR million

92.

European Investment Fund


Participation at 31.12.2018 591

Contributions –

Dividends received (3)

Share of net result 53

Share in the net assets (49)

Participation at 31.12.2019 591

The following carrying amounts are attributable to the EU based on its percentage of participation:

EUR million

93.

31.12.2019 31.12.2018


Total EIF Total EIF

Assets 2 965 2 662

Liabilities (975) (674)

Revenue 337 291

Expenses (161) (167)

Surplus/(deficit) 176 124

Reconciliation of the above summarised financial information to the carrying amount of the interest held in the EIF is as follows:

EUR

94.

31.12.2019 31.12.2018


Net assets of the associate 1 990 1 988

EC ownership interests in EIF 29.70% 29.70%

Carrying amount 591 591

The EU, represented by the Commission, has paid in 20 % of its subscribed shares in the EIF capital at 31 December 2019, the amount uncalled being as follows:

EUR

95.

Total EIF capital EU subscription


Total share capital 4 500 1 337

Paid-in (900) (267)

Uncalled 3 600 1 070

Annual accounts of the European Union 2019

2.4. FINANCIAL ASSETS

Non-current

Available for sale financial assets

Financial assets at fair value through surplus or deficit

Loans

Current

Available for sale financial assets

Financial assets at fair value through surplus or deficit

Loans

EUR million

96.

31.12.2019 31.12.2018


Total

2.4.115 21113 657
2.4.213414
2.4.351 36851 560
66 71465 231
2.4.13 1961 786
2.4.232
2.4.31 3162 380
4 5144 168
71 22869 398

97.

2.4.1. Available for sale financial assets


BUFI investments

ECSC in Liquidation

European Bank for Reconstruction and Development

EEAS local staff pension plan

Guarantee Funds for budgetary guarantees:

EFSI Guarantee Fund

Guarantee Fund for external actions

EFSD Guarantee Fund

Financial Instruments financed by the EU budget:

Horizon 2020

Connecting Europe Facility

Risk Sharing Finance Facility

EU SME Equity Facilities

European Fund for South East Europe

Risk Capital Operations

Energy Efficiency Finance Facility

Other

Total

Non-current Current

98.

31.12.2019


EUR million

99.

31.12.2018


1 8631 888
1 4591 506
188188
75-
3 5853 582
6 6545 000
2 5452 465
5959
9 7947 474
2 4552 031
699540
597679
507464
166115
112113
105101
387343
5 0284 386
18 40715 443
15 21113 657
3 1961 786

Out of the total of EUR 18 407 million, the EU holds available for sale financial assets in the form of debt securities (e.g. bonds) of EUR 14 998 million (2018: EUR 13 993 million), equity instruments of EUR 2 801 million (2018: EUR 1 365 million) and investments in money market funds (such as the EIB Unitary Fund) of EUR 608 million (2018: EUR 85 million).

100.

BUFI investments


Provisionally cashed fines related to competition cases Budget Fines Fund) and invested by the Commission sale financial assets.

are allocated to a dedicated fund (BUFI Fund – in debt instruments categorised as available for

101.

Note


Annual accounts of the European Union 2019

102.

ECSC in Liquidation


Regarding the European Coal and Steel Community in Liquidation (ECSC i.L.), all available for sale financial assets are debt securities denominated in EUR and quoted in an active market.

103.

European Bank for Reconstruction and Development


The EU holds a financial investment in the capital of the European Bank for Reconstruction and Development (EBRD), in which the number of shares held at 31 December 2019 were 90 044 (2018: 90 044 shares), representing 3 % of the total subscribed share capital. The EU subscribed for a total amount of EUR 900 million of share capital, out of which EUR 713 million is currently uncalled. According to the agreement establishing the EBRD, the shareholders have some contractual restrictions such as the fact that the shares are not transferable and their redemption is capped at the maximum of the original purchase cost.

The EU measures the investment in EBRD at fair value. The original purchase cost is considered to be the best estimate of the fair value, in particular due to contractual restrictions referred to above. Although EBRD's shares are not quoted on any stock exchange market, there were recent transactions in the investee's equity (issuance of capital at par value), indicating that the cost is the best estimate of the fair value in this situation.

104.

GUARANTEE FUNDS FOR BUDGETARY GUARANTEES


EFSI Guarantee Fund

Pursuant to the EFSI Regulation (Regulation (EU) 2015/2017), the EFSI Guarantee Fund has been established to provide a liquidity cushion against potential losses incurred by the EIB in relation to its financing and investment operations eligible for the EFSI EU guarantee under the EFSI Agreement – see note 4.1.1. The EFSI Guarantee Fund is financed by contributions from the EU budget. It is also endowed by returns on guarantee fund resources invested, revenues received by the EU as remuneration for the guarantee under the EFSI Agreement, and amounts recovered by the EIB from defaulting debtors in respect of previous guarantee calls. At the end of 2019 the assets of the EFSI guarantee fund totalled EUR 6 688 million (2018: EUR 5 452 million), of which EUR 6 654 million was invested in available for sale financial assets (2018: EUR 5 000 million), while another EUR 1 879 million (2018: EUR 2 688 million) have been committed but not yet paid into the fund and is included in the budgetary RAL and also disclosed as outstanding commitments not yet expensed in note 5.1. The fund will be progressively provisioned and will gradually reach EUR 9.1 billion, i.e. 35 % of the total EU EFSI guarantee obligations.

105.

Guarantee Fund for external actions


The Guarantee Fund for external actions covers loans guaranteed by the EU budget, in particular EIB lending operations outside the EU, financed from the EIB's own resources and loans under macro-financial assistance (MFA) and Euratom loans outside the EU – see note 4.1.1. The fund is managed by the EIB and it is intended to cover any defaulting loans guaranteed by the EU. The fund is endowed by payments from the EU budget, the proceeds from interest on investments made from the fund's assets, and amounts recovered from defaulting debtors for whom the fund has had to activate its guarantee. The Guarantee Fund for external actions should be maintained at a target amount corresponding to 9 % of the guaranteed loans outstanding at year-end. The difference between the target amount and the value of the fund's assets at year-end will be covered from the EU budget in year N+2, while any surplus is paid back to the EU budget.

106.

EFSD Guarantee Fund


Pursuant to the EFSD Regulation (Regulation (EU) 2017/1601) the EFSD Guarantee Fund has been established to provide a liquidity cushion to be used in the event of a call on the Union guarantee given pursuant to the relevant EFSD guarantee agreements. The EFSD Guarantee Fund is financed by contributions from the EU budget and from contributions from the 11th EDF to the EU budget, along with voluntary contributions from Member States and other contributors. The fund is also endowed by returns on invested resources, amounts recovered from defaulting debtors, revenues and any other payments received by the EU in accordance with the EFSD guarantee agreements. Total payments received into the guarantee fund as at 31 December 2019 amounted to EUR 600 million, of which EUR 595 million is invested in available for sale financial assets, while another EUR 95 million (2018: 325 EUR million) has been committed but not yet paid and is included in budgetary RAL and also disclosed as outstanding

Annual accounts of the European Union 2019

and gradually reach EUR 750 million, i.e. 50 % of total future EFSD guarantee obligations covered by the EU budget, and will be further increased by other contributions.

107.

FINANCIAL INSTRUMENTS FINANCED BY THE EU BUDGET


Horizon 2020

Under the EU Regulation establishing Horizon 2020 – the Framework Programme for Research and Innovation (2014-2020), new financial instruments have been established in order to enhance access to finance to entities engaged in research and innovation (R&I). These instruments are: the InnovFin Loan and Guarantee Service for R&I under which the Commission shares the financial risk related to a portfolio of new financing operations entered into by the EIB; the InnovFin SME Guarantee including the SME Initiative Uncapped Guarantee Instrument (SIUGI) – guarantee facilities managed by the EIF providing guarantees and counter-guarantees to the financial intermediaries for the new portfolios of loans (under SIUGI the Commission shares the financial risk related to the guarantee given with Member States, EIF and EIB); and the InnovFin Equity Facility for R&I providing for investments in venture capital funds which is managed by the EIF.

108.

Risk-Sharing Finance Facility


The Risk-Sharing Finance Facility (RSFF) is managed by the EIB and the Commission's investment portfolio is used to provision financial risk for loans and guarantees given by the EIB to eligible research projects. In total, an EU budget of up to EUR 1 billion was allocated to the RSFF under the 2007-2013 MFF. Under the 2014-2020 MFF, there are no new budget contributions foreseen for the RSFF. Given that the significant portion of the RSFF outstanding operations has been already repaid, in 2019 the EIB partially released the EU guarantee, which resulted in a decrease in the EU contingent liability as disclosed in the note 4.1.3.

109.

Connecting Europe Facility


Pursuant to Regulation (EU) No 2013/1316, the Connecting Europe Facility (CEF) debt instrument has been established with the objective to facilitate infrastructure projects’ access to financing in the sectors of transport, telecommunications and energy. It is managed by the EIB under an agreement with the EU. The CEF debt financial instrument is the continuity of the Loan Guarantee Instrument for TEN-T projects (LGTT) and of the pilot phase of the Project Bond Initiative (PBI). It offers risk-sharing for debt financing in the form of senior and subordinated debt or guarantee as well as support for project bonds. After 19 June 2019, with the effect of the first amendment of the delegation agreement with the EIB, all CEF operations deployed by the EIB are assigned to one of the two portfolios: debt portfolio or non securitisable financing portfolio, for which a new portfolio-based risk sharing approach is introduced.

110.

EU SME Equity Facilities


These are equity instruments financed by the COSME, the CIP and MAP programmes and the Technology Transfer Pilot Project, under the trusteeship of the EIF, supporting the creation and financing of EU SMEs in their early (start-up) and growth stages by investing in suitable specialised venture capital funds.

111.

2.4.2. Financial assets at fair value through surplus or deficit


EUR million

112.

31.12.2019


Type of derivative

Foreign currency forward contract Guarantee on equity portfolio

Total

Non-current Current

113.

amount


393 1 439

1 832

1 439 393

114.

Fair value


3 134

137

134 3

115.

31.12.2018 Notional F i amount


476 674

1 150

674 476

116.

Fair value


2 14

16

14 2

The EU enters into foreign currency forward contracts in order to hedge the foreign currency risk related to USD denominated debt securities held in the EFSI Guarantee Fund. Under the foreign currency forward

Annual accounts of the European Union 2019

date. Such derivative contracts are measured at fair value at the balance sheet date and classified as either financial assets or financial liabilities at fair value through surplus or deficit depending on whether their fair value is positive or negative.

The heading Guarantee on equity portfolio comprises guarantees given by the EU to financial institutions on portfolios of equity investments that are classified as derivative financial instruments and accounted for as a financial asset or financial liability at fair value through surplus or deficit. The total amount represents mainly the EFSI guarantee given by the EU to the EIB Group with underlying equity investments disbursed by the EIB and EIF amounting to EUR 1 420 million (2018: EUR 674 million). The fair value of the EU guarantee on the EFSI equity portfolios totalled EUR 134 million (2018: EUR 14 million).

117.

Fair value hierarchy of financial assets measured at fair value


Level 1: Quoted prices in active markets

Level 2: Observable inputs other than quoted prices Level 3: Valuation techniques with inputs not based on observable market data

118.

31.12.2019


15 482

1 543

Total

1 518

18 544

EUR million

119.

31.12.2018


13 993 275

1 191

15 459

During the period there were no transfers between level 1 and level 2.

120.

Reconciliation of financial assets measured using valuation techniques with inputs not based on observable market data (level 3)


EUR million

Opening balance at 1.1.2019

Purchases, sales, issues and settlements

Gains or losses for the period in financial income or finance costs

Gains or losses in net assets

Transfers into level 3

Transfers out of level 3

Other

1 191

173

90

71

(8)

Closing balance at 31.12.2019

1 518

121.

2.4.3. Loans


EUR million

122.

31.12.2019 31.12.2018


Loans for financial assistance Other loans

Total

Non-current Current

2.4.3.152 56453 873
2.4.3.2121

52 684

51 368
67
53 939
51 560
1 3162 380

123.

Note


Annual accounts of the European Union 2019 2.4.3.1. Loans for financial assistance

EUR million

EFSMBOPMFAEuratomECSC in LiquidationTotal
Total at 31.12.201847 4001 7344 3882549853 873
New loans--420--420
Repayments-(1 500)(52)(40)(97)(1 689)
Exchange differences----55
Changes in carrying amount(6)(33)(1)(0)(6)(45)
Impairment------
Total at 31.12.201947 3942014 754214052 564
Non-current46 8002004 112178-51 290
Current594164335-1 273

The nominal value of loans for financial assistance at 31 December 2019 totals EUR 51 941 million (2018: EUR 53 206 million). The change in carrying amount corresponds to the change in accrued interests.

EFSM enables the granting of financial assistance to a Member State in difficulties, or seriously threatened by severe difficulties caused by exceptional circumstances beyond its control. The assistance may take the form of a loan or credit line. The ECOFIN Council conclusions of 9 May 2010 restrict the facility to EUR 60 billion but the legal limit restricts the outstanding amount of loans or credit lines to the margin available under the own resources ceiling. Borrowings related to loans disbursed under the EFSM are guaranteed by the EU budget. It is not foreseen that the EFSM will engage in new financing programmes or enter into new loan facility agreements.

The BOP facility, a policy-based financial instrument, provides medium-term financial assistance to Member States of the EU that have not adopted the Euro. It enables the granting of loans to Member States who are experiencing, or are seriously threatened by, difficulties in their balance of payments or capital movements. The maximum outstanding amount of loans granted under the instrument is limited to EUR 50 billion. Borrowings related to these BOP loans are guaranteed by the EU budget. During 2019, Romania repaid the remaining EUR 1 billion of its outstanding loan amount and Latvia repaid EUR 500 million of its EUR 700 million outstanding amount.

MFA is a form of financial aid extended by the EU to partner countries experiencing a balance of payment crisis. It takes the form of medium/long term loans or grants or an appropriate combination of both and generally complements financing provided in the context of an IMF-supported adjustment and reform program. These loans are guaranteed by the Guarantee Fund for external actions. During the year ended 31 December 2019, further disbursements of loans under MFA for a total amount of EUR 420 million were provided, being EUR 300 million to Tunisia, EUR 100 million to Jordan and EUR 20 million to Moldova – see also note 4.1.2.

The European Atomic Energy Community (Euratom, represented by the Commission) lends money to both Member States and non-Member States, and to entities of both, to finance projects relating to energy installations. Guarantees from third parties of EUR 214 million (2018: EUR 254 million) have been received to cover Euratom loans – see note 4.1.2.

ECSC in Liquidation loans are not loans for financial assistance but promissory notes in order to keep the cash flows in parallel with the borrowings. However, similar to the loans for financial assistance, they were granted on borrowed funds in accordance with articles 54 and 56 of the ECSC Treaty for project financing. The last promissory notes were fully reimbursed in 2019.

124.

Loans effective interest rates (expressed as a range of interest rates)


Macro Financial Assistance (MFA)

Euratom

Balance of Payment (BOP)

European Financial Stability Mechanism (EFSM)

ECSC in Liquidation

125.

31.12.2019


0 % - 3.82 %

0.08 % - 5.76 %

2.88 %

0.50 % - 3.75 %

126.

31.12.2018


0 % - 3.82 % 0.08 % - 5.76 % 2.88 % - 3.38 % 0.50 % - 3.75 % 5.23 % - 5.81 %

Annual accounts of the European Union 2019

127.

2.4.3.2. Other loans


Loans with special conditions ECSC in Liquidation housing loans Term deposits

128.

31.12.2019


73

1

46

Total

121

Non-current Current

78 42

EUR million

129.

31.12.2018


64 2 0

67

38 28

Nominal value of other loans at 31 December 2019 total EUR 728 million (2018: EUR 617 million).

Loans with special conditions are granted at preferential rates as part of co-operation with non-Member States.

Term deposits include mainly amounts with maturity between 3 and 12 months that do not meet the definition of cash equivalents.

130.

Impairment on other loans


Loans with special conditions Subrogated loans

EUR million

131.

31.12.2018 Additions Reversals Write-off Other 31.12.2019


8 579

Total

587

2 75

77

4_ 4

10 658

668

Subrogated loans are defaulted loans which were granted by the EIB and guaranteed by the EU budget, for which all rights have been subrogated to the EU following the payment from the Guarantee Fund for external actions or from the EFSI Guarantee Fund. These loans are fully impaired for an amount of EUR 658 million (2018: EUR 579 million). Guarantee calls are partially covered by financial provisions made in previous years. Under the relevant agreements between the EU and the EIB, recovery proceedings are undertaken by the EIB on behalf of the EU with the aim to recover any sums due.

2.5. PRE-FINANCING

Non-currentNote
Pre-financing2.5.1
Other advances to Member States2.5.2
Contribution to Trust Funds
Current
Pre-financing2.5.1
Other advances to Member States2.5.2
Total

132.

31.12.2019


22 135

4 045

60

26 240

22 314 2 892

25 206 51 446

EUR million

133.

31.12.2018


21 814

4 122

71

26 006

21 572 2 396

23 968 49 974

The level of pre-financing in the various programmes must be sufficient to ensure the necessary funding for the beneficiary to initiate and advance the project, while also safeguarding the financial interests of the EU and taking into consideration legal, operational and cost-effectiveness constraints.

134.

2.5.1. Pre-financing


Annual accounts of the European Union 2019

Shared management

EAFRD & other rural

development instruments

ERDF & CF

ESF

Other

Direct Management

Implemented by: Commission

EU executive agencies Trust funds

Indirect Management

Implemented by:

Other EU agencies & bodies Third countries

International organisations Other entities

Total

Non-current Current

135.

Gross Cleared via Net amount


amount accruals at 31.12.2019

3 193

17 985 6 830 3 549

31 557

12 839

16 522

858

30 219

1 162

1 491

8 289

10 570

21 513

83 289

22 135 61 154

(3 540) (1 530) (1 463)

(6 533)

(8 344)

(10 339)

(665)

(19 347)

(678)

(861)

(5 317)

(6 104)

(12 960) (38 840)

(38 840)

EUR million

136.

Gross Cleared via Net amount


amount accruals at 31.12.2018

3 193

14 444 5 301 2 086
3 743

18 088 6 548

4 684
25 02433 063
4 495

6 184

194
12 531

15 012

585
10 87228 127
484

630

2 972

4 467
762 1 546 7 684 9 107
8 55319 099
44 44980 289
22 135 22 31421 814 58 476
-3 743
(3 461)14 627
(1 147)5 401
(2 498)2 186

(7 105)

(18 234)

(207)

(879)

(5 053)

(5 426)

(11 565) (36 904)

(36 904)

25 958

(8 262)4 269
(9 540)5 472
(433)152

9 893

555 667

2 631

3 681

7 534

43 386

21 814 21 572

Pre-financing represents money paid out, and thus the implementation of payment appropriations. As explained in note 1.5.7, these are advances and so not yet expensed. Thus while pre-financing reduces outstanding RAL (see note 5.1) it represents expenses still to be accepted and recognised in the statement of financial performance.

For shared management, almost all pre-financing relates to the current programming period. There is an initial pre-financing which will not be cleared (i.e. recognised in the statement of financial performance) before the end of the programming period and is shown as a non-current pre-financing. There is also an annual pre-financing which is cleared on an annual basis and is shown as a current pre-financing. EUR 10.5 billion of new pre-financing has been paid in 2019. The shared management pre-financing is stable compared to 2018 except for a decrease in the EAFRD which relates to the remaining pre-financing of the previous programming period. This has been cleared during the year.

For direct management, the biggest part of pre-financing concerns Research (mainly Horizon 2020,

implemented by the Commission and EU executive agencies) and amounts to EUR 7.8 billion (2018:

EUR 6.8 billion). The increase is a consequence of the agreements entered into during 2019, for which pre-financing payments were made.

For indirect management, the pre-financing covers mainly internal policies programmes like Erasmus, Galileo and EGNOS, but also instruments related to external relations like ENI (European Neighbourhood Instrument), DCI (Development Cooperation Instrument) and IPA (Instrument for Pre-Accession). The increase in pre-financing to international organisations concerns mainly the above mentioned external relations instruments. The increase in pre-financing to other entities mainly concerns the Erasmus program implemented by national agencies with new agreements starting in 2019.

137.

Guarantees received in respect of pre-financing


These are guarantees that the Commission requests in certain cases from beneficiaries that are not Member States, when paying out advance payments (pre-financing). There are two values to disclose for this type of guarantee, the ‘nominal’ and the ‘on-going’ values. For the nominal value, the generating

Annual accounts of the European Union 2019

At 31 December 2019 the nominal value of guarantees received in respect of pre-financing amounted to EUR 492 million while the on-going value of those guarantees was EUR 406 million (2018: EUR 516 million and EUR 420 million respectively).

Certain pre-financing amounts paid out under the 7th Research Framework Programme for research and technological development (FP7) and under Horizon 2020 are effectively covered by a Participants Guarantee Fund (PGF). The PGF is a mutual benefit instrument set up to cover the risks relating to nonpayment of amounts by the beneficiaries during the implementation of the indirect actions of FP7 and Horizon 2020. All participants of indirect actions receiving a grant from the EU contribute 5 % of the total amount received to the PGF's capital.

At 31 December 2019, pre-financing amounts covered by the PGF totalled EUR 2.1 billion (2018: EUR 2 billion). The EU (represented by the Commission) acts as an executive agent of the participants of the PGF, but the fund is owned by the participants.

At year-end, the PGF had total assets of EUR 2.2 billion (2018: EUR 2.1 billion). The assets of the PGF also include financial assets that are managed by the Commission. As the PGF is a separate entity the assets of the fund are not consolidated in these EU annual accounts.

138.

2.5.2. Other advances to Member States


Advances to Member States for financial instruments under shared management Aid Schemes

139.

31.12.2019


3 304 3 634

Total

6 937

Non-current Current

4 045 2 892

EUR million

140.

31.12.2018


3 675 2 843

6 518

4 122 2 396

141.

Advances to Member States for financial instruments under shared management


Under the framework of the European Structural and Investment Funds (ESIF) programmes, it is possible to make advance payments from the EU budget to Member States so as to allow them to contribute to financial instruments (i.e. loans, equity investments or guarantees). These financial instruments are set up and managed under the responsibility of the Member States, not the Commission. Nevertheless, monies that are unused by these instruments at year-end are the property of the EU (as with all prefinancing) and are thus treated as an asset on the EU’s balance sheet.

2014-2020 Period:

Under cohesion policy, out of EUR 7 146 million paid, it is estimated that EUR 3 247 million were unused at 31 December 2019. This includes the contribution of the Member States to the SME Initiative, an instrument aimed at stimulating additional lending by the banking sector to SMEs (EUR 1 198 million paid excluding amounts still in pre-financing, out of which EUR 324 million is estimated as unused).

For rural development, EUR 54 million remained unused at year-end.

2007-2013 Period:

All amounts related to the cohesion policy are considered to have been either implemented or reallocated to other measures, therefore no assets remain on the balance sheet at 31 December 2019. It should be noted that the actual implementation by the various instruments will be reviewed as part of the closure process of the programmes in the coming years.

142.

Aid Schemes


Similar to the above, advances paid by the Member States for various aid schemes (state aid, market measures of EAGF or investment measures of EAFRD) that were not used at year-end are recorded as

Annual accounts of the European Union 2019

2014-2020 Period:

The unused amounts at year-end were estimated at EUR 2 044 million for cohesion policy and EUR 1 460 million for agriculture and rural development.

2007-2013 Period:

It is estimated that EUR 130 million paid in the context of rural development remains unused at the end of 2019.

2.6. EXCHANGE RECEIVABLES AND NON-EXCHANGE RECOVERABLES

Non-current

Recoverables from non-exchange transactions Receivables from exchange transactions

Current

Recoverables from non-exchange transactions Receivables from exchange transactions

Total

EUR million

143.

31.12.2019 31.12.2018


2.6.1 2.6.2

2.6.1 2.6.2

2 422397
1 18519
3 607416
19 32822 212
1 0382 036
20 36724 248
23 97424 664

144.

2.6.1. Recoverables from non-exchange transactions


EUR million

Non-currentNote31.12.201931.12.2018
Member States2.6.1.12 422

2 422
397
397
Current
Member States2.6.1.16 18010 900
Competition fines2.6.1.211 3019 727
Accrued income and deferredcharges2.6.1.31 7881 511
Other recoverables59

19 328 21 750
74
22 212
Total22 609

145.

Note


Annual accounts of the European Union 2019 2.6.1.1. Recoverables from Member States

EUR million

146.

31.12.2019 31.12.2018


TOR A accounts

TOR separate accounts

Own resources to be received

Impairment

Other

Own resources recoverables

European Agricultural Guarantee Fund (EAGF)

European Agricultural Fund for Rural Development (EAFRD) and

other rural development instruments

Impairment

EAGF and rural development recoverables

Pre-financing recovery

VAT paid and recoverable

Other recoverables from Member States

Total

Non-current Current

5 478

1 591

7

(931)
5 609

1 612

2 758 (991)

86
6 1459 075
1 722

879

(822)
1 708

954

(788)
1 7791 875
443145
4445
191158
8 60211 297
2 422 6 180397 10 900

The largest amount included under non-current relates to amounts due from Member States, and the large increase concerns the United Kingdom (UK) infringement case (explained below) – in the previous year this amount, EUR 2.1 billion, had been shown under current. Also included as non-current, as in previous years, are amounts relating to non-executed conformity clearance decisions for the European Agricultural Guarantee Fund (EAGF) as well as for the European Agricultural Fund for Rural Development (EAFRD). The amounts related to these decisions are being recovered in annual instalments.

The above mentioned move from current to non-current also explains the large decrease in current amounts due from Member States. The decrease is also due to there being no own resources to be received linked to an amending budget in 2019 as compared to 2018 – see below.

147.

Own resources recoverables


'A accounts' refers to the monthly statements where the Member States communicate the established Traditional Own Resources (TOR) entitlements to the Commission, not yet recovered. TOR are composed of customs duties and sugar levies, collected by Member States on behalf of the Commission.

The ‘A accounts’ have tended to have a level of approximately EUR 3 billion at year-end, however, in both 2018 and 2019 the balance includes additional TOR amounts related to the UK infringement case (explained below) and other TOR inspection reports. As late payment interest of EUR 1.2 billion is applicable (2018: EUR 1.3 billion), those amounts are therefore also reported in these annual accounts (see notes 2.6.2 and 3.7).

Concerning the infringement case, on 8 March 2018, the Commission sent a letter of formal notice (Infringement No 2018/2008) to the UK because it failed to make the correct amount of traditional own resources available to the EU budget, as required by EU law. As the UK did not provide a satisfactory reply, neither to the letter of formal notice nor to the reasoned opinion sent on 24 September 2018, the Commission confirmed on 6 March 2019 its decision to refer the infringement to the Court of Justice of the EU and lodged its application on 7 March 2019. The case originated in a 2017 OLAF report, that found that importers in the UK evaded a large amount of customs duties by using fictitious and false invoices and incorrect customs value declarations at importation. Based on a methodology developed by OLAF and JRC and on the information available, the Commission estimates that the infringement of EU legislation by the UK resulted, during the period November 2011 to October 2017, in losses to the EU budget amounting to EUR 2.1 billion (net, i.e. after deducting the collection costs to be retained by the UK from the gross amount of EUR 2.7 billion). The UK does not agree with the methodology used by the Commission to estimate the above losses. The ongoing Court proceedings and the information available to date are indicative of a long-term process. Therefore, both the principal of EUR 2.1 billion and the

Annual accounts of the European Union 2019

In addition, the Commission included in the accounts a receivable of EUR 0.2 billion for established customs duties and late payment interest which is based on the latest available information. The amount of EUR 0.7 billion initially recognised in 2018 has been adjusted downwards following new information that the UK authorities provided in 2019 (see notes 2.6.2 and 3.7).

‘Separate accounts’ refers to established entitlements that have not been included in the A accounts, because they have not been recovered by Member States and no security has been provided (or if security has been provided but the amounts are contested). These entitlements are subject to impairment based on information provided every year by the Member States. These amounts are generally at a similar level at each year-end, as seen above.

‘Own resources to be received’ in 2018 refer to recoverables as a result of the amending budget No 6/2018 adopted on 12 December 2018. The amounts were entered by Member States on the first working day of January 2019. There is no such amount relating to 2019.

148.

EAGF and Rural Development recoverables


This item primarily covers the amounts owed by Member States at 31 December 2019, as declared and certified by the Member States as at 15 October 2019. An estimation is made for the recoverables arising after this declaration and up to 31 December 2019. The Commission also estimates a write-down for the amounts owed by beneficiaries that are unlikely to be recovered. The fact that such an adjustment is made does not mean that the Commission is waiving future recovery of these amounts. A deduction of 20 % is also included in the adjustment and corresponds to what Member States are allowed to retain to cover administrative costs.

149.

2.6.1.2. Recoverables from competition fines


EUR million

150.

31.12.2019 31.12.2018


Recoverable from fines gross amount 14 606 13 022

Provisional payments (3 125) (3 131)

Impairment (180) (164)

Total 11 301 9 727

Non-current – –

Current 11 301 9 727

The provisional payments mainly relate to cash receipts from companies that have nevertheless initiated an appeal or still have the option to appeal against the fine decisions at EU courts. A contingent liability is disclosed for the possibility of having to pay back these amounts to the fined companies (see note 4.1.4).

Fined companies who have launched or are planning to launch an appeal have an option to either make provisional payments or to provide bank guarantees to the Commission. For EUR 11 133 million (2018: EUR 9 354 million) of fines not paid at year-end, the Commission has accepted financial guarantees.

The amounts written down due to impairment reflect the Commission's case-by-case assessment of fines amounts not cashed or not covered with a guarantee, which the Commission expects not to recover.

The increase in recoverables from competition fines is mainly due to one significant fine (EUR 1 494 million) where the company concerned covered the fine with a bank guarantee accepted by the Commission. The remaining increase due to other competition fines raised in the year (EUR 2 597 million) was largely offset by fines which were definitively cashed in 2019 (see note 2.8.1).

Annual accounts of the European Union 2019 2.6.1.3. Accrued income and deferred charges

Accrued income

Deferred charges relating to non-exchange transactions

EUR million

151.

31.12.2019 31.12.2018


1 502 286

1 240 272

Total

1 788

1 511

Non-current Current

1 788

1 511

Accrued income includes EUR 1.4 billion (2018: EUR 1.1 billion) that the Commission expects to recover from the Member States in the area of cohesion. The recovery will be made as a result of the examination and acceptance of the annual accounts submitted by the Member States in early 2020. This procedure for the acceptance of Member States' annual accounts was introduced in the cohesion area for the programming period 2014-2020.

152.

2.6.2. Receivables from exchange transactions


Non-current

Late payment interest Other receivables

153.

31.12.2019


137 48

EUR million

154.

31.12.2018


19

Current

Customers

Impairment on receivables from customers

Deferred charges relating to exchange transactions

Other

1 185

19

269

(153)

238

684

232 (143)

243 1 704

1 038

2 036

Total

2 223

2 055

The non-current late payment interest concerns 2018 this interest had been shown under current.

the infringement case mentioned in note 2.6.1.1. In

The other current receivables mainly relate to late payment interests. The decrease in 2019 is primarily due to the classification as non-current of the interest relating to the infringment case and the downwards adjustment of TOR inspection reports (see note 2.6.1.1).

2.7. INVENTORIES

Scientific materials Other

Total

155.

31.12.2019


47 21

68

EUR million

156.

31.12.2018


52 21

73

1

Annual accounts of the European Union 2019

2.8. CASH AND CASH EQUIVALENTS

Accounts with Treasuries and Central Banks

Current accounts

Imprest accounts

Transfers (cash in transit)

Bank accounts for budget implementation

Cash belonging to financial instruments

EUR million

157.

Note 31.12.2019 31.12.2018


Cash relating to fines

Cash relating to other institutions, agencies and bodies

15 519

91

7

0

15 617

1 567

1 258

1 208

97
12 932

79

5

0
2.8.113 017
2.8.22 377
2.8.31 438
1 167
114
19 74518 113

Cash relating to trust funds

Total

158.

2.8.1. Bank accounts for budget implementation


This heading covers the funds which the Commission keeps in its bank accounts in each Member State and EFTA country (treasury or central bank), as well as in commercial bank current accounts, imprest accounts and petty cash accounts. The treasury balance at the end of 2019 is driven by the following main elements:

. An amount of EUR 2.6 billion of fines, imposed by the Commission for breach of competition rules, definitively cashed in 2019 and not yet included in an amending budget, is included in the year-end treasury balance.

. The treasury balance also includes not yet used assigned revenue and other payment appropriations of EUR 9.7 billion of the 2019 budget.

159.

2.8.2. Cash belonging to financial instruments


Amounts shown under this heading primarily concern cash equivalents managed by fiduciaries, on behalf of the Commission, for the purpose of implementing particular financial instrument programmes funded by the EU budget and cash and cash equivalents held in the guarantee funds relating to budgetary guarantees (see note 2.4.1). The cash belonging to financial instruments and guarantee funds can only be used in the programmes concerned.

160.

2.8.3. Cash relating to fines


This is cash received in connection with fines issued by the Commission for which the case is still open. These amounts are kept in specific deposit accounts that are not used for any other activities. Where an appeal has been lodged or when it is unknown if an appeal will be made by the other party, the underlying amount is shown as contingent liability in note 4.1.4.

Since 2010, all subsequent provisionally cashed fines are managed by the Commission in the BUFI fund and invested in financial instruments categorised as available for sale (see note 2.4.1).

Annual accounts of the European Union 2019

LIABILITIES

2.9. PENSION AND OTHER EMPLOYEE BENEFITS

161.

Net employee benefit scheme liability


EUR million

PensionOtherJoint Sickness31.12.201931.12.2018
Scheme ofretirementInsuranceTotalTotal
EuropeanbenefitScheme
Officialsschemes
Defined Benefit Obligation Plan assets83 842 N/A2 149 (94)12 071 (309)98 062 (403)80 871 (415)
Net liability83 8422 05511 76297 65980 456

The increase in the total employee benefits liability is primarily driven by the increase in the net liability of the Pension Scheme of European Officials (PSEO), the largest scheme in place. This PSEO liability has increased mainly because of the actuarial loss from changes in financial assumptions caused by a sharp decrease in the nominal discount rate. Furthermore, as the nominal discount rate is adjusted for inflation to obtain the real discount rate, this year the real discount rate was for the first time negative – meaning that any given amount is worth more today than in the future: this significantly increases the size of the liability at year-end (see note 2.9.3). The lower discount rate has had a similar effect on the other smaller schemes.

Additionally, the rights accrued during the year due to service are higher than the benefits paid out during the year. There is also an increase due to the annual interest cost (unwinding of the liability discounting) as well as actuarial losses from experience.

162.

2.9.1. Pension Scheme of European Officials


This defined benefit obligation represents the present value of expected future payments that the EU is required to make so as to settle the pension obligations resulting from employee service in the current and prior periods. The scheme is ongoing, and as such, all payments required to be made from the scheme on an annual basis are included in the EU budget each year.

In accordance with Article 83 of the Staff Regulations, the payment of the benefits provided for in the staff pension scheme constitutes a charge to the EU's budget. The scheme is notionally funded, and the Member States guarantee the payment of these benefits collectively. A compulsory pension contribution is deducted from the basic salaries of active members, currently 9.7 %. These contributions are treated as budget revenue of the year and contribute to the funding of EU expenditure in general, see also note 3.6.

The liabilities of the pension scheme were assessed on the basis of the number of PSEO staff (active staff, retirees, former active staff now on invalidity and dependants of deceased staff) at 31 December 2019 and on the rules of the Staff Regulations applicable at this date. This valuation was carried out in accordance with the methodology of IPSAS 39 (and therefore also EU accounting rule 12).

163.

2.9.2. Other retirement benefit schemes


This refers to the liability relating to the pension obligations towards Members and former Members of the Commission, the Court of Justice (and General Court) and the Court of Auditors, the Council, the Ombudsman, the European Data Protection Supervisor, and the European Union Civil Service Tribunal. Also included under this heading is a liability relating to the pensions of Members of the European Parliament.

Annual accounts of the European Union 2019 2.9.3. Joint Sickness Insurance Scheme

In addition to the above retirement benefit schemes, a valuation is made for the estimated liability that the EU has regarding the Joint Sickness Insurance Scheme (JSIS) in relation to healthcare costs which must be paid during post-activity periods (net of their contributions). As stated in note 1.5.10, the calculation of this liability takes account of the full active service period, ensuring that both the pension and the sickness insurance schemes of the staff’s post-employment plan are accounted for consistently. Taking into account the obligation to faithfully present the economic substance of the underlying situation as required by both EAR and IPSAS, we have not interpreted IPSAS 39 in a stricter sense when attributing the benefits to the periods of service. If one were to accrue the service cost for the JSIS scheme fully over 10 years for all officials, as opposed to the period of active service of the employee, the impact of such an approach on the defined benefit obligation at year-end would be an increase of EUR 4.3 billion. However, as already indicated, this stricter approach would not be compatible with the qualitative characteristic of faithful representation, and thus would not be deemed to provide reliable information in accordance with EAR 1 and the IPSAS Conceptual Framework. This estimate is highly sensitive to the evolution of current staff administrative status (in particular the number of fixed-term contract members assumed to become officials in the future).

164.

Movement in present value of employee benefits defined benefit obligation


The present value of the defined benefit obligation is the discounted expected future payments required to settle the obligation resulting from employee service in the current and prior periods.

An analysis of the current year movement in the defined benefit obligation is presented below:

EUR million
Pension SchemeOtherJoint SicknessTotal
of EuropeanretirementInsurance
Officialsbenefit schemesScheme
Present value as at 31.12.201870 0171 8658 99080 871
Recognised in statement of
financial performance
Current Service Cost2 824842773 185
Interest cost1 339301801 549
Past Service Cost-(60)-(60)
Recognised in net assets
Remeasurements in employee benefits
liabilities
Actuarial (gains)/losses from experience1 91077(339)1 648
Actuarial (gains)/losses from00
demographic assumptions
Actuarial (gains)/losses from
financial assumptions
Other
Benefits paid(1 587)(67)(101)(1 756)
Present value as at 31.12.201983 8422 14912 07198 062

Current service cost is the increase in the present value of the defined benefit obligation arising from current members' service in the current year.

Interest cost refers to the increase during the period in the present value of the defined benefit obligation because the benefits are one period closer to settlement.

Actuarial gains and losses from experience refer to the effects of differences between what was expected according to the assumptions made last year for 2019 and what really occurred in 2019.

Actuarial gains and losses from actuarial assumptions (demographic variables such as employee turnover and mortality and financial variables such as discount rates and expected salary increases) arise where these assumptions are updated in order to reflect changes in underlying conditions.

165.

Benefits (for example, pensions or medical cost reimbursements) are paid during the year according to


Annual accounts of the European Union 2019

166.

Plan assets


Present value as at 31.12.2018

Net movement in plan assets

Present value as at 31.12.2019

167.

Other retirement benefit schemes


119

(25)

168.

Joint Sickness Insurance Scheme


296

14

EUR million Total

415

(12)

94

309

403

Actuarial assumptions – employee benefits

The principal actuarial assumptions used in the valuation of the two main employee benefit schemes of the EU are shown below:

169.

Pension Scheme of European Officials


Joint Sickness Insurance Scheme

2019

Nominal discount rate

Expected inflation rate

Real discount rate

Expected rate of salary increases

Medical cost trend rates

Retirement age

2018

Nominal discount rate

Expected inflation rate

Real discount rate

Expected rate of salary increases

Medical cost trend rates

Retirement age

1.1%1.2%
1.3%1.3%
(0.2)%(0.1)%
1.8%1.8%
N/A3.0%
63/64/6663/64/66
1.9%2.0%
1.4%1.5%
0.5%0.5%
1.9%1.8%
N/A3.0%
63/64/6663/64/66

Mortality rates for 2018 and 2019 are based on the EU Civil Servants Life Table - EULT 2018.

The nominal discount rate is determined as the value of the Euro zero-coupon yield (with a maturity of 22 years as of December 2019 for the PSEO, and 26 years for the Joint Sickness Insurance Scheme). The inflation rate used is the expected inflation rate over the equivalent period. It must be determined empirically, based on prospective values as expressed by index-linked bonds on the European financial markets. The real discount rate is calculated from the nominal discount rate and the expected long-term inflation rate.

A decrease in the real discount rate, i.e. the difference between the nominal discount rate and the expected inflation rate, has been observed over the past few years but it was particularly steep in 2019. The decrease in the real discount rate is mainly due to the decline in the nominal discount rate, which is in line with the trend observed globally on the financial markets. With the expected inflation rate having fallen only slightly, the decline in the nominal discount rate was not counterbalanced and translated to the significant decrease in the real discount rate, thus becoming negative for the first time and contributing to the significant actuarial loss from financial assumptions.

170.

Sensitivity analyses


The sensitivity analysis is based on simulations which change, everything else being equal, the value of the concerned assumptions and observing how the model reacts.

171.

Joint Sickness Insurance Scheme sensitivity


A ten basis point change in assumed medical cost trend rates would have the following effects:

Annual accounts of the European Union 2019

The aggregate of the current service cost and interest cost components of net periodic post-employment medical costs Defined benefit obligation

2019 Increase 0.1% Decrease 0.1%

(8)

EUR million

2018 Increase 0.1% Decrease 0.1%

352

(341)

12

253

(12)

(246)

A ten basis point (0.1%) change in the assumed discount rate would have the following effects:

2019 Increase 0.1% Decrease 0.1%

EUR million

2018 Increase 0.1% Decrease 0.1%

Defined benefit obligation

(311)

322

(219)

226

A ten basis point (0.1%) change in expected salary increases would have the following effects:

2019 Increase 0.1% Decrease 0.1%

EUR million

2018 Increase 0.1% Decrease 0.1%

Defined benefit obligation

(30)

29

(26)

25

A one-year change in assumed retirement age would have the following effects:

EUR million

Defined benefit obligation

2019 se (363)

172.

One year increase One year decrease One year increase One year decrease


383

2018 se (91)

54

173.

Pension Scheme of European Officials sensitivity


A ten basis point (0.1%) change in the assumed discount rate would have the following effects:

Defined benefit obligation

2019 Increase 0.1% Decrease 0.1%

1 854

EUR million

2018 Increase 0.1% Decrease 0.1%

(1 797)

(1 434)

1 478

A ten basis point (0.1%) change in expected salary increases would have the following effects:

2019 Increase 0.1% Decrease 0.1%

EUR million

2019 Increase 0.1% Decrease 0.1%

Defined benefit obligation

1 774

(1 724)

1 427

(1 388)

A one-year change in assumed retirement age would have the following effects:

EUR million

Defined benefit obligation

2019 se (620)

174.

One year increase One year decrease One year increase One year decrease


771

2018 se (573)

645

8

Annual accounts of the European Union 2019

2.10. PROVISIONS

EUR million

Amount atAdditionalUnusedAmountsTransferChange in Amount at
31.12.2018provisionsamounts reversedusedbetween categoriesestimation 31.12.2019
Legal cases:
Agriculture270439-(269)0-441
Other1004(8)(6)121103
Nuclear site dismantlement1 933--(34)-2332 132
Financial1 551587(1)(206)071 938
Other27831(34)(24)(12)(27)211

Total Non-current

Current

4 1321 061(43)(539)02144 826
3 281871(17)(278)(362)2153 710
852190(27)(261)362(2)1 116

Provisions are reliably estimated amounts, arising from past events, that will probably have to be paid by the EU budget in the future.

175.

Legal cases


This is the estimate of amounts that will probably have to be paid out after the year-end in relation to a number of on-going legal cases. The Agriculture amounts relate to legal actions of Member States against conformity clearance decisions for the EAGF.

176.

Nuclear site dismantlement


As of 2017 the basis for the provision was updated as per the ‘JRC Decommissioning & Waste Management Programme Strategy (D&WMP) – Updated in 2017’. The review of the strategy, along with budget and staff needs, was conducted together with the independent D&WMP Expert Group. It represents the best available estimate of the budget and staff needed to complete the decommissioning of the JRC sites of Ispra, Geel, Karlsruhe and Petten.

In accordance with the EU accounting rules, this provision is indexed for inflation and then discounted to its net present value (using the Euro swap curve). At 31 December 2019, this resulted in a provision of EUR 2 132 million, split between amounts expected to be used in 2020 (EUR 31 million) and afterwards (EUR 2 101 million). The increase compared to 2018 is mainly the result of the decreasing discount rate applied to the estimated future costs.

It must be noted that major uncertainties, inherent to the long term planning of nuclear decommissioning, could affect this estimate, which could significantly increase in the future. The main sources of uncertainty are related to the end state of the decommissioned site, nuclear materials, waste management and disposal aspects, incomplete or lacking definition of national regulatory frames, complicated and time-consuming licensing processes and future developments of the decommissioning industrial market.

177.

Financial provisions


These concern mainly provisions, which represent the estimated losses that will be incurred in relation to the guarantees given under different financial instruments, where entrusted entities are empowered to issue guarantees in their own name but on behalf of and at the risk of the EU. The financial risk of the EU linked to the guarantees is capped and financial assets are gradually provisioned to cover for the future guarantee calls. This heading also includes provisions for outstanding loans to Syria issued by the EIB under its external lending mandate and thus guaranteed by the EU via the Guarantee Fund for external actions. Non-current financial provisions are discounted to their net present value.

178.

The increase of the financial provision relates


to the increase of the volume of guaranteed operations

Annual accounts of the European Union 2019

2.11. FINANCIAL LIABILITIES

Non-current

Financial liabilities at amortised cost

Financial liabilities at fair value through surplus or deficit

Current

Financial liabilities at amortised cost

Financial liabilities at fair value through surplus or deficit

Financial guarantee liabilities

Total

2.11.1 2.11.2

EUR million
31.12.201931.12.2018
53 062 9

53 071
53 281 7

53 289
2.11.11 4232 602
2.11.2415
2.11.320-
1 4462 617
54 51755 906

179.

2.11.1. Financial liabilities at amortised cost


Borrowings for financial assistance Other financial liabilities

Total

Non-Current Current

2.11.1.1 2.11.1.2

EUR million

180.

31.12.2019 31.12.2018


52 564

1 921

54 485

53 062 1 423

53 872 2 012

55 884

53 281 2 602

181.

2.11.1.1. Borrowings for financial assistance


EUR million

EFSMBOPMFAEuratomECSC in LiquidationTotal
Total at 31.12.201847 4001 7344 3882549753 872
New loans--420--420
Repayments-(1 500)(52)(40)(97)(1 689)
Exchange differences----55
Changes in carrying amount(6)(33)(1)-(5)(44)
Total at 31.12.201947 3942014 754214052 564
Non-current46 8002004 112178-51 290
Current594164335-1 273

Borrowings mainly include debts evidenced by certificates amounting to EUR 52 433 million (2018: EUR 53 725 million). The changes in carrying amount correspond to the change in accrued interests.

The repayment of the above borrowings are ultimately guaranteed by the EU budget and by extension by each Member State.

see note 4.1.2,

182.

Note


Note

Annual accounts of the European Union 2019 Borrowings effective interest rates (expressed as a range of interest rates)

Macro Financial Assistance (MFA)

Euratom

Balance of Payment (BOP)

European Financial Stability Mechanism (EFSM)

ECSC in Liquidation

183.

31.12.2019


0% - 3.82%

0% - 5.68%

2.88%

0.50% - 3.75%

184.

31.12.2018


0 % - 3.82 %

0 % - 5.68 %

2.88 % - 3.38 %

0.50 % - 3.75 %

6.91 % - 8.97 %

185.

2.11.1.2. Other financial liabilities


Non-current

Finance lease liabilities Buildings paid for in instalments Other

186.

31.12.2019


244 385 144

1 772

Current

Finance lease liabilities Buildings paid for in instalments Fines to be reimbursed Other

97 36

17

149

Total

1 921

EUR million

187.

31.12.2018


331 314 115

1 760

93

29

125

5

252

2 012

188.

Finance lease liabilities


Future amounts to be paid

Land and buildings Other fixed assets

Total at 31.12.2019

Interest element

Total future minimum lease payments at 31.12.2019

Total future minimum lease payments at 31.12.2018

153

654

1 089

EUR million

< 1 yearTotal
91 5332 124

456

189

644
788

788

157

946
1 211 129
971 340
54400
1501 741

1 896

The lease and building related amounts above will have to be funded by future budgets.

1

1

Annual accounts of the European Union 2019 2.11.2. Financial liabilities at fair value through surplus or deficit

EUR million

189.

Type of derivative


Guarantee on equity portfolio FX option (put spread)

Total

Non-current Current

190.

31.12.2019


otional amount

752 13

765

148 617

191.

Fair value


10 2

12

9 4

192.

31.12.2018


Notional

Fair amount

536 11

546

82 464

193.

Fair value


20 2

22

7 15

194.

Guarantee on equity portfolio


Guarantees given on equity portfolio are classified as financial liabilities at fair value through surplus or deficit since they do not meet the definition of a financial guarantee liability – see note 1.5.12. As at 31 December 2019 this heading relates mainly to a guarantee provided by the EU under the H2020 financial instruments (see note 2.4.1) to the EIB Group for portfolios of equity operations. The EU financial liability is measured based on the value of the underlying investments.

195.

Foreign exchange option


As at 31 December 2019 the EU holds a derivative financial instrument (Foreign exchange option – put spread type of option) in which it covers the devaluation of the foreign exchange currency (UHA) related to loans given by financial institutions to SMEs in Ukraine so as to enhance the access to financing, as well as the attractiveness of the loan conditions in Ukraine. Under the terms of the contract, the EU provides its partners with an option to call, for each eligible loan, up to a maximum of 30 %, for an EU contribution in the case of devaluation of the ratio UHA/EUR.

196.

Fair value hierarchy of financial liabilities measured at fair value


Level 1: Quoted prices in active markets

Level 2: Observable inputs other than quoted prices Level 3: Valuation techniques with inputs not based on observable market data

197.

31.12.2019


2 10

EUR million

198.

31.12.2018


2 20

Total

12

22

199.

2.11.3. Financial guarantee liabilities


The EFSI guarantee on the debt portfolio disbursed by the EIB under the EFSI Innovation and Infrastructure window (IIW), as well as the External Lending Mandate (ELM) guarantee for the EIB loans disbursed under the EIB Resilience Initiative (ERI) are classified as a financial guarantee liability. At 31 December 2019, the EFSI financial guarantee liability totals EUR zero (2018: EUR zero), as the revenues to be received under this guarantee exceed expected losses, while the ELM ERI financial guarantee liability amounts to EUR 20 million (see note 4.1.1).

2.12. PAYABLES

Annual accounts of the European Union 2019

EUR million

Gross AmountAdjustmentsNet Amount at 31.12.2019Gross AmountAdjustmentsNet Amount at 31.12.2018
Cost claims and invoices
received from:
Member States
EAFRD & other rural development instruments2121247247
ERDF & CF8 068(2 437)5 63110 761(1 724)9 037
ESF2 882(558)2 3255 195(496)4 699
Other852(45)807632(75)557
Private and public entities1 562

13 384
(180)

(3 220)
1 3811 461(179)

(2 475)
1 282
Total cost claims and invoices received10 16518 29615 821
E AG F16 255N/A N/A N/A N/A16 25514 772N/A N/A N/A N/A14 772
Own resources payables-769769
Sundry payables539 283539570570
Other283294294
Total30 462(3 220)27 24134 701(2 475)32 227

Payables include invoices and cost claims received but not yet paid at year-end. They are initially recognised at the time of the reception of the invoices / cost claims for the requested amounts. The payables are subsequently adjusted to reflect only the amounts accepted following review of costs, and the amounts estimated to be eligible. The amounts estimated to be non-eligible are included in the column ‘Adjustments’; the largest amounts concern the structural actions.

In the 2014-2020 programming period, the Common Provisions Regulation (CPR) applicable to the Structural Funds (ERDF and ESF), Cohesion Fund and to the European Maritime and Fisheries Fund (EMFF) foresees that the EU budget is protected by means of a systematic retention of 10 % of the interim payments made. By February following the end of the CPR accounting year (1 July - 30 June), the control cycle is complete both through management verifications by the managing authorities and audits by the audit authorities. The Commission examines the assurance documents and the accounts provided by the relevant authorities in the Member States. The payment / recovery of the final balance is made only after this assessment is finalised and the accounts are accepted. The amount retained according to this provision at end 2019 totalled EUR 7.6 billion. A part of this amount (EUR 2 billion) is estimated as being non-eligible on the basis of the information provided by the Member States in their accounts and is also included in the column ‘Adjustments’. The final component of the adjustments to the payables is represented by the amounts corresponding to other advances to Member States (see note 2.5.2) still to be paid at year-end (EUR 0.5 billion).

Payables concerning cohesion policy (ERDF, CF, ESF) have decreased. The claims related to the period 2007-2013 have further decreased to EUR 1.9 billion (2018: EUR 3.5 billion), as the Commission has validated and paid the final cost claims submitted by the Member States for this period. At the same time, claims related to period 2014-2020 decreased to EUR 5.8 billion (2018: EUR 10 billion) as fewer cost claims were received for payment at 31 December compared to last year. The implementation of the programmes is however progressing (see ERDF, CF expenses note 3.9) as evidenced by the fact that the overall liabilities for ERDF, CF are stable – see increase in accrued charges note 2.13.

The increase in EAGF payables relates to the repartition of the total EAGF liabilities between payables and accrued charges. The total EAGF liabilities remain stable at EUR 44 448 million against EUR 44 159 million last year. However, in 2019 the amounts already claimed by the Member States at the end of the year (accounted for as payable) are higher than in 2018.

200.

Requests for pre-financing


In addition to the above amounts, at the end of 2019, EUR 0.5 billion of requests for pre-financing have been received and were not yet paid at year-end. According to the EU accounting rules, these amounts are not booked as payables.

Annual accounts of the European Union 2019

201.

Own Resources Payables


Own resources payables refer to Member States EU budget contributions to be reimbursed at year-end. Amending budgets are implemented according to Article 10 i of Regulation no 609/2014. The amount on 31 December 2018 was due to the adoption of the amending budget No 6/2018 adopted on 12 December 2018. According to this legal provision, the resulting amounts were returned to the Member States on the first working day of January 2019. This year there was no similar amending budget, thus no such payables.

2.13. ACCRUED CHARGES AND DEFERRED INCOME

Accrued charges Deferred income Other

Total

EUR million
31.12.201931.12.2018
66 86062 877
25196
116213
67 22763 186

The split of accrued charges is as follows:

EAGF

EAFRD and other rural development instruments

ERDF and CF

ESF

Other

EUR million

202.

31.12.2019 31.12.2018


28 19329 387
18 58318 687
9 5255 863
3 0162 321
7 5426 619

Total

66 860

62 877

Accrued charges refer to recognised expenses for which the Commission has still to receive cost claims. For cohesion policy, the increase for ERDF & CF accrued charges (as the programmes are being further implemented) offsets the decrease in payables, thus resulting in a stable amount of the overall liability towards the Member States (EUR 15 156 million, compared to EUR 14 900 million in the previous year). For ESF, the total liability has decreased to EUR 5 341 million (2018: EUR 7 020 million) following the trend in the ESF expenses. For the decrease in EAGF see note 2.12 above.

Annual accounts of the European Union 2019

NET ASSETS

2.14. RESERVES

Fair value reserve Guarantee Fund reserve Other reserves

Total

2.14.1 2.14.2 2.14.3

EUR million
31.12.201931.12.2018
391231
2 8702 849
1 7761 881
5 0374 961

203.

2.14.1. Fair value reserve


In accordance with the EU accounting rules, the adjustment to fair value of available for sale financial assets is accounted for through the fair value reserve.

204.

Movements of the fair value reserve during the period


Included in fair value reserve

Included in the statement of financial performance

Total

205.

31.12.2019


200 (40)

160

EUR million

206.

31.12.2018


(70) 23

(47)

207.

2.14.2. Guarantee Fund reserve


This reserve reflects the 9 % target amount of the outstanding amounts guaranteed by the EU budget under the EIB external lending mandate, that is required to be kept as assets in the Guarantee Fund for external actions (see note 2.4.1).

208.

2.14.3. Other reserves


The amount relates primarily to the reserves of the ECSC in Liquidation (EUR 1 461 million) for the assets of the Research Fund for Coal and Steel, which were created in the context of the winding-up of the ECSC i.L.

209.

Note


Annual accounts of the European Union 2019

2.15. AMOUNTS TO BE CALLED FROM MEMBER STATES

EUR million

Amounts to be called from Member States at 31.12.2018 66 424

Return of budget surplus to Member States 1 803

Movement in Guarantee Fund reserve 21

Remeasurements in employee benefits liabilities 14 164

Other reserve movements (56)

Economic result of the year (4 796)

Total amounts to be called from Member States at 31.12.2019 77 560

This amount represents that part of the expenses incurred by the EU up to 31 December that must be funded by future budgets. Many expenses are recognised under accrual accounting rules in the year N although they may be actually paid in year N+1 (or later) and therefore funded using the budget of year N+1 (or later). The inclusion in the accounts of these liabilities coupled with the fact that the corresponding amounts are financed from future budgets, results in liabilities greatly exceeding assets at the year-end. The most significant amounts to be highlighted concern the EAGF activities and employee benefit liabilities.

It should also be noted that the above has no effect on the budget result – budget revenue should always equal or exceed budget expenditure and any excess of revenue is returned to Member States.

The remeasurements in employee benefits liabilities relate to actuarial gains and losses arising from the actuarial valuation of these liabilities. As from 1 January 2018 the amended EU accounting rule 12 (based on IPSAS 39) for employee benefits is applicable. According to this rule actuarial gains and losses are presented as a movement in net assets rather than in the statement of financial performance.

Annual accounts of the European Union 2019

3. NOTES TO THE STATEMENT OF FINANCIAL

PERFORMANCE

REVENUE

REVENUE FROM NON-EXCHANGE TRANSACTIONS: OWN RESOURCES

3.1. GNI RESOURCES

Own resources revenue is the primary element of the EU's operational revenue. GNI (gross national income) revenue amounts to EUR 108 820 million for 2019 (2018: EUR 105 780 million) and is the most significant of the three categories of own resources. A uniform percentage is levied on the GNI of each Member State. The GNI revenue balances revenue and expenditure i.e. funds the part of the budget that is not covered by other sources of income. The increase of GNI revenue is explained mainly by the size of adjustments for the past (mostly years 2012 to 2017). Every year, the GNI bases are updated with real data and the contributions of Member States to the EU budget are recalculated in line with their updated economic performance. This procedure is key to ensuring a level playing field among Member States in terms of their annual contributions.

3.2. TRADITIONAL OWN RESOURCES

EUR million
20192018
21 23522 763
04
21 23522 767

Customs duties Sugar levies

Total

Traditional own resources comprise custom duties and sugar levies. Member States retain, by way of collection costs, 20 % of traditional own resources, and the above amounts are shown net of this deduction. The decrease in customs duties largely refers to the absence of the infringement case revenue recognised in 2018. (see note 2.6.1.1).

3.3. VAT RESOURCES

The VAT resource is defined as the Union’s second kind of own resources since this tax type was the first to be largely harmonised at the EU level. The VAT contribution is calculated by applying a uniform call rate of 0.3 % to the national VAT base which cannot exceed 50 % of the gross national income (GNI) of each Member State. For the period 2014-2020, the Council Decision 2014/335/EU, Euratom, foresees a reduced rate of call of 0.15 % for Germany, the Netherlands and Sweden.

REVENUE FROM NON-EXCHANGE TRANSACTIONS: TRANSFERS

3.4. FINES

Revenue of EUR 4 291 million (2018: EUR 6 740 million) relates to fines the Commission has imposed on companies for breaches of EU competition rules and fines the Commission has imposed on Member States for infringements of EU law. The Commission recognises revenue from fines when it adopts the decision to impose a fine and it officially notifies the addressee. The amounts relate mainly to competition fines (EUR 4 091 million). The biggest cases concern breaches of EU antitrust rules, i.e. a fine imposed on

EUR million
20192018
2 5472 116
6565
1634
2 6272 215

Annual accounts of the European Union 2019

fine imposed on Mastercard for obstructing merchants' access to cross-border card payment services (EUR 570 million).

3.5. RECOVERY OF EXPENSES

Shared management Direct management Indirect management

Total

This heading mainly represents the recovery orders issued by the Commission that are cashed or offset against (i.e. deducted from) subsequent payments recorded in the Commission's accounting system, issued so as to recover expenditure previously paid out from the EU budget. Recoveries are based on controls, audits or eligibility analysis and therefore, these operations protect the EU budget from expenditure incurred in breach of law.

Recovery orders issued by Member States to beneficiaries of EAGF expenditure, as well as the variation of accrued income estimations from the previous year-end to the current year-end, are also included.

The amounts included in the above table represent revenue earned through the issuance of recovery orders. For this reason, these figures cannot and do not show the full extent of the measures taken to protect the EU budget, particularly for cohesion policy where specific mechanisms are in place to ensure the correction of ineligible expenditure, most of which do not involve the issuance of a recovery order. Not included are amounts recovered through offsetting with expenses, amounts recovered by way of withdrawals and recoveries of pre-financing amounts.

Shared management recoveries make up the bulk of the total:

210.

Agriculture: EAGF and rural development


In the framework of the EAGF and the EAFRD, amounts accounted for as revenue of the year under this heading are financial corrections of the year and reimbursements declared by Member States and recovered during the year, as well as the net increase in the outstanding amounts declared by Member States to be recovered at year-end concerning fraud and irregularities.

211.

Cohesion policy


The main amounts related to cohesion policy relate to accrued income of EUR 1.4 billion (2018: EUR 1.1 billion) that the Commission expects to recover from the Member States. The recovery will be made as a result of the examination and acceptance of the annual accounts submitted by the Member States in early 2020. This procedure for the acceptance of Member States' annual accounts in the cohesion area started with the programming period 2014-2020.

Annual accounts of the European Union 2019

3.6. OTHER REVENUE FROM NON-EXCHANGE TRANSACTIONS

Contributions from third countries

Staff taxes and contributions

Contributions from Member States for external aid

Transfer of assets

Adjustment of provisions

Agricultural levies

Budgetary adjustments

Other

Total

EUR million
20192018
1 4851 376
1 2991 268
331594
6085
41100
24
(1 719)(726)
574612
2 0723 312

Contributions from third countries are contributions from EFTA countries and pre-accession countries.

Staff taxes and contributions revenue relates primarily to the deductions from staff salaries. contributions and income tax represent the substantial amounts within the category.

212.

Retirement


Contributions from Member States for external aid are mainly the amounts received to set up the Facility for Refugees in Turkey.

Transfer of assets revenue relates mainly to the transfer of satellites under the Copernicus programme from the European Space Agency (ESA) to the Commission (see note 2.2). This transfer is a non-exchange transaction according to the EU accounting rules and will occur in future periods for the remaining Copernicus satellites currently under construction.

The budgetary adjustments resulted in a negative amount as the positive effect from taking in the budget surplus from the previous year of EUR 1 803 million (2018: EUR 555 million) was overcompensated by GNI/VAT adjustments of EUR 3 443 million (2018: EUR 1 292 million).

Other revenue from non-exchange transactions includes EUR 151 million of Member State contributions to Fusion for Energy, the European Joint Undertdaking for ITER and the Development of Fusion Energy.

REVENUE FROM EXCHANGE TRANSACTIONS

3.7. FINANCIAL REVENUE

Interest on:

Late payments

Loans

Other Premium on financial guarantee liability Dividends

Financial revenue from financial assets or liabilities at fair value through surplus or deficit

Realised gains on available for sale financial assets Other

Total

213.

2019


EUR million

214.

2018


1331 458
1 1801 265
7068
193121
29103
12529
8223
448
1 8173 115

The late payment interest of 2018 included a large initial interest revenue on late payments in relation to the UK infringement case and the TOR inspection reports (see note 2.6.1.1). This year additional

Annual accounts of the European Union 2019 Interest revenue on loans relates mainly to loans granted for financial assistance (see note 2.4.3).

3.8. OTHER REVENUE FROM EXCHANGE TRANSACTIONS

Fee revenue for rendering of services (agencies)

Foreign exchange gains

Fee and premium revenue related to financial instruments

Share of net result of EIF

Sales of goods

Fixed assets related revenue

Other

Total

EUR million
20192018
592602
347329
4354
5337
3133
527
227297
1 2981 379

Fee revenue for rendering of services mainly includes marketing authorisation fees charged by the European Medicines Agency and trademark fees collected by the European Union Intellectual Property Office.

EXPENSES

3.9. SHARED MANAGEMENT

215.

Implemented by Member States


European Agricultural Guarantee Fund

European Agricultural Fund for Rural Development and other rural

development instruments

European Regional Development Fund and Cohesion Fund

European Social Fund

Other

Total

216.

2019


EUR million

217.

2018


43 95143 527
13 54113 149
35 17830 230
11 21811 935
2 6082 826
106 495101 666

The increase mainly concerns cohesion policy (ERDF, CF) where almost all expenses relate to the current programming period, where the work continues to advance.

Other expenses mainly include: Asylum and Migration (EUR 0.6 billion), Fund for European Aid to the Most Deprived (EUR 0.5 billion), Internal Security (EUR 0.4 billion), European Union Solidarity Fund (EUR 0.4 billion) and European Maritime and Fisheries Fund (EUR 0.7 billion). The decrease compared to last year mainly relates to the European Union Solidarity Fund.

3.10. DIRECT MANAGEMENT

Implemented by the Commission Implemented by EU Executive Agencies Implemented by Trust funds

Total

8 435

10 095

412

18 942

EUR million

218.

2018


8 120

8 964

468

17 551

These amounts mainly concern the implementation of Research Policy (EUR 7.7 billion), Connecting Europe Facilty (CEF) - transport part (EUR 3.1 billion), Development Co-operation Instrument (EUR 1.4 billion), European Neighbourhood Policy (EUR 1.1 billion).

Annual accounts of the European Union 2019

The increase in direct management expenses implemented by EU Executive agencies refers mainly (EUR 0.8 billion) to the Innovation and Networks Executive Agency (INEA) out of which the biggest part relates to the transport part of the CEF. The CEF for transport is the funding instrument to implement European transport infrastructure policy and aims in building new or upgrading/rehabilitating transport infrastructure in Europe.

3.11. INDIRECT MANAGEMENT

Implemented by other EU agencies & bodies Implemented by third countries

Implemented by international organisations Implemented by other entities

Total

EUR million
20192018
3 1313 396
637679
3 4483 337
2 8753 569
10 09110 981

In indirect management expenses, EUR 4.2 billion relates to external actions (mainly the areas of pre-accession, humanitarian aid, international co-operation and neighbourhood). A further EUR 5.8 billion is related to increasing Europe's competitiveness (in areas such as research, satellite navigation systems and education). The decrease in expenses implemented by other entities mainly relates to education (Erasmus).

3.12. STAFF AND PENSION COSTS

Staff costs Pension costs

Total

EUR million
20192018
6 6926 454
4 6744 476
11 36610 929

Pension costs represent elements of the movements that have arisen following the actuarial valuation of the employee benefits liabilities other than actuarial assumptions. They do not therefore represent actual pension payments of the year, which are significantly lower.

3.13. FINANCE COSTS

Interest expenses:

Borrowings

Other Impairment losses on loans and receivables

Loss on financial assets or liabilities at fair value through surplus or deficit

Finance leases

Impairment losses on available for sale financial assets Realised loss on available for sale financial assets Other

Total

219.

2019


EUR million 2018

1 1741 260
2326
105126
5795
7073
1925
721
3650
1 4911 677

The amount of interest expense on borrowings corresponds mainly to interest income on loans for financial assistance (back-to-back transactions).

Annual accounts of the European Union 2019

3.14. OTHER EXPENSES

220.

2019


Administrative and IT expenses

Fixed assets related expenses

Adjustment of provisions

Foreign exchange losses

Operating lease expenses

Reduction of fines by the Court of Justice

Other

Total

EUR million

221.

2018


2 5402 313
1 6301 608
1 294923
343341
442424
911
769598
7 1096 208

Expenses relating as follows:

222.

to research and development are included in administrative and IT expenses and are


Research costs

Non-capitalised development costs

223.

2019


398 119

Total

517

EUR million

224.

2018


385 106

491

Annual accounts of the European Union 2019

3.15. SEGMENT REPORTING BY MULTIANNUAL FINANCIAL FRAMEWORK HEADING (MFF)

GNI resources

Traditional own resources

VAT

Fines

Recovery of expenses

Other

Revenue from non-exchange transactions

Financial revenue Other

Revenue from exchange transactions

225.

Smart and


Sustainable

Security and citizenship

Global

Administration

1 520

1 202

2 722

423 155

578

1 076 29

1 104

1 (12)

(11)

1022
43214
54235
011
(5)13
(5)24

0 5 176

5 176

0 283

283

226.

Not assigned to MFF heading*


108 820

21 235

18 128

4 291

0

(4 592)

147 882

1 383 864

2 247

EUR million Total

Total expenses

Economic result of the year

* ‘Not-assigned to MFF heading’ includes consolidated entities' budget

(69 070) (65 770)

execution and consolidation

(59 800) (58 707)

(4 194) (4 145)

(9 427) (9 167)

(10 985) (5 526)

108 820

21 235

18 128

4 291

2 627

2 072

157 174

1 817 1 298

3 116

Total revenue3 3001 093492605 459150 129160 289
Expenses implemented by Member States:
EAGF-(43 951)----(43 951)
EAFRD & other rural development instruments-(13 541)----(13 541)
ERDF & CF(35 178)-----(35 178)
ESF(11 218)-----(11 218)
Other(512)(668)(1 382)(46)-(0)(2 608)
Implemented by the EC, executive agencies and trust funds(12 763)(676)(1 060)(4 446)(19)23(18 942)
Implemented by other EU agencies and bodies(2 799)(62)(927)(32)-689(3 131)
Implemented by third countries and int. org.(526)(2)(242)(3 314)(0)-(4 085)
Implemented by other entities(2 037)(1)(1)(839)(0)3(2 875)
Staff and Pension costs(1 637)(350)(444)(604)(7 222)(1 110)(11 366)
Finance costs(113)(56)(0)(9)(104)(1 209)(1 491)
Other expenses(2 287)(493)(137)(136)(3 640)(415)(7 109)

(2 018) 148 111

(155 493) 4 796

eliminations, off-budget operations and unallocated programmes with individually immaterial amounts.

The display of revenue and expenses by MFF heading is based on estimation as not all commitments are linked to an MFF heading.


Annual accounts of the European Union 2019

4.

CONTINGENT LIABILITIES AND ASSETS

4.1. CONTINGENT LIABILITIES

Contingent liabilities are possible future payment obligations for the EU that may arise due to past events or legally binding commitments taken but which will depend on future events not wholly under the control of the EU. They relate mainly to financial guarantees given (on loans and financial assistance programmes) and to legal risks. All contingent liabilities, except those relating to fines and guarantees covered by funds (see note 2.4.1), would be financed, should they fall due, by the EU budget (and thus the EU Member States) in the years to come.

227.

4.1.1. Budgetary guarantees


228.

31.12.2019


229.

31.12.2018


EUR million

230.

Ceiling Signed Disbursed Ceiling Signed Disbursed


EIB external lending mandate37 92931 52120 01440 41730 88920 510
EFSI guarantee25 79721 88917 63425 89819 84215 764
EFSD guarantee50-----
Total63 77553 41037 64866 31550 73136 273

The above table shows the extent of the exposure of the EU budget to possible future payments linked to guarantees given to the EIB group or other financial institutions. Disbursed amounts represent the amounts already given to final beneficiaries, while signed amounts include these disbursed monies plus agreements already signed with beneficiaries or financial intermediaries but not yet disbursed (EUR 15 762 million). The ceiling represents the total guarantee that the EU budget, and thus its Member States, have committed to cover, since in order to disclose the maximum exposure faced by the EU at 31 December 2019, one must also include operations authorised to be signed but not yet signed (EUR 10 365 million). The amounts are presented net of financial provisions or financial liabilities recognised for those programmes.

231.

EIB external lending mandate guarantees


The EU budget guarantees loans signed and granted by the EIB from the EIB's own resources to third countries. At 31 December 2019 the amount of loans outstanding and covered by the EU guarantee totalled EUR 20 014 million (2018: 20 510 million). The EU budget guarantees:

• EUR 19 074 million (2018: EUR 19 360 million) via the Guarantee Fund for external actions (see note 2.4.1), and

EUR 940 million (2018: EUR 1 150 million) directly for loans granted to accession.

232.

Member States before


In addition to the EUR 20 014 million disclosed above as disbursed, the EU guarantees a further EUR 161 million of outstanding loans to Syria for which provisions have been made, and EUR 20 million recognised as financial guarantee liability for the EIB Economic Resilience Initiative (ERI) Private Mandate (see below).

The EU external lending mandate guarantee relating to loans granted by the EIB is limited to 65 % of the outstanding balances for agreements signed after 2007 (mandates 2007-2013 and 2014-2020). For agreements made before 2007, the EU guarantee is limited to a percentage of the ceiling of the credit lines authorised, in most cases 65 % but also 70 %, 75 % or 100 %. Where the ceiling is not reached, the EU guarantee covers the full amount.

According to Decision (EU) 2018/412, up to EUR 2.3 billion shall be allocated to the new private sector lending mandate for projects directed to the long term economic resilience of refugees, migrants, host and transit communities under the EIB ERI. The EIB has disbursed the first ERI Private Mandate


Annual accounts of the European Union 2019

for EIB finacing operations under the ERI Private Mandate, hence the ERI Private Mandate guarantee is accounted for as a financial guarantee liability (see note 2.11.3).

EU guarantee payments are made by the Guarantee Fund for external actions – see note 2.4.1. During 2019, EUR 55 million of guarantee calls have been paid out from the Guarantee Fund for external actions (2018: EUR 56 million).

233.

European Fund for Strategic Investments (EFSI) guarantee


EFSI is an initiative that aims to increase the risk bearing capacity of the EIB Group by enabling the EIB to extend its investments in the EU. The objective of EFSI is to support additional investments in the EU and access to finance for small companies. The EU budget provides a guarantee of up to EUR 26 billion ('EFSI EU guarantee') under an agreement between the EU and the EIB, hereinafter referred to as EFSI Agreement, in order to protect the EIB from potential losses it may suffer from its financing and investment operations.

The EFSI operations are conducted within two windows: the Infrastructure and Innovation Window (IIW) implemented by the EIB (EFSI EU guarantee of EUR 19.5 billion) and the SME Window (SMEW) implemented by the EIF (EFSI EU guarantee of EUR 6.5 billion), both of which have a debt portfolio and an equity portfolio. The EIF acts under an agreement with the EIB on the basis of an EIB guarantee, which itself is counter-guaranteed by the EFSI EU Guarantee under the EFSI Agreement.

The EU and the EIB have distinct roles within EFSI. EFSI is established within the EIB who finance the operations (debt and equity investments) and, to do this, borrow the necessary funds on the capital markets. The EIB Group takes the investment decisions independently and manages the operations in accordance with its rules and procedures. The EU provides the guarantee for those operations, and covers losses incurred by the EIB up to the ceiling of this guarantee.

In order to ensure that investments made under EFSI remain focused on the specific objective of addressing market failures and that they are eligible for the protection of the EU guarantee, a dedicated governance structure has been put in place, including an Investment Committee of independent experts which examines each project proposed by the EIB under the IIW regarding its eligibility for the EU guarantee coverage and EFSI Steering Board ensuring an oversight over the programme.

As the control criteria and accounting requirements for consolidation under the EU accounting rules (and IPSAS) are not met, the related guaranteed assets are not accounted for in the consolidated annual accounts of the EU.

The EU guarantee granted to the EIB Group under EFSI is accounted for as a financial guarantee liability in respect of the IIW debt portfolio (see note 2.11.3), as a financial provision for the SMEW debt portfolio and as a derivative (financial asset or liability at fair value through surplus or deficit) for both equity portfolios (see note 2.4.2). In addition, a contingent liability related to the EFSI guarantee given is disclosed in this note. The EFSI contingent liability includes operations of the COSME, H2020, CCS LGF and EaSI programmes for the part covered by the EFSI EU guarantee under SMEW debt portfolio, and is presented net of EUR 74 million of financial provisions recognised for this portfolio, as included under the heading financial provisions in the note 2.10.

EU guarantee payments, not covered by the EU revenues standing in credit on the EFSI settlement account at the EIB, are made by the EFSI Guarantee Fund – see note 2.4.1. During 2019 no guarantee calls have been paid out from the EFSI Guarantee Fund (2018: EUR 61 million).

234.

European Fund for Sustainable Development (EFSD)


The European Fund for Sustainable Development, established by the EFSD Regulation, is an initiative aiming to support investments in Africa and the European Neighbourhood as a means to contribute to the achievement of the sustainable development and to address specific socioeconomic root causes of migration. Under the EFSD Regulation, the EU should make available guarantees of EUR 1.5 billion (further increased by external contributions) to implementing partners for their investment and financing operations, in order to reduce their investment risks. The EFSD Guarantee is backed by the EFSD Guarantee Fund (see note 2.4.1). As at 31 December 2019, one EFSD guarantee agreement ’Framework to Scale Up Renewable Energy Investments‘, was effective, but no underlying financing operations were signed by the implementing partner, EBRD.

Annual accounts of the European Union 2019 4.1.2. Guarantees relating to financial assistance (borrowing and lending activities)

235.

31.12.2019


Drawn Undrawn

Total

236.

31.12.2018 Drawn Undrawn


EUR million

237.

Total


EFSM47 394-47 39447 400-47 400
BOP201-2011 734-1 734
MFA4 7545605 3144 3889805 368
Euratom214200414254200454
Total52 56476053 32453 7751 18054 955

The EU budget guarantees the borrowings of the Commission taken to finance lending to Member and non-Member States in back-to-back transactions. These borrowings are already recognised as liabilities on the EU balance sheet - see note 2.11.1. However, should there be a default on the back-to-back-loans given out with these borrowings, the EU budget, based on Article 14 of Council Regulation 2014/609, would have to bear the full cost of the amount defaulted:

• Borrowings related to loans disbursed under the EFSM are guaranteed solely by the EU budget;

• Borrowings related to BOP loans are guaranteed solely by the EU budget;

• MFA loans are firstly guaranteed by the Guarantee Fund for external actions (see note 2.4.1) and then by the EU budget; and

• Guarantees from third parties are the first cover for the entire amounts of the outstanding Euratom loans. The Guarantee Fund would cover the external lending amounts should the third party guarantors not provide for them.

238.

4.1.3. Guarantees given for EU financial instruments


Horizon 2020

Risk Sharing Finance Facility

Connecting Europe Facility

Other

Total

239.

31.12.2019


1 584 110 684

38

2 416

EUR million

240.

31.12.2018


1 467 642 579

29

2 717

As mentioned in Article 210 i FR, the budgetary expenditure linked to a financial instrument and the financial liability of the EU shall in no case exceed the amount of the relevant budgetary commitment made for it, thus excluding contingent liabilities for the budget. In practice, it means that these liabilities have a counter-part on the asset side of the balance sheet or are covered by the outstanding budgetary commitments not yet expensed. The contingent liabilities above are shown net of financial provisions and financial liabilities recognised for these instruments – see notes 2.10 and 2.11.2.

241.

4.1.4. Legal cases


EUR million

242.

31.12.2019 31.12.2018


Fines

Agriculture Cohesion Other

Total

3 1283 187
199653
34126
2 1371 867
5 8055 732

Annual accounts of the European Union 2019

243.

Fines


These amounts mainly concern fines imposed by the Commission for infringement of competition rules that have been provisionally paid by fined companies and where either an appeal has been lodged or where it is unknown whether an appeal will be made. The contingent liability will be maintained until a decision by the Court of Justice on the case is final or until the expiry of the period for appeal. Interest earned on provisional payments is included in the economic result of the year and also as a contingent liability to reflect the uncertainty of the Commission’s title to these amounts.

Should the EU lose any of the cases relating to fines imposed, the amounts that have been provisionally received will be returned to the companies without budgetary impact. The amount of fines is only recognised as budgetary revenue when the fines are definitive (Article 107 FR).

244.

Agriculture


These are contingent liabilities towards the Member States connected with EAGF and rural development conformity decisions pending judgement of the Court of Justice. The determination of the final amount of the liability and the year in which the effect of successful appeals will be charged to the budget will depend on the length of the procedure before the Court.

245.

Cohesion


These are contingent liabilities towards the Member States in connection with actions under cohesion policy awaiting the oral hearing date or pending judgement of the Court of Justice. The increase comes from two cases concerning eligible expenses and Member States accounts.

246.

Other legal cases


This heading relates to actions for damages currently being brought against the EU, other legal disputes and the estimated legal costs. It should be noted that in an action for damages under Article 340 TFEU, the applicant must demonstrate a sufficiently serious breach by the institution of a rule of law intended to confer rights on individuals, real harm suffered by the applicant, and a direct causal link between the unlawful act and the harm. The amount for 2019 (as in 2018) mainly concerns a damages claim against the Commission for a merger prohibition decision, where, in the absence of a reliable estimate, the amount disclosed relates to the claimed amount. The increase in 2019 relates to damages claims concerning a Commission delegated regulation, annuled by the General Court.

4.2. CONTINGENT ASSETS

Guarantees received:

Performance guarantees Other guarantees

Other contingent assets

Total

247.

31.12.2019


349 16 65

430

EUR million

248.

31.12.2018


321 19 25

366

Performance guarantees are requested to ensure that beneficiaries of EU funding meet the obligations of their contracts with the EU.

Annual accounts of the European Union 2019

5.

BUDGETARY AND LEGAL COMMITMENTS

This note provides information on the budgetary process and future funding needs and not on liabilities existing as at 31 December 2019.

The multiannual financial framework (MFF) agreed by the Member States defines the programmes and sets out the heading ceilings for commitment appropriations and the total for payment appropriations within which the EU may enter into budgetary and legal commitments, and ultimately make payments for a period of 7 years – see table 1.1 in the notes to the budgetary implementation reports.

The MFF ceilings were adopted by the Council (Member States), with the consent of the European Parliament, and Article 16 of Regulation 2013/1306 on the financing of the CAP makes a direct link between the annual ceiling of EAGF expenditure and the MFF Regulation. The European Parliament and the Council also adopted the respective basic acts for the EAGF expenditure that set out the expenditure per Member State for the entire period 2014-2020.

Legal commitments correspond to programmes, projects, agreements or contracts signed, thus legally binding the EU. A legal commitment is the act whereby the authorising officer enters or establishes an obligation (for the EU) which results in a charge (Article 2 i FR).

A budgetary commitment is in principle made before the legal commitment, but for some multiannual programmes/projects it is the reverse, the relevant budgetary commitments being made in annual instalments, over several years, when the basic act so provides for. For example, for cohesion, Article 76 of the Common Provisions Regulation (CPR) (Regulation (EU) No 2013/1303) provides that the decision of the Commission adopting a programme shall constitute a legal commitment within the meaning of the Financial Regulation but that the budget commitments of the Union in respect of each programme shall be made in annual instalments for each fund during the period between 1 January 2014 and 31 December 2020. Other legal bases may contain similar provisions. For this reason, there may be amounts that the EU has legally committed to pay, but where the budgetary commitment has not yet been made – see notes 5.2 and 5.3 below.

If the budgetary commitment has been made but the subsequent payments are not yet made, the amount of outstanding commitments is called ‘Reste à Liquider’ (RAL). This can represent programmes or projects, often multiannual, signed and for which payments will only be made in later years. They represent payment obligations for future years. As the financial statements are prepared on an accrual basis, whereas the budgetary implementation reports are prepared on a cash basis, part of the overall amounts unpaid (RAL) has already been expensed and is recognised as a liability on the balance sheet (see notes 2.12 and 2.13). The calculation of these expenses is made based either on cost claims/invoices received or on the estimated implementation of a programme or project where no claims have been notified yet to the EU until the reporting date – see note 5.1 below. Once the payments relating to the RAL are made, the liability on the balance sheet is derecognised. The part of the RAL not expensed yet is not included under liabilities but is instead disclosed below.

The disclosures below thus represent amounts at 31 December 2019 that the EU has committed to pay based on the fulfilment of the contractual agreements and which are therefore intended to be funded by future EU budgets.

Outstanding budgetary commitments not yet expensed Shared management legal commitments under the current MFF pending implementation Significant legal commitments in other areas

Total

EUR million

249.

31.12.2019 31.12.2018


5.1249 686235 836
5.272 832143 883
5.313 94118 126
336 459397 845

250.

Note


Annual accounts of the European Union 2019

5.1. OUTSTANDING BUDGETARY COMMITMENTS NOT YET EXPENSED

Outstanding budgetary commitments not yet expensed

EUR million

251.

31.12.2019 31.12.2018


249 686

235 836

The amount disclosed above is the budgetary RAL (‘Reste à Liquider’) of EUR 297 693 million (see table 4.4 in the notes to the budgetary implementation reports), less related amounts that have been included as liabilities on the balance sheet and as expenses in the statement of financial performance. The budgetary RAL is an amount representing the open commitments for which payments and/or de-commitments have not yet been made. As explained above, this is the normal consequence of the existence of multiannual programmes.

It should be noted that outstanding pre-financing advances at 31 December 2019 totalled EUR 51 billion (see note 2.5). This represents budgetary commitments that have been paid, decreasing the RAL, but where the amounts paid are still considered as belonging to the EU and not to the beneficiary, until the relevant contractual obligations are fulfilled. They are thus, like the RAL disclosed above, not yet expensed.

5.2. SHARED MANAGEMENT LEGAL COMMITMENTS UNDER THE CURRENT MFF PENDING IMPLEMENTATION

EUR million

FundsFinancial

framework

2014-2020 (A)
Legal

commitments

according to

latest

Commission

Decision (B)
Budget

commitments

including

decommitments

(C)
Legal

commitments

pending

implementation

(B-C)
European Regional Development Fund and Cohesion Fund262 585262 407220 44741 960
European Social Fund92 91292 75178 84113 910
European Neighbourhood Policy
Instrument
Fund for European Aid to the most Deprived3 8143 8133 235578

HEADING 1B: COHESION POLICY FUNDS

European Agricultural Fund for

Rural Development

European Maritime and Fisheries

Fund

HEADING 2: NATURAL RESOURCES

Asylum and Migration Fund Internal Security Fund

HEADING 3: SECURITY & CITIZENSHIP

Total

359 310358 971302 52456 448
100 079 5 749100 079 5 68785 404 4 82814 675 859
105 829105 76690 23215 534
4 575 3 159

7 733
4 482 3 095

7 577
4 032 2 695

6 727
450 401

851
472 872472 315399 48372 832

These are legal obligations that the EU has committed to paying when adopting the operational programmes related to shared management. The decision of the Commission adopting an operational programme constitutes a financing decision within the meaning of Article 110 FR and once notified to the Member State concerned, a legal commitment within the meaning of that Regulation.

Article 76 of the CPR for European Structural and Investment Funds (ESIF) states:

Annual accounts of the European Union 2019

‘The budget commitments of the Union in respect of each programme shall be made in annual instalments for each Fund during the period between 1 January 2014 and 31 December 2020. The budget commitments relating to the performance reserve in each programme shall be made separately from the remaining allocation to the programme.’

The table above provides an overview of the legal and budgetary commitments related to the headings 1B, 2 and 3 of the MFF 2014-2020. The table starts by disclosing the total MFF amounts voted for the period (column A). Column B shows the legal commitments concluded by the EU at year-end, some of which are not yet covered by budgetary commitments. Column C contains the budgetary commitments already made to cover the above mentioned legal commitments. The difference between these two columns represents the outstanding amounts that the EU will commit budgetarily and then pay after 31 December 2019. As the end of the MFF period approaches, the difference between legal commitments and budgetary commitments reduces significantly (EUR 72.8 billion compared to EUR 143.8 billion in 2018).

5.3. SIGNIFICANT LEGAL COMMITMENTS IN OTHER AREAS

Connecting Europe Facility

ITER

Copernicus

Galileo

Fisheries agreements

Operating lease commitments

Other contractual commitments

Total

252.

31.12.2019


7 680

1 676 601 438 223

2 535 788

13 941

EUR million

253.

31.12.2018


11 554 1 489

1 267 493

46

2 352 924

18 126

These amounts reflect the long-term legal commitments that were not yet covered by commitment appropriations in the budget at year-end. These binding obligations will be budgeted in annual instalments in future years and paid.

Certain important programmes (see below) may be implemented by annual instalments according to Article 112 i FR. This allows the EU to make legal commitments (sign grant agreements, delegation agreements and procurement contracts) in excess of the available commitment appropriations of a given year. Therefore a substantial amount of the overall allocation for the current MFF may be already committed. This applies in particular for the programmes described below:

254.

Connecting Europe Facility (CEF)


The CEF provides financial assistance to trans-European networks in order to support projects of common interest in the sectors of transport, telecommunications and energy infrastructures. The legal commitments for the CEF programme cover an implementation period running from 2014 until 2023 for the CEF Transport and up to 31.12.2024 for CEF Energy. The legal basis of these commitments is Regulation (EU) No 2013/1316 of the EP and of the Council of 11 December 2013 establishing the Connecting Europe Facility, amending Regulation (EU) No 2010/913 and repealing Regulations (EC) No 2007/680 and (EC) No 2010/67 Text with EEA relevance (OJ L 348, 20 December 2013) which foresees the use of the annual instalment in its article 19.

255.

Copernicus


Copernicus is the European Earth observation programme – see also note 2.2. These commitments are made for the period until 2020. Based on Regulation (EU) 2014/377 of the EP and Council of 3 April 2014 (OJ L 122/44 of 24 April 2014) the Commission signed delegation agreements with the European Space Agency (ESA), EUMETSAT, Mercator and the European Centre for Medium Range weather forecasts. Article 8 of Regulation 2014/377 authorises the use of annual instalments.

ITER – International Thermonuclear Experimental Reactor

Annual accounts of the European Union 2019

basis of Council decision (Euratom) 2013/791 of 13 December 2013 amending decision (Euratom) 2007/198 establishing the European Joint Undertaking for ITER and the Development of Fusion Energy which authorises the use of annual instalments. ITER was created to manage and to encourage the exploitation of the ITER facilities, to promote public understanding and acceptance of fusion energy, and to undertake any other activities that are necessary to achieve its purpose. ITER involves the EU, China, India, Russia, South Korea, Japan and the USA.

256.

Galileo


These are amounts committed to the Galileo programme developing a European Global Navigation Satellite System – see also note 2.2. These commitments are made for the period until 2020. Based on Regulation (EU) 2013/1285 of the EP and Council of 11 December 2013 (OJ L 347/1 of 20 December 2013) the Commission signed a delegation agreement with ESA. Article 9 of Regulation (EU) 2013/1285 authorises the use of annual instalments.

257.

Fisheries agreements


These represent commitments entered into with third countries for operations under international fisheries agreements up to 2025. The commitments made are based on Council decisions for each third country (e.g. Agreement between the EU and the Kingdom of Morocco, the Implementation Protocol thereto and the Exchange of Letters accompanying the Agreement; OJ L 77, 20.3.2019) and are considered specific international treaties with multiannual rights and obligations.

258.

Operating lease commitments


Minimum amounts committed to be paid according to the underlying contracts during the remaining term of these lease contracts are as follows:

Minimum lease payments < 1 year 1- 5 years > 5 years

EUR million

259.

Total


Buildings4299811 0792 490
IT materials and other equipment1026945
Total4391 0081 0882 535

In March 2019, in the context of the United Kingdom’s notification of its intention to withdraw from the EU, and as a result of Regulation (EU) 2018/1718 of the European Parliament and of the Council of 14 November 2018 amending Regulation (EC) No 2004/726, the seat of the European Medicines Agency (EMA) was relocated from London to Amsterdam. On 2 July 2019, the Agency reached an agreement with its landlord and since then has sublet its premises to a subtenant under conditions that are consistent with the ones of the headlease, including the sublease term that extends until the expiry of EMA’s headlease in June 2039.

The amounts disclosed in the table above include EUR 418 million still due under the headlease contract. An equal amount of payments is expected to be received by the subtenant under the non-cancellable sublease.

260.

Other contractual commitments


The amounts included under this disclosure correspond to amounts committed to be paid during the term of the contracts. The most significant amount included here relates to a building contract (JMO2) of the Commission in Luxembourg (EUR 381 million).

Annual accounts of the European Union 2019

6. FINANCIAL RISK MANAGEMENT

The following disclosures with regard to the financial risk management of the EU relate to:

• Borrowing and lending activities for financial assistance carried out by the Commission through EFSM, BOP, MFA, and Euratom actions;

• The treasury operations carried out by the Commission in order to implement the EU budget, including the receipt of fines;

• Assets held in funds for budgetary guarantees: the Guarantee Fund for external actions, the EFSI Guarantee Fund and the EFSD Guarantee Fund; and

• Financial instruments financed by the EU budget.

6.1. TYPES OF RISK

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate, because of variations in market prices. Market risk embodies not only the potential for loss, but also the potential for gain. It comprises currency risk, interest rate risk and other price risk (the EU has no significant other price risk).

• Currency risk is the risk that the EU's operations or its investments' value will be affected by changes in exchange rates. This risk arises from the change in price of one currency against another.

• Interest rate risk is the possibility of a reduction in the value of a security, especially a bond, resulting from an increase in interest rates. In general, higher interest rates will lead to lower prices of fixed rate bonds, and vice versa.

Credit risk is the risk of loss due to a debtor's / borrower's non-payment of a loan or other line of credit (either the principal or interest or both) or other failure to meet a contractual obligation. The default events include a delay in repayments, restructuring of borrower repayments and bankruptcy.

Liquidity risk is the risk that arises from the difficulty in selling an asset; for example, the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss or meet an obligation.

6.2. RISK MANAGEMENT POLICIES

The implementation of the EU budget relies increasingly on the use of operational programme financial instruments. For more information on the amounts concerned, see note 2.4.1.

Common to most financial instruments is the fact that the implementation is delegated to either the EIB group (including EIF) or to other financial institutions based on an agreement between the Commission and the financial institution. Agreements signed with these financial institutions include strict conditions and obligations on the intermediaries so as to ensure that EU monies are properly managed and reported on. Once a financial contribution to one of the instruments has been committed, the funds are transferred to a specifically created bank account opened by the financial institution in its name but on behalf of the Commission (i.e. a fiduciary account). The financial institution may, depending on the instrument in question, use the funds on this fiduciary account to provide loans, issue debt instruments, invest in equity instruments or cover the guarantee calls. Proceeds from financial instruments have, as a general rule, to be reimbursed to the EU budget.

The risk as regards these financial instruments is limited to a ceiling as indicated in the underlying agreements, which is the budgeted amount foreseen for the instrument. As the Commission often bears the ’first loss piece‘ and since instruments are intended to finance riskier beneficiaries (who have difficulties in obtaining funding from commercial lenders), it is therefore likely that some losses to the EU

Annual accounts of the European Union 2019

261.

Measurement of financial instruments


The following classes of financial assets and liabilities are not measured at fair value: cash and cash equivalents, loans, exchange receivables and non-exchange recoverables, borrowings and other financial liabilities measured at amortised cost. The carrying amount of those financial assets and liabilities is considered as a reasonable approximation of their fair value.

262.

Borrowing and lending activities for financial assistance


The borrowing and lending transactions are carried out by the EU according to the respective Council Regulations, Council and EP Decisions, and, if applicable, internal guidelines. Written procedure manuals covering specific areas such as borrowings and loans have been developed and are used by the relevant operational units. Lending operations are financed by ’back-to-back‘ borrowings, which thus do not generate open interest rate or currency positions.

263.

Treasury


The rules and principles for the management of the Commission's treasury operations are laid down in the Council Regulation 2014/609 (as amended by Council Regulation 2016/804) and in the Financial Regulation.

As a result of the above regulations, the following main principles apply:

• Own resources are paid by the Member States into accounts opened for this purpose in the name of the Commission with the treasury or national central bank. The Commission may draw on the above accounts solely to cover its cash requirements.

• Own resources are paid by Member States in their own national currencies, while the Commission's payments are mostly denominated in EUR.

• Bank accounts opened in the name of the Commission may not be overdrawn. This restriction does not apply to the Commission's own resource accounts in case of a default on loans contracted or guaranteed pursuant to EU Council regulations and decisions and under certain conditions in case the cash resource requirements are in excess of the cash held in those accounts.

• Funds held in bank accounts denominated in currencies other than EUR are either used for payments in the same currencies or periodically converted in EUR.

In addition to the own resources accounts, other bank accounts are opened by the Commission, with central banks and commercial banks, for the purpose of executing payments and receiving receipts other than the Member State contributions to the budget.

Treasury and payment operations are highly automated and rely on modern information systems. Specific procedures are applied to guarantee system security and to ensure segregation of duties in line with the Financial Regulation, the Commission’s internal control standards, and audit principles.

A written set of guidelines and procedures regulate the management of the Commission's treasury and payment operations with the objective of limiting operational and financial risk and ensuring an adequate level of control. They cover different areas of operation (for example: payment execution and cash management, cashflow forecasting, business continuity, etc.), and compliance with the guidelines and procedures is checked regularly.

Annual accounts of the European Union 2019

264.

Fines


Provisionally cashed fines: deposits

Amounts received before 2010 remain in bank accounts with banks specifically selected for the deposit of provisionally cashed fines. The selection of banks is conducted in compliance with tender procedures defined by the Financial Regulation. Placement of funds with specific banks is determined by the internal risk management policy defining the credit rating requirements and the amount of funds which could be placed in proportion to the counterparty equity. Financial and operational risks are identified and evaluated and compliance with internal policies and procedures is checked regularly.

Provisionally cashed fines: BUFI portfolio

Fines imposed and provisionally cashed from 2010 onwards are invested in a specifically created portfolio, BUFI. The main objectives of the portfolio are the reduction of risks associated with financial markets and the equal treatment of all entities by applying a guaranteed return calculated on the same basis to the nominal amount of fines. However, the guaranteed return applied to entities fined before the entry into force of the new Financial Regulation in August 2018 is floored at zero. The asset management for provisionally cashed fines is carried out by the Commission in accordance with internal asset management guidelines. Procedural manuals covering specific areas such as treasury management have been developed and are used by the relevant operational units. Financial and operational risks are identified and evaluated and compliance with internal guidelines and procedures is checked regularly.

The objectives of the asset management activities are to invest the fines provisionally paid to the Commission in such a way as to:

• ensure that the funds are easily available when needed, while

• aiming at delivering, under normal circumstances, a return which on average is in line with the return of the BUFI Benchmark minus costs incurred, while preserving the nominal amount for the fines which were imposed by the Commission before the entry into force of the new Financial Regulation in August 2018.

Investments are restricted essentially to the following categories: term deposits with Member States' central banks, sovereign debt agencies, fully state-owned or state-guaranteed banks or supranational institutions, and bonds, bills and certificates of deposit issued by either sovereign or supranational institutions.

Financial guarantees

Significant amounts of guarantees issued by financial institutions are held by the Commission in relation to the fines it imposes on companies breaching EU competition rules (see note 2.6.1.2). These guarantees are provided by fined companies as an alternative to making provisional payments. The guarantees are managed in compliance with the internal risk management policy. Financial and operational risks are identified and evaluated and compliance with internal policies and procedures is checked regularly.

265.

Guarantee Fund for external actions


The rules and principles for the asset management of the Guarantee Fund are laid out in the Convention between the Commission and the EIB dated 25 November 1994 and the subsequent amendments. This Guarantee Fund operates only in euros. It exclusively invests in this currency in order to avoid any foreign currency risk. Management of the assets is based upon the traditional rules of prudence adhered to for financial activities. It is required to pay particular attention to reducing the risks and to ensuring that the managed assets can be sold or transferred without significant delay, taking into account the commitments covered.

266.

EFSI Guarantee Fund


The EFSI Guarantee Fund was established by the EFSI Regulation - see note 2.4.1. The rules and principles for the asset management of the fund are laid out in the Commission Decision C(2016)165 of 21 January 2016. The fund is managed by the Commission, which is authorised to invest the assets of the EFSI Guarantee Fund on the financial markets in accordance with the principle of sound financial management following appropriate prudential rules. The managed assets shall provide sufficient liquidity

Annual accounts of the European Union 2019

267.

EFSD Guarantee Fund


EFSD Guarantee Fund has been established pursuant to the EFSD Regulation – see note 2.4.1. The management of the EFSD Guarantee Fund assets is carried out by the Commission in accordance with internal guidelines and asset management guidelines which are included as Annex 1 to Commission Decision C(2017)7693 of 22 November 2017. The Commission is authorised to invest the assets of the EFSD Guarantee Fund on the financial markets following the principle of sound financial management and appropriate prudential rules. The assets are managed in such a way so as to provide sufficient liquidity in relation to the potential guarantee calls, while still aiming at optimising the return and risk level that is compatible with maintaining a high degree of security and stability.

6.3. CURRENCY RISK

Financial instruments exposure of the EU to currency risk at year-end – net position

Financial assets

Available for sale financial assets

Financial assets at fair value

through surplus or deficit

Loans*

Receivables and recoverables

Cash and cash equivalents

EUR million

Financial liabilities

Financial liabilities at fair value through surplus or deficit Payables

Total

Excluding back-to-back loans for financial assistance.

31.12.2019
USDGBPDKKSEKEUROtherTotal
5776217917 7232118 407
(393)---529-137
1732--657121
30804629322 75123323 974
100311

1 209
319

398
432

533
16 910

57 979

(10)
1 673

1 934

(2)
19 745
33262 384
(0)(12)
(5)(1)

(1) 1 208
(0)

(0) 398
(1)

(1) 532
(27 200)

(27 211) 30 768
(33)

(35) 1 898
(27 241)
(5)(27 254)
32635 130
EUR million
31.12.2018
USDGBPDKK SEKEUROther Total

Financial assets

Available for sale financial assets

Financial assets at fair value

through surplus or deficit

Loans*

Receivables and recoverables

Cash and cash equivalents

Financial liabilities

Financial liabilities at fair value through surplus or deficit Payables

Total

* Excluding back-to-back loans for financial assistance.

6195718714 7251715 443
(475)---491-16
60--56567
194 1099910920 02630324 664
491 524

5 690
290

407
406

523
14 338

49 635

(20)
1 505

1 830

(2)
18 113
21858 303
_(22)
(2)(1)

(1) 5 689
(0)

(0) 407
(0)

(0) 523
(32 218)

(32 238) 17 397
(5)

(7) 1 824
(32 227)
(2)(32 249)
21626 055

Annual accounts of the European Union 2019

If the EUR had strengthened against other currencies by 10 %, then it would have had the following impact:

2019 2018

(14) (7)

268.

Economic result


GBP DKK

(104) (512)

(35) (35)

EUR million

(48) (47)

2019 2018

(17) (13)

269.

Net assets GBP


(6) (5)

(2) (2)

EUR million

(1) (1)

If the EUR had weakened against these currencies by 10 %, then it would have had the following impact:

EUR million

2019 2018

17 9

270.

Economic result


GBP DKK

127 625

42 43

58 57

2019 2018

20 16

271.

Net assets GBP


7 6

2 2

EUR million

272.

Borrowing and lending activities for financial assistance


Financial assets and liabilities are currently only in EUR, so the EU has no foreign currency risk.

273.

Treasury


Own resources paid by Member States in currencies other than EUR are kept on the own resources accounts, in accordance with Council Regulation 2014/609 (as amended by Council regulation 2016/804). They are converted into EUR when they are needed for the execution of payments. The procedures applied for the management of these funds are laid down by the above referred regulation. In a limited number of cases, these funds are directly used for payments to be executed in the same currencies.

A number of accounts in EU currencies other than EUR, and in USD and CHF, are held by the Commission with commercial banks, for the purpose of executing payments denominated in these same currencies. These accounts are replenished depending on the amount of payments to be executed, as a consequence their balances do not represent exposure to currency risk.

When miscellaneous receipts (receipts other than own resources) are received in currencies other than EUR, they are either transferred to Commission's accounts held in the same currencies, if they are needed to cover the execution of payments, or converted into EUR and transferred to accounts held in EUR. Imprest accounts held in currencies other than EUR are replenished depending on the estimated short-term local payment needs in the same currencies. Balances on these accounts are kept within their respective ceilings.

274.

USD


SEK

USD

SEK

DKK

USD

SEK

USD

DKK

SEK

Annual accounts of the European Union 2019

275.

Fines


All fines are imposed, paid currency risk.

276.

or provisionally covered in EUR and therefore do not pose any foreign


Guarantee Fund for external actions

The financial assets of this fund are in EUR so there is no currency risk. The loans subrogated to the EU as result of calls on the fund, following payment defaults by a loan beneficiary, are carried out in their original currency and therefore expose the EU to currency risk. There are no activities to compensate foreign currency variations (‘hedging‘ activities) due to uncertainty relating to the loans’ repayment timing.

277.

EFSI Guarantee Fund


The EFSI Guarantee Fund currently operates in both EUR and USD. Currency risk is managed through entering into derivative contracts (foreign exchange forward contracts) hedging the market value of the USD investments portfolio. The limit for maximum unhedged foreign exchange exposure is set at 1 % of the total portfolio value within the benchmark and annual strategy allocations. Thus, upward or downward movements in the USD investments' market value above or below the 1 % limit would trigger a rebalancing trade (a new forward contract with the same or opposite direction), adjusting or reversing the hedged position accordingly. Readjustment of the hedge may also be prompted by movements of the EUR/USD exchange rate.

The loans subrogated to the EU as result of calls on the fund following payment defaults by a loan beneficiary are carried out in their original currency and therefore expose the EU to currency risk. For the subrogated loans, there are no activities to compensate foreign currency variations (‘hedging‘ activities) due to uncertainty relating to the loans’ repayment timing.

278.

EFSD Guarantee Fund


The EFSD Guarantee Fund currently operates in EUR only, but the asset management guidelines for the EFSD Guarantee Fund provide for the possibility to invest in certain non-EUR denominated assets.

6.4. INTEREST RATE RISK

The following table illustrates the interest rate sensitivity of available for sale financial assets assuming a possible change in interest rates of +/- 100 basis points (1 %).

2019: Available for sale financial assets

2018: Available for sale financial assets

Increase (+) / decrease (-) in basis points

+100 -100

+100 -100

EUR million

279.

Effect on net assets


(447) 483

(348) 374

280.

Borrowing and lending activities for financial assistance


Due to the nature of its borrowing and lending activities, the EU has significant interest-bearing assets and liabilities. However, there is no interest rate risk since the borrowings are offset by equivalent loans at the same terms and conditions (back-to-back).

281.

Treasury


The Commission's treasury does not borrow money; so as a consequence, it is not exposed to interest rate risk. Interest is however calculated on balances held on the different bank accounts. The Commission has therefore put in place measures to ensure that interest earned on its bank accounts regularly reflects market interest rates, as well as their possible fluctuation.

Annual accounts of the European Union 2019

at the official rates applied by each institution. As some of the remunerations applied to these accounts may currently be negative, cash management procedures are in place to minimise balances kept on these accounts. Own resources accounts are protected from any impact of negative interest in accordance with Council Regulation 2014/609 and as amended by Council Regulation 2016/804.

Overnight balances held on commercial bank accounts earn interest on a daily basis. This is based on variable market rates to which a contractual margin (positive or negative) is applied. The rates applied by commercial banks are in general floored at zero for operational balances up to a specified ceiling.

Sensitivity to interests rate changes of a given portfolio of money market instruments and bonds increases with its duration. The duration of the main asset portfolios managed by the Commission is described below.

282.

Fines


The provisionally cashed fines are invested in a portfolio of money market instruments and long-term bonds with an average portfolio duration of 2.57 years.

283.

Guarantee Fund for external actions


The budget provisioned in the Guarantee Fund is invested in a portfolio of money market instruments and long-term bonds with a total average portfolio duration of 2.99 years.

284.

EFSI Guarantee Fund


The budget provisioned in the EFSI Guarantee Fund is invested in a portfolio of money market instruments and long-term bonds with a total average portfolio duration of 3.07 years.

285.

EFSD Guarantee Fund


The budget provisioned in the EFSD Guarantee Fund is invested in a portfolio of money market instruments and long-term bonds with a total average portfolio duration of 2.51 years.

6.5. CREDIT RISK

The amounts that represent the EU's exposure to credit risk at the end of the reporting period are the carrying amounts of the financial instruments as disclosed in note 2.

286.

Analysis of the age of financial assets that are not impaired


Total Neither past

due nor

impaired

EUR million

287.

Past due but not impaired


< 1 year 1-5 years > 5 years

Loans

Receivables and recoverables Financial assets at fair value through surplus or deficit

52 684 23 974

137

52 683 9 410

137

1 2 726

11 543

295

Total at 31.12.201976 79562 2312 72711 543295
Loans53 93953 9390--
Receivables and recoverables24 66414 7376 5853 209134
Financial assets at fair value through surplus or deficit1616---
Total at 31.12.201878 62068 6926 5853 209134

Receivables and recoverables past due for less than 1 year include recoverables related to competition fines of EUR 1 799 million. Receivables and recoverables past due between 1 and 5 years contain recoverables concerning competition fines of EUR 9 212 million and receivables and recoverables past due for more than 5 years contain recoverables from competition fines of EUR 257 million. The previously


__________________________


Annual accounts of the European Union 2019

payments. In addition to these, the receivables and recoverables past due for less than 1 year and those past due between 1 and 5 years contain EUR 0.8 billion receivables and EUR 2.1 billion recoverables respectively that relate to the infringement case referred to in note 2.6.1.1.

288.

Credit quality of financial assets that are neither past due nor impaired


EUR million

31.12.2019
AFS*Financial

assets at

FVSD**
LoansReceivables

and

recoverables
CashTotal
Counterparties with external credit rating

Prime and high grade 8 848
137323 63215 45228 101
Upper medium grade 3 588-23 0131 4443 68831 734
Lower medium grade 2 298-24 7111 86732229 198
Non-investment grade 264-4 8554782625 858
14 99813752 610

73
7 422

1 987
19 724

21
94 891
Counterparties without external credit rating

Group 1 –
2 082
Group 2 –--2

1 989 9 410
21 19 7452
--73 52 6832 083
Total 14 99813796 974

EUR million

31.12.2018
AFS*FinancialLoansReceivablesCashTotal
assets atand
FVSD**reco verables
Counterparties with external
credit rating
Prime and high grade9 01916989 06414 95033 146
Upper medium grade3 209-23 5137552 74030 217
Lower medium grade1 765-25 7751 45618129 177
Non-investment grade--4 488

53 874
200

11 475
221

18 092
4 909
13 993 external1697 449
Counterparties without
credit rating
Group 1--643 262213 347
Group 2--2

66 53 939
0

3 262 14 737
21 18 1132
--3 349
Total13 99316100 797

* Available for sale financial assets (excluding investments in money market funds and equity instruments). ** Financial assets at fair value through surplus or deficit.

Not included in the above table are available for sale financial assets in the form of equity instruments without external credit rating. The four risk categories mentioned above are in principle based on the rating categories of external rating agencies and correspond to:

• Prime and high grade: Moody P-1, Aaa - Aa3; S&P A-1+, A-1, AAA - AA -; Fitch F1+, F1, AAA -AA- and equivalent

• Upper medium grade: Moody P-2, A1 - A3; S&P A-2, A+ - A-; Fitch F2, A+ - A- and equivalent

Lower medium grade: Moody P-3, Baa1 – Baa3, S&P A-3, BBB+ - BBB-; Fitch F-3, BBBB+ - BBB-and equivalent


Annual accounts of the European Union 2019

The EU uses these external agencies rating categories as a reference point notably for financial instruments and commercial banks, but may, after making its own analysis of individual cases, keep amounts in one of the above risk categories even though one or more of the above mentioned rating agencies may have downgraded the corresponding counterparty. As regards non-rated counterparties, group 1 relates to debtors without defaults in the past and group 2 relates to debtors with defaults in the past.

The amounts displayed above under loans categorised in non-investment grade relate primarily to financial support loans disbursed by the Commission to partner countries in financial difficulties. The amount under receivables and recoverables relates to recoverables against certain Members States based on own resources regulations or other legal basis. The amount under cash relates mainly to own resources bank accounts opened in the treasury or in the central banks of certain Member States to hold the own resources contributions as foreseen in the above referred regulation. The Commission may draw on these accounts solely to cover cash requirements for the implementation of the budget.

289.

Borrowing and lending activities for financial assistance


Exposure to credit risk is managed firstly by obtaining state guarantees in the case of Euratom, then through the Guarantee Fund for external actions (MFA & Euratom), then by the possibility of drawing the necessary funds from the Commission's own resources accounts with the Member States and ultimately through the EU budget.

The Own Resources legislation fixes the ceiling for own resources payments at 1.20 % of Member States' GNI and during 2019 0.88 % was actually used to cover payment appropriations. This means that at 31 December 2019 there existed an available margin of 0.32 % to cover these guarantees. To this end, the EU is entitled to call upon Member States to ensure compliance with the EU's legal obligation towards its lenders.

290.

Treasury


Most of the Commission's treasury resources are kept, in accordance with Council Regulation 609/2014 (as amended by Council Regulation 804/2016) on own resources, in the accounts opened by Member States for the payment of their contributions (own resources). All such accounts are held with Member States' treasuries or national central banks. These institutions carry the lowest credit (or counterparty) risk for the Commission as the exposure is with its Member States. For the part of the Commission's treasury resources kept with commercial banks, in order to cover the execution of payments, replenishment of these accounts is made on a just-in-time basis and is automatically managed by the treasury cash management system. Minimum cash levels, which take into account the average amount of daily payments executed from it, are kept on each account. As a consequence the total amount kept overnight on these accounts remains constantly at low levels (overall less than EUR 70 million on average, spread over around 20 accounts) and so it is ensured that the Commission's risk exposure is limited. These amounts should be viewed with regard to the daily overall treasury balances which fluctuated in 2019 between EUR 6 billion and EUR 40 billion, and with an overall amount of payments made from Commission accounts in 2019 that exceeded EUR 158 billion.

In addition, specific guidelines are applied for the selection of commercial banks in order to further minimise counterparty risk to which the Commission is exposed:

• All commercial banks are selected by call for tenders. The minimum short-term credit rating required for admission to the tendering procedures is Moody's P-1 or equivalent. A lower level may be accepted in specific and duly justified circumstances.

• The credit ratings of the commercial banks where the Commission has accounts are monitored on a daily basis.

• In delegations outside the EU, imprest accounts are held with local banks selected by a simplified tendering procedure. Rating requirements depend on the local situation and may significantly differ from one country to another. In order to limit risk exposure, balances on these accounts are kept at the lowest possible levels (taking into account operational needs), they are regularly replenished, and the applied ceilings are reviewed on a yearly basis.

Annual accounts of the European Union 2019

291.

Fines


Provisionally cashed fines: deposits

Banks holding deposits for the fines provisionally cashed before 2010 are selected by tender procedure in compliance with the risk management policy which defines the credit rating requirements and the amount of funds which could be placed in proportion to the counterparty equity.

For commercial banks that have been specifically selected for the deposit of provisionally cashed fines, a minimum long-term rating A- (S&P or equivalent) with two rating agencies is required as a general rule. Specific measures are applied in case banks in this group are subject to downgrade. In addition, the amount deposited with each bank is limited to a certain percentage of its own funds, which varies depending on the rating level of each institution. The calculation of such limits also takes into account the amount of outstanding guarantees issued to the Commission by the same institution. The compliance of outstanding deposits with the applicable policy requirements is reviewed regularly.

Provisionally cashed fines: BUFI portfolio

For sovereign debt investments from provisionally cashed fines imposed as from 2010, the Commission takes on the exposure to credit risk. The highest concentration of exposure is towards Spain, which represents 20 % of the portfolio. The five countries with the highest exposure (Spain, Italy, Germany, France and Belgium) represent altogether 52 % of the investment portfolio. The weighted average credit rating of the portfolio is A (S&P or equivalent).

Financial guarantees

The risk management policy applied for the acceptance of such guarantees ensures a high credit quality for the Commission. The policy includes defining a maximum credit exposure towards a particular financial sector entity based on its credit rating and the level of an entity’s capital as accounted for in its IFRS financial statements. The compliance of the outstanding guarantees with the applicable policy requirements is reviewed regularly.

292.

Guarantee Fund for external actions


The asset management guidelines and/or investment strategy define certain limits and restrictions in order to limit the exposure to credit risk of the portfolio. Such limits and restrictions include eligibility criteria, absolute credit limits in nominal terms depending on issuer category, relative concentration limits depending on issuer category and concentration limits per issue. All investments are rated at least as investment grade.

293.

EFSI Guarantee Fund


The asset management guidelines, risk and investment strategies define certain limits and restrictions in order to limit the exposure to credit risk of the portfolio which is limited to investment grade, except for EU Member States exposure. The weighted average credit rating of the portfolio is BBB+ (S&P or equivalent).

As the sole counterparty for all outstanding currency forwards as of 31 December 2019 is the Banque de France, no credit enhancements, such as collateral, netting agreements, or guarantees are put in place as of this date. The maximum exposure to credit risk for foreign exchange derivatives having a positive fair value at the end of the reporting period is equal to the carrying amount on the balance sheet.

294.

EFSD Guarantee Fund


The asset management guidelines, risk and investment strategies define certain limits and restrictions in order to limit the exposure to credit risk of the portfolio, which is limited to investment grade, except for EU Member States exposure. The weighted average credit rating of the portfolio is BBB+ (S&P or equivalent).

Annual accounts of the European Union 2019

6.6. LIQUIDITY RISK

295.

Maturity analysis of financial liabilities by remaining contractual maturity


EUR million

Borrowings< 1 year (1 273)1-5 years (19 312)> 5 years (31 978)Total (52 564)
Payables(27 241)--(27 241)
Financial guarantee liabilities(20)--(20)
Other(149)(640)(1 132)(1 921)
Total at 31.12.2019(28 684)(19 952)(33 110)(81 746)
Borrowings(2 350)(17 363)(34 158)(53 872)
Payables(32 227)(32 227)
Other(252)(648)(1 112)(2 012)
Total at 31.12.2018(34 829)(18 011)(35 270)(88 110)
Financial instruments at fair valuethrough surplus or deficitEUR million Total (406)
Derivative pay leg< 1 year (397)1-5 years (2)> 5 years (7)
Derivative receive leg395

(2)
(2)-395
Net cash flows at 31.12.2019(7)(10)
Derivative pay leg(490)(2)(6)(498)
Derivative receive leg477

(14)
(2)-477
Net cash flows at 31.12.2018(6)(21)

296.

Borrowing and lending activities for financial assistance


The liquidity risk that arises from borrowings is generally offset by equivalent loans in terms and conditions (back-to-back operations). For MFA and Euratom, the Guarantee Fund for external actions serves as a liquidity reserve (or safety net) in case of payment default and payment delays of borrowers. For BOP, the Council Regulation 2009/431 provides for a procedure allowing sufficient time to mobilise funds through the Commission's own resources accounts with the Member States. For EFSM, the Council Regulation 2010/407 provides for a similar procedure.

297.

Treasury


EU budget principles ensure that overall cash resources for a given year are always sufficient for the execution of all payments. In fact, the total Member States contributions together with the miscellaneous revenue equal the amount of payment appropriations for the budgetary year. Member States’ contributions, however, are received in twelve monthly instalments throughout the year and based on the adopted budget, while payments are subject to operational needs. Moreover, in accordance with the Council Regulation 609/2014 (on the methods and procedure for making available own resources, amended by Council Regulation 804/2016), Member States contributions relating to amending budgets approved in a given month (N) only become available either on the first working day of the month N+1 (if approved before the 16th of the given month) or on the first working day of month N+2 (if approved on the 16th or later of that given month), while the related payment appropriations are immediately available.

In order to ensure that available treasury resources are always sufficient to cover the payments to be executed in any given month, procedures regarding regular cash forecasting are in place, and own resources or additional funding can be called up in advance from Member States if needed, up to certain limits and under certain conditions. Operational needs and overall budgetary restrictions in recent years have resulted in the need for increased monitoring of the rhythm of payments over the year. In addition to the above, in the context of the Commission's daily treasury operations, automated cash management tools ensure that sufficient liquidity is available on each of the Commission's bank accounts, on a daily basis.

298.

Fines


Annual accounts of the European Union 2019

The portfolio is composed of mostly highly liquid securities that can be sold to meet short-term cash outflows. In addition, the share of cash, cash equivalents and securities maturing within 1 year is 24 %.

299.

Guarantee Fund for external actions


The fund is managed according to the principle that the assets shall have a sufficient degree of liquidity and mobilisation in relation to the relevant commitments. The fund therefore maintains a sufficient amount of monetary assets to cover short-term cash outflows. The share of cash, cash equivalents and securities maturing within 1 year is 11 %.

300.

EFSI Guarantee Fund


The EFSI Guarantee Fund is managed according to the principle that the assets shall have a sufficient degree of liquidity and mobilisation in relation to the relevant commitments. The portfolio is composed of liquid assets that can be sold to meet short-term cash outflows if necessary. In addition the share of cash, cash equivalents and securities maturing within 1 year is 23 %.

The settlement of derivative contracts is gross and is based on their contractual maturity. Obligations are honoured via sales of USD-denominated assets and/or a swap transaction, whereby it is possible that a cash outflow arises due to foreign exchange differences.

No liquidity management is necessary with regard to collateral / margin requirements as the current hedging counterparty accepts to operate with the Commission without any requirements for collateral / margin calls.

301.

EFSD Guarantee Fund


The EFSD Guarantee Fund is managed according to the principle that the assets shall have a sufficient degree of liquidity and mobilisation in relation to the relevant commitments.

The portfolio is composed of liquid assets that can be sold to meet short-term cash outflows, if necessary. In addition the share of cash, cash equivalents and securities maturing within 1 year is 42 %.

Other financial instruments – derivative financial liabilities

In 2017, the EU entered into a derivative contract (foreign exchange option) covering the devaluation of foreign exchange currency related to loans given by financial institutions under Eastern Partnership SME Finance Facility programme (see note 2.11.2). Moreover, the EU guarantee on equity portfolios held by the EIB Group led to a financial obligation to cover changes in the value or impairments of underlying investments. As for the other financial instruments financed by the EU Budget, the amount for which the EU is liable under these instruments cannot exceed the amount committed, being the liquidity risk mitigated by that fact.

Annual accounts of the European Union 2019

7. RELATED PARTY DISCLOSURES

7.1. RELATED PARTIES

The related parties of the EU are the EU consolidated entities, associates and the key management personnel of these entities. Transactions between these entities take place as part of the normal operations of the EU and as this is the case, no specific disclosure requirements are necessary for these transactions in accordance with the EU accounting rules.

7.2. KEY MANAGEMENT ENTITLEMENTS

For the purposes of presenting information on related party transactions concerning the key management of the EU, such persons are shown here under five categories:

302.

Category 1: the Presidents of the European Council, the Commission and the Court of Justice of the European Union


Category 2: the Vice-president of the Commission and High Representative of the EU for Foreign Affairs and Security Policy and the other Vice-presidents of the Commission

Category 3: the Secretary-General of the Council, the Members of the Commission, the Judges and Advocates General of the Court of Justice of the European Union, the President and Members of the General Court, the Ombudsman and the European Data Protection Supervisor

Category 4: the President and Members of the European Court of Auditors

Category 5: the highest-ranking civil servants of the Institutions and Agencies

A summary of their entitlements is given below – further information can be found in the Staff Regulations published on the Europa website which is the official document describing the rights and obligations of all officials of the EU. Key management personnel have not received any preferential loans from the EU.

Annual accounts of the European Union 2019

KEY MANAGEMENT FINANCIAL ENTITLEMENTS

EUR
Entitlement (per employee)Category 1Category 2Category 3Category 4Category 5
Basic salary (per month)28 461.3925 780.25 -26 811.4720 624.20 -23 202.2322 274.14 -23 717.8413 113.98 -20 624.20

Residential/Expatriation allowance

15%

15%

15%

15%

0-4%-16%

Family allowances:

Household (% salary)

303.

Dependent child


Pre-school

Education, or

Education outside place of work

Presiding judges allowance

Representation allowance Annual travel costs

2% + 191.44 2% + 191.44 2% + 191.44 2% + 191.44 2% + 191.44

418.31418.31418.31418.31418.31
102.18102.18102.18102.18102.18
283.82283.82283.82283.82283.82
567.38567.38567.38567.38567.38
N/AN/A651.20N/AN/A

1 542.36

N/A

991.26

N/A

651.20

N/A

N/A

N/A

N/A

N/A

Transfers to Member State:

304.

Education allowance*


% of salary*

% of salary with no cc

Representation expenses

Taking up duty:

305.

Installation expenses


Family travel expenses Moving expenses

Leaving office:

306.

Resettlement expenses


Family travel expenses Moving expenses Transition (% salary)** Sickness insurance

Pension (% salary, before tax)

Deductions:

307.

Tax on salary


Sickness insurance (% salary) Special levy on salary Pension deduction

Number of persons at year-end

* With correction coefficient (‘CC’) applied.

** Paid for the first 3 years following departure.

YesYesYesYesYes
5%5%5%5%5%
max 25%max 25%max 25%max 25%max 25%
ReimbursedReimbursedReimbursedN/AN/A
56 922.7751 560.49 - 53 622.9341 248.39 - 46 404.4544 548.28 - 47 435.67Reimbursed
ReimbursedReimbursedReimbursedReimbursedReimbursed
ReimbursedReimbursedReimbursedReimbursedReimbursed
28 461.3925 780.25 -26 811.4720 624.20 -23 202.2322 274.14 -23 717.84Reimbursed
ReimbursedReimbursedReimbursedReimbursedReimbursed
ReimbursedReimbursedReimbursedReimbursedReimbursed
40% - 65%40% - 65%40% - 65%40% - 65%N/A
CoveredCoveredCoveredCoveredCovered
Max 70%Max 70%Max 70%Max 70%Max 70%
8% - 45%8% - 45%8% - 45%8% - 45%8% - 45%
1.7%1.7%1.7%1.7%1.7%
7%7%7%7%6-7%
N/AN/AN/AN/A9.7%
389328112

Annual accounts of the European Union 2019

8. EVENTS AFTER THE BALANCE SHEET DATE

The annual accounts and related notes were prepared using the most recently available information and this is reflected in the information presented above. At the date of signature of these accounts two key material matters are disclosed below, the departure of the United Kingdom from the European Union and the EU reaction to the coronavirus outbreak. No further material issues had come to the attention of or were reported to the Accounting Officer of the Commission that would require separate disclosure under this section.

Coronavirus disease 2019 (COVID-19)

During the first half of 2020, the coronavirus outbreak has had huge global impacts. As a non-adjusting event, the outbreak of the coronavirus does not require any adjustments to the figures reported. For subsequent reporting periods, the implementation of the immediate response initiatives proposed by the Commission (including the reactivation of the Emergency Support Instrument (ESI) and further reinforcement of the Union Civil Protection Mechanism (UCPM/rescEU), the Coronavirus Response Investment Initiative (CRII and CRII+) and the support to mitigate Unemployment Risks in an Emergency (SURE) following the COVID-19 outbreak) will affect the recognition, measurement or reclassification of some assets and liabilities in the financial statements:

• Activation of the Emergency Support Instrument (ESI) and further reinforcement of the Union Civil Protection Mechanism (UCPM/rescEU):

Given the depth of the crisis following the COVID-19 outbreak as well as the extent and nature of the needs requiring support from the EU budget, the EU reactivated the ESI instrument. This instrument, originally established in March 2016 to address the emergency situation which had arisen following the massive influx of refugees in Greece (see Council Regulation (EU) 2016/369 of 15 March 2016), has been reactivated for a period of 3 years (2020-22) to finance expenditure necessary to address the COVID-19 pandemic for the period 1 February 2020 to 31 January 2022 (see Council regulation (EU) 2020/521 of 14 April 2020). To further this objective, the 2020 budget was amended to include EUR 2.7 billion in commitment appropriations and EUR 1.4 billion in payment appropriations (see Definitive Adoption (EU, Euratom) 2020/537 of Amending budget No 2 of the European Union for the financial year 2020 of 17 April 2020). The reactivation will allow the Union to deploy measures preventing and mitigating severe consequences in one or more Member States and to address in a coordinated manner the needs related to the COVID-19 disaster, by complementing any assistance provided under other EU instruments. The instrument is centrally managed by the Commission and mainly focuses on direct procurement and grants, whilst in certain cases actions will be implemented through partners such as international organisations.

As a complementary measure to the ESI, the Union Civil Protection Mechanism/rescEU was reinforced to allow wider stock-piling and coordination of essential resource distribution across Europe (see Commission Implementing Decision (EU) 2019/570, as amended by Commission Implementing Decision 2020/414 of 19 March 2020 and Commission Implementing Decision (EU) 2020/452 of 26 March 2020). To this purpose the 2020 budget was amended to include a further EUR 0.3 billion in commitment appropriations and EUR 0.2 billion in payment appropriations. The reinforcement of the UCPM/rescEU will support Member States in purchasing some of the needed equipment (including therapeutics, medical equipment, Personal Protective Equipment, laboratory supplies), thus increasing the volume as well as complementing and widening the scope of priority items purchased through the joint procurement under the Joint Procurement Agreement, a coordinated approach giving Member States a strong position when negotiating with the industry on availability and price of medical products. The rescEU direct grants will provide 100 % financing from the EU budget, which includes full financing for development of these capacities and full financing of deployment of equipment. The equipment purchased will be hosted by one or more Member States, while decision making is organised at EU level, providing emergency supplies over and beyond national stocks. It will be available to all Member States and will be used in case of insufficient national availability.

• Coronavirus Response Investment Initiative (CRII and CRIIplus):

308.

CRII, implemented by Regulation 2020/460 of the European Parliament and the Council of 30 March 2020, introduced specific measures to mobilise investments in the healthcare systems of


Annual accounts of the European Union 2019

introducing flexibility in applying EU spending rules and extending the scope of the EU Solidarity Fund. CRIIplus, implemented by Regulation 2020/558 of the European Parliament and the Council of 23 April 2020, introduced further measures to provide exceptional flexibility for the use of the European Structural and Investments Funds. The 2019 balance sheet includes EUR 6.8 billion as current pre-financing since these amounts were originally intended to be recovered during 2020. However, as a consequence of the CRII, the amounts will now remain with the Member States so as to be used to accelerate investments related to the COVID-19 outbreak. As the CRII foresees the clearance or recovery of pre-financing at closure, and eligibility periods may end in 2022, this EUR 6.8 billion of current pre-financing will likely all be reclassified, in conformity with the accounting rules, to non-current in the 2020 financial statements.

• European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE) following the COVID-19 outbreak:

As part of its emergency support package to tackle the economic impact of the COVID-19 crisis, the EU adopted on 19 May 2020 Council Regulation (EU) 2020/672 establishing the SURE instrument to help workers keep their jobs during the crisis. SURE is a temporary scheme which can provide up to EUR 100 billion of financial assistance (loans under favourable terms) to Member States. The instrument enables Member States to request EU financial assistance to help finance the sudden and severe increases of national public expenditure, as from 1 February 2020, related to national short-time work schemes and similar measures, including for self-employed persons, or to some health-related measures, in particular at the work place in response to the crisis. To enable the EU to provide financial assistance under SURE, the Commission shall be empowered to borrow on the capital markets or with financial institutions on behalf of the EU to a maximum amount of EUR 100 billion. SURE loans will be backed by the EU budget and guarantees provided by Member States according to their share in the EU's GNI. The total amount of guarantees will be EUR 25 billion and the instrument will become active only when all guarantees have been provided. The instrument is limited until 31 December 2022.

• Next Generation EU:

Furthermore, on 27 May 2020 President von der Leyen presented a new proposal for the EU long-term budget (multiannual financial framework) 2021-2027 and sectoral programmes boosted by ‘Next Generation EU’13, an emergency temporary recovery instrument, to help repair the immediate economic and social damage brought about by the coronavirus pandemic, kickstart the recovery and prepare for a better future for the next generation. This proposal is currently being discussed with Member States and the European Parliament. Should an agreement be reached based on this proposal, many EU budget programmes would be topped-up by funds raised through borrowings by the EU. Given the size of the proposed amounts, it would have a significant impact on the content of future EU balance sheets; the specific impact can only be assessed once the final proposal has been approved by the budget authority and its implementation starts.

Departure of United Kingdom from the European Union

On 1 February 2020 the United Kingdom ceased to be a Member State of the European Union. Following the conclusion of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (the ‘Withdrawal Agreement’) between the two parties, the United Kingdom committed to pay all its obligations under the current MFF and previous financial perspectives following from its membership of the Union.

At the date of signature of these accounts, and based on the Withdrawal Agreement concluded and already in operation, there is no financial impact to be reported in these accounts.

Annual accounts of the European Union 2019

9.

SCOPE OF CONSOLIDATION

A. CONTROLLED ENTITIES (52)

1. Institutions and consultative bodies (11)

European Parliament

European Council

European Commission

European Court of Auditors

Court of Justice of the European Union

European External Action Service

European Data Protection Supervisor European Economic and Social Committee European Ombudsman Committee of the Regions Council of the European Union

2. EU Agencies (39)

2.1. Executive Agencies (6)

Education, Audiovisual and Culture Executive

Agency (EACEA)

Consumers, Health, Agriculture and Food Executive

Agency (CHAFEA)

Research Executive Agency (REA)

Executive Agency for Small and Medium-sized

Enterprises (EASME)

European Research Council Executive Agency

(ERCEA)

Innovation and Networks Executive Agency (INEA)

2.2. Decentralised Agencies (33)

European Maritime Safety Agency (EMSA)

European Medicines Agency (EMA)

European Chemicals Agency (ECHA)

European Institute for Gender Equality (EIGE)

European Environment Agency (EEA)

European Banking Authority (EBA)

European Asylum Support Office (EASO)

European Border and Coast Guard Agency (Frontex)

European Union Agency for Law Enforcement

Training (CEPOL)

European Global Navigation Satellite Systems

Agency (GSA)

European Union Agency for Criminal Justice

Cooperation (Eurojust)

European Agency for Safety and Health at Work

(EU-OSHA)

European Centre for Disease Prevention and Control

(ECDC)

European Centre for the Development of Vocational

Training (CEDEFOP)

European Union Agency for the Cooperation of

Energy Regulators (ACER)

Agency for Support for the Body of European

Regulators for Electronic Communications (BEREC

Office)

European Union Agency for Cybersecurity (ENISA)

European Food Safety Authority (EFSA)

European Union Agency for Railways (RAIL)

Community Plant Variety Office (CPVO)

European Fisheries Control Agency (EFCA)

European Union Intellectual Property Office (EUIPO)

European Union Aviation Safety Agency (EASA)

European Securities and Markets Authority (ESMA)

European Training Foundation (ETF)

European Foundation for the Improvement of Living

and Working Conditions (Eurofound)

European Monitoring Centre for Drugs and Drug

Addiction (EMCDDA)

European Union Agency for Law Enforcement

Cooperation (EUROPOL)

European Union Agency for Fundamental Rights

(FRA)

European Insurance and Occupational Pensions

Authority (EIOPA)

Translation Centre for the Bodies of the European

Union

Fusion for Energy (European Joint Undertaking for

ITER and the Development of Fusion Energy)

European Union Agency for the Operational

Management of Large-Scale IT Systems in the Area

of Freedom, Security and Justice (eu-LISA)

3. Other controlled entities (2)

European Coal and Steel Community in Liquidation (ECSC i.L.)

B. ASSOCIATES (1)

European Investment Fund (EIF)

European Institute of Innovation and Technology (EIT)

Annual accounts of the European Union 2019

309.

MINOR ENTITIES


The entities listed below have not been consolidated using the equity method in the 2019 EU consolidated financial statements on the basis of immateriality:

310.

Bio Based Industries Joint Undertaking (BBI)


BBI is a Public-Private Partnership (PPP) between the EU and the Bio-based Industries Consortium (BIC). The objectives of the BBI are to contribute to a more resource efficient and sustainable low-carbon economy and to increasing economic growth and employment by developing sustainable and competitive bio-based industries in Europe.

311.

Clean Sky Joint Undertaking (Clean Sky)


Clean Sky is the largest European research programme developing innovative, cutting-edge technology aimed at reducing CO2, gas emissions and noise levels produced by aircraft. Funded by the EU’s Horizon 2020 programme, Clean Sky contributes to strengthening European aero-industry collaboration, global leadership and competitiveness.

312.

Innovative Medicines Initiative Joint Undertaking (IMI)


IMI, a partnership between the European Union and the European pharmaceutical industry, is the world’s biggest public private partnership in life sciences and working to improve health by speeding up the development of, and patient access to, innovative medicines, particularly in areas where there is an unmet medical or social need.

313.

Electronic Components and Systems for European Leadership Joint Undertaking (ECSEL)


ECSEL, a PPP in electronic components and systems, funds research, development and innovation projects for world-class expertise in electronic components and systems, thus contributing to the development of a strong and globally competitive electronics components and systems industry in the European Union.

314.

Fuel Cells Hydrogen Joint Undertaking (FCH)


FCH is a PPP supporting research, technological development and demonstration (RTD) activities in fuel cell and hydrogen energy technologies in Europe. Its aim is to accelerate the market introduction of these technologies, realising their potential as an instrument in achieving a carbon-lean energy system.

315.

Single European Sky ATM Research Joint Undertaking (SESAR)


SESAR is a PPP responsible for the modernisation of the European air traffic management (ATM) system by coordinating and concentrating all ATM relevant research and innovation efforts in the EU.

316.

Shift2Rail Joint Undertaking (Shift2Rail)


Shift2Rail is the first European rail joint technology initiative to seek focused research and innovation (R&I) and market-driven solutions by accelerating the integration of new and advanced technologies into innovative rail product solutions.

The annual accounts of the above entities are publicly available on their respective websites.

Annual accounts of the European Union 2019

FINANCIAL STATEMENT DISCUSSION AND ANALYSIS

317.

FINANCIAL YEAR 2019


It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add up.

Annual accounts of the European Union 2019

CONTENTS

1. CONSOLIDATED FINANCIAL STATEMENTS OF THE EU:

318.

FINANCIAL SITUATION 2019 ..................................................................... 98


319.

1.1. REVENUE .......................................................................................... 98


320.

1.2. EXPENSES ......................................................................................... 99


321.

1.3. ASSETS .......................................................................................... 100


322.

1.4. LIABILITIES .................................................................................... 106


323.

2. MANAGEMENT OF RISKS AND UNCERTAINTIES OF EU BUDGET IMPLEMENTATION ................................................................................. 107


324.

2.1. MACRO-ECONOMIC ENVIRONMENT .................................................... 107


325.

2.2. BUDGETARY CONTINGENT LIABILITIES FOR FINANCIAL ASSISTANCE .... 107


326.

2.3. BUDGETARY GUARANTEES ................................................................ 108


327.

2.4. NEW ENTRANTS' RESERVE (NER) 300 ................................................. 109


Annual accounts of the European Union 2019

The objective of this Financial Statement Discussion and Analysis (FSDA) is to assist readers to understand the financial position, financial performance and cash flows presented in the consolidated financial statements of the EU. The information presented in this FSDA has not been audited.

1. CONSOLIDATED FINANCIAL STATEMENTS OF

THE EU: FINANCIAL SITUATION 2019

1.1. REVENUE

The consolidated revenue of the EU incorporates amounts related to exchange transactions and non-exchange transactions, the latter being the most significant.

328.

Five-year trend of revenue from main non-exchange transactions (in EUR million)


As budget revenue should equal (or exceed) budget expenditure, the main driver in the revenue trend shown above is the payments made each year.

In 2019, the consolidated revenue amounted to EUR 160.3 billion, a slight decrease of EUR 2.6 billion or 1.6 % from the previous year figure of EUR 162.9 billion, which was mainly due to an increase in GNI and VAT resources being overcompensated by a decrease in other revenue categories:

• Revenue from GNI (gross national income), the primary element of the EU’s operating revenue, and VAT resources increased from EUR 123.4 billion in 2018 to EUR 126.9 billion in 2019. The increase of EUR 3.5 billion or 2.8 % was primarily caused by adjustments made for past amounts (mainly for the years 2012 to 2017) as GNI/VAT bases were updated with real data.

• The increase in recovery of expenses from EUR 2.2 billion to EUR 2.6 billion (an increase of EUR 0.4 billion or 18.2%) further contributed to an increase in revenues.

• At the same time, revenue from fines, which amounted to EUR 6.7 billion in 2018, fell by EUR 2.4 billion or 35.8 % to EUR 4.3 billion due to the lower magnitude of the amount of fines imposed. Whereas in 2018 the three biggest fines imposed amounted to EUR 5.7 billion, the three biggest cases in 2019 amounted to EUR 3.1 billion.

The above changes were accompanied by a decrease in revenue from traditional own resources, which fell from EUR 22.8 billion in 2018 to EUR 21.2 billion in 2019 (a decrease of EUR 1.6 billion or 7.0%) and the decrease in financial revenue, which fell from EUR 3.1 billion in 2018 to EUR 1.8 billion in 2019 (a

Annual accounts of the European Union 2019

1.2. EXPENSES

The main component of expenses recognised in the consolidated financial statements is transfer payments under the shared management mode, which includes the following funds: (i) European Agricultural Guarantee Fund (EAGF), (ii) European Agricultural Fund for Rural Development (EAFRD) and other rural development instruments, (iii) European Regional Development Fund (ERDF) & Cohesion Fund (CF), and (iv) European Social Fund (ESF). These funds made up 66.8 % of total expenses in 2019 (2018: 66.3 %) – the split can be found in the chart below:

329.

Relative weight of the main expenses implemented by the Member States (shared management) for the financial year of 2019


Expenses incurred under direct management represent the budget implementation by the Commission, executive agencies and by trust funds. Under indirect management the budget is implemented by EU agencies, EU bodies, third countries, international organisations and other entities.

Expenses incurred under direct and indirect management made up EUR 29.0 billion or 18.7 % of total expenses and remained stable compared to the previous financial year (2018: EUR 28.5 billion or 19.1 %).

The EU recognises certain future payment obligations as expenses even if they are not yet shown in the cash-based budgetary accounts. Significant amounts are shown under payables and accrued charges concerning agriculture and rural development and also under pension and employee benefits liabilities relating to pension and other post-employment rights acquired by Commissioners, Members of the EU institutions and staff (see note 2.9).

Overall, expenses increased by 4.4 % or EUR 6.5 billion from EUR 149.0 billion to EUR 155.5 billion when compared with 2018, mainly resulting from expenses from programmes implemented under shared management by Member States which rose by EUR 4.8 billion or 4.7 % from EUR 101.7 billion to EUR 106.5 billion led by implementation of programmes under ERDF & Cohesion fund as the current MFF advances.

Annual accounts of the European Union 2019

1.3. ASSETS

The most significant items on the asset side of the balance sheet relate to financial assets (loans given, available for sale financial assets, cash) and pre-financing amounts, which make up 79.6 % of the assets of the EU (2018: 78.8 %)

330.

Composition of the consolidated assets of the EU


As at 31 December 2019 the total assets were EUR 178.9 billion, reflecting an increase of EUR 4.5 billion or 2.6 % over the previous year (2018: EUR 174.4 billion). The key changes were:

• an increase of EUR 3.0 billion (19.2 %) in available for sale financial assets reflecting the continued funding of the EFSI & EFSD guarantee funds, as well as Horizon 2020;

• an increase of EUR 1.6 billion (9.0 %) in cash and cash equivalents (see below);

• pre-financing, i.e. advances paid to beneficiaries of EU funds, remained essentially stable with a slight increase of EUR 1.1 billion (2.5 %);

• the above effects were partially compensated by a decrease of EUR 1.3 billion (2.3 %) in loans mainly due to the repayment of BOP loans by Romania (EUR 1 billion) and Latvia (EUR 0.5 billion) during 2019, the effect of which was partially offset by new MFA loans.

In general, the EU institutions and bodies strive to keep the amounts held as cash and cash equivalents at a low level. The cash balance of EUR 19.7 billion at year-end is made up of the following main elements:

. An amount of EUR 2.6 billion of fines imposed by the Commission for breach of competition rules, definitively cashed in 2019 and not yet included in an amending budget is included in the year-end treasury balance.

The treasury balance also includes not yet used assigned revenue and other payment appropriations of EUR 9.7 billion of the 2019 budget.


Annual accounts of the European Union 2019

331.

Pre-financing


It should be noted that the level of pre-financing is significantly influenced by the MFF cycle – for example at the beginning of an MFF period one can expect large advances to be paid to Member States under cohesion policy and these amounts remain available to the Member States until closure of the programmes. An annual pre-financing is also paid out, which must be used within the year or be recovered the following year as part of the annual closure of the accounts cycle. The Commission makes every effort to ensure that the levels of pre-financing are maintained at an appropriate level. A balance has to be struck between ensuring sufficient funding for the projects and the timely recognition of expenditure.

The total pre-financing (excluding other advances to Member States and contributions to the trust funds Bêkou and Africa) on the EU balance sheet amounts to EUR 44.4 billion (2018: EUR 43.4 billion), almost all of which relates to Commission activities. Some 56 % of the Commission's pre-financing concerns shared management, which means that the implementation of the budget is delegated to Member States (the Commission retains a supervisory role).

332.

Commission pre-financing by management mode


The most significant pre-financing amount under the shared management mode relates to ERDF & Cohesion Fund (EUR 14.4 billion), which is at a similar level to 2018 (EUR 14.6 billion).

333.

FINANCIAL INSTRUMENTS


The following items are shown statements of the EU:

334.

in accounting terms as financial instruments in the consolidated financial


• Financial Instruments financed by the EU budget: under this type of budget implementation funds are either already disbursed to the fiduciary accounts managed by the entrusted entities and stay available (as cash and cash equivalents, debt securities or investment in money market funds or pooled portfolios of assets) to cover future guarantee calls or have been invested in equity;

• Financial assets held in guarantee funds for budgetary guarantees: under this type of budget implementation the EU provides guarantees to counterparts for which the funding is only partially provisioned via guarantee funds set-up by the Commission and thus creating contingent liabilities for the EU budget - see note 4.1; and

• Loans and related borrowings for financial assistance programmes. Financial instruments financed by the EU budget

335.

The significance and volume of financial instruments financed by the EU budget under direct and indirect


Annual accounts of the European Union 2019

support due to the leverage effect. This use of the EU budget aims at maximising the impact of the funds available. Financial instruments financed by the EU budget exist in the form of guarantee instruments, equity instruments and loan instruments – see the overview by MFF in the below table. Assets held in these instruments are either kept in cash and cash equivalents or invested in equity instruments and debt securities categorised as available for sale financial assets in the consolidated financial statements of the EU.

Available for sale financial assets relating to financial instruments financed by the EU budget (year-end value):

The following tables provide an overview of financial instruments financed by the EU budget per MFF and their values at 31 December 2019:

EUR million

Related to more than one MFFAssets*Liabilities**Contingent Liabilities***
Guarantee and risk-sharing instruments:
Guarantee Facility under the Western Balkan (EDIF)36(40)

(40)
-
36-
Equity instruments:
European Fund for Southeast Europe (EFSE)166--
Green for Growth Fund to the Eastern Neighbourhood Region71--
European Progress Microfinance Fund53--
MENA Fund for Micro-, Small and Medium Enterprises (SANAD)44--
Enterprise Innovation Fund (ENIF)17--
Enterprise Expansion Fund (ENEF)10--
Microfinance Initiative for Asia Debt Fund (MIFA)9--
370--
Total406(40)-

MFF 2014-2020

Guarantee and risk-sharing instruments:

Horizon 2020 – InnovFin Loan & Guarantee Service for R&I

Horizon 2020 – InnovFin SME Guarantee

336.

Connecting Europe Facility Debt Instrument (CEF DI)


COSME Loan Guarantee Facility

Private Finance for Energy Efficiency Instrument (PF4EE)

Cultural and Creative Sector Guarantee Facility

Assets

Liabilities

337.

1 237


936

708

401

44

37

(33)

(557)

(4)

(758)

(2)

(28)

Contingent Liabilities

(1 091)

(361)

(684)

(2)

(8)

Annual accounts of the European Union 2019

MFF 2014-2020AssetsLiabilitiesContingent Liabilities
(continuing from previous page)
Student Loan Guarantee Facility14(1)-
Eastern Partnership SME Finance facilities13(4)(2)
Natural Capital Financing Facility11(0)(7)
Other Guarantee and risk-sharing instruments8(1)

(1 387)
(6)
3 451(2 175)
Equity instruments:
Horizon 2020 InnovFin Equity Facility for R&I515(17)(131)
COSME – Equity Facility for Growth86(2)-
Risk Capital Facility for the Southern Neighbourhood countries24--
Climate Investor One15--
Latin American Investment Facility12--
Africa Agriculture Trade and Investment Fund11--
Other Equity instruments16(1)

(20)
-
679(131)
Mixed instruments:
Employment and Social Innovation (EaSI) Guarantee Facility and Capacity Building81(72)-
EU Deep and Comprehensive Free Trade Area facilities62(24)-
Facility for Energy Inclusion37(3)-
ElectriFI30--
Agriculture Financing Initiative21--
232(98)-
Total4 362(1 505)(2 306)
MFF Prior to 2014AssetsLiabilitiesContingent Liabilities
Guarantee and risk-sharing instruments:
Risk Sharing Finance Facility (RSFF)609(58)(110)
SME Guarantee Facility under CIP71(140)-
Multi Annual Program (MAP) for Enterprises32(31)-
European Progress Microfinance Guarantee Facility4(4)

(233)
-
716(110)
Equity instruments:
High Growth and Innovative SME Facility under CIP448(4)-
Multi Annual Framework Programme Equity Facility196--
European Energy Efficiency Fund105--
Global Energy Efficiency and Renewable Energy Fund79(4)-
Marguerite Fund54--
European Technology Start up Facility 1998 (ETF)3(0)

(8)
-
885-
Mixed instruments:
European Neighbourhood and Partnership Instrument (ENPI)124(2)-
Instrument of economic and financial cooperation MEDA119(2)

(4)
-
243-
Total1 844(244)(110)
Overall Total6 612(1 790)(2 416)

The assets presented in this table include several items of the financial statements (Available for sale financial assets of EUR 5 028 million; Cash and cash equivalents of EUR 1 485 million; Loans of EUR 73 million and other items of EUR 24 million). The liabilities presented in this table include several items of the financial statements (Provisions of EUR 1 702 million; Payables of EUR 75 million and other items in the amount of EUR 12 million).

_____________ _


Annual accounts of the European Union 2019

338.

Financial assets held in guarantee funds for budgetary guarantees


The Commission has set up guarantee funds to cover budgetary guarantees given to the EIB group and other financial institutions (see note 4.1.1 of the consolidated financial statements). These guarantee funds are provisioned by payments from the EU budget so as to provide a liquidity cushion against potential losses from guaranteed operations. Payments to the guarantee funds are invested in financial instruments including debt securities, money market funds, cash and term deposits. At 31 December 2019, the Commission holds financial assets in the:

• Guarantee Fund for external actions of EUR 2.6 billion;

• EFSI Guarantee Fund of EUR 6.7 billion; and

• EFSD Guarantee Fund of EUR 0.6 billion.

339.

Loans and related borrowings for financial assistance programmes


Financial support for Member States and third countries in the form of bilateral loans financed from the capital markets with the guarantee of the EU budget is provided by the Commission under decisions of the European Parliament and of the Council.

The Commission, acting on behalf of the EU, currently operates three main programmes:

European Financial Stabilisation Mechanism (EFSM);

340.

Balance of Payments (BOP) assistance; and


Macro-financial assistance (MFA), under which it may grant loans.

The capital required to fund the EU lending is raised on the capital markets or with financial institutions.

At 31 December 2019, the nominal amount of the loans granted for financial assistance under the EFSM and BOP were:

341.

Total granted


Total disbursed at 31.12.2019

Total repaid at 31.12.2019 Outstanding amount at 31.12.2019

*

Without re-financing transactions. Excluding precautionary assistance.

3.1

2.9

(2.7)

0.2

EUR billion

5.0**

5.0

(5.0)

8.1

7.9

(7.7)

0.2

22.5

22.5

22.5

26.0

24.3

24.3

48.556.6
46.854.7
-(7.7)
46.847.0

EFSM

EFSM was created to provide financial assistance to all Member States experiencing or seriously threatened by a severe economic financial disturbance caused by exceptional occurrences beyond their control. The EFSM was used to provide financial assistance, conditional on the implementation of reforms, to Ireland and Portugal between 2011 and 2014.

This programme expired and no additional loans can be drawn, though it remains in place for specific tasks such as the lengthening of maturities for loans to Ireland and Portugal and providing bridging loans.

The main points of the EFSM programme are as follows:

342.

Ireland


• Ireland requested the full total of EUR 22.5 billion granted by the EFSM in December 2010. This amount was disbursed in eight instalments between January 2011 and March 2014.

0

Annual accounts of the European Union 2019

343.

Portugal


Portugal has requested EUR 24.3 billion from a total of EUR 26 billion granted by the EFSM in May 2011. This amount was disbursed in seven instalments between May 2011 and November 2014.

As in the case of Ireland, there were no scheduled repayments of principal in 2019 and all the interests payments have been fully made on time.

Portugal has formally requested that the EU waives its rights under the ’mandatory prepayment clause‘ of the EFSM Loan Facility Agreement, to allow Portugal to repay in advance an amount of EUR 2 billion to the European Financial Stability Facility (EFSF). An early repayment to the EFSF triggers a mandatory proportionate repayment of EFSM loans. A Commission Decision has authorised the waiver subject to some specific conditions.

BOP

The BOP is an assistance programme designed for countries outside the euro area that are experiencing or are threatened by difficulties regarding their balance of payments. BOP assistance takes the form of medium-term loans that are conditional on the implementation of policies designed to address underlying economic problems. Typically, balance of payments assistance from the EU is offered in cooperation with the International Monetary Fund (IMF) and other international institutions or countries.

The main points are as follows:

• During 2019, the beneficiary Member States of BOP have reimbursed on time and in full a total amount of EUR 1.5 billion out of which EUR 1.0 billion related to a capital reimbursement from Romania and EUR 0.5 billion capital reimbursement from Latvia. In addition, both Member States paid the amount of interest due in 2019 on time.

• The outstanding amount at end 2019 is EUR 0.2 billion relating only to Latvia and scheduled for repayment in 2025. Romania has repaid all principal and interest so its BOP financial assistance programme can be closed.

MFA

The MFA is a form of financial aid extended by the EU to partner countries outside the EU experiencing a balance of payments crisis. It takes the form of medium/long-term loans or grants, or a combination of these, and is only available to countries benefiting from a disbursing IMF programme.

As at 31 December 2019, the total outstanding value) thus stood at EUR 4.7 billion.

344.

loan volume under the MFA loan programme (nominal


Total granted

Total disbursed at 31.12.2019 Total repaid at 31.12.2019 Outstanding amount at 31.12.2019

Ukraine

3.8

3.3

0.0

3.3

345.

Tunisia


0.8

0.8

0.0

0.8

MFA

346.

Jordan


0.4

0.4

0.0

0.4

347.

Others


0.5

0.4

(0.2)

0.2

348.

Total


5.5

4.9

(0.2)

4.7

The main points are as follows:

• In 2019 new loans were disbursed for a total amount of EUR 0.4 billion, being EUR 0.3 billion to Tunisia, EUR 0.1 billion to Jordan and EUR 0.02 billion to Moldova.

349.

The largest loan beneficiary under MFA is Ukraine, which has been granted loans to the amount of



Annual accounts of the European Union 2019

1.4. LIABILITIES

The most significant items on the liability side of the balance sheet consist primarily of four items: (i) pension obligation and other employee benefits liabilities; (ii) borrowings; (iii) payables to third parties and (iv) accrued charges.

350.

Composition of the liabilities on the consolidated balance sheet of the EU


As at 31 December 2019 the total liabilities were EUR 251.5 billion, an increase of EUR 15.6 billion or 6.6 % compared to the previous year (EUR 235.9 billion).

The key changes were related to the following effects:

• Pensions and other post-employee benefits increased by EUR 17.2 billion or 21.4 %. The increase is mainly due to the actuarial loss from financial assumptions caused by the significant decrease in the discount rate which became negative for the first time;

• Borrowings decreased by EUR 1.3 billion or 2.4 %, mainly due to the repayment of BOP loans (EUR 1 billion relating to Romania and EUR 0.5 billion to Latvia), and partly offset by new MFA loans amounting to EUR 0.4 billion;

• Looking at payables (decrease of EUR 5.0 billion) and accrued charges (increase of EUR 4.0 billion) together, the overall level of liabilities remains the same. As the same level of cost claims have not been received by year-end in the field of cohesion policy (ERDF, CF and ESF), this leads to payables being lower; however accrued charges will increase, indicating that the implementation of the programmes is progressing.

351.

Total cost claims and invoices received and recognised under the payables heading of the balance sheet


Annual accounts of the European Union 2019

352.

Net assets


The excess of liabilities over assets does not mean that the EU institutions and bodies are in financial difficulties, rather it means that certain liabilities will be funded by future annual budgets. Many expenses are recognised under accrual accounting rules in the current year although they may be actually paid in the following or later years and funded using future budgets; the related revenues will only be accounted for in future periods. The most significant amounts to be highlighted are the EAGF activities (the bulk of which is usually paid in the first quarter of the following year) and the employee benefits liability (to be paid over the next 30 plus years).

2. MANAGEMENT OF RISKS AND UNCERTAINTIES

OF EU BUDGET IMPLEMENTATION

2.1. MACRO-ECONOMIC ENVIRONMENT

Given the current global situation concerning the spread of the coronavirus disease during the first quarter of 2020, it is not possible to accurately assess its undoubted significant negative impact on the EU macro-economic environment at the time of transmission of these accounts.

The macro-economic environment of the EU has an impact on the ability of EU Member states to meet their funding obligations towards the EU institutions and bodies and thus on the ability of the EU to continue implementing EU policies.

Euro area and EU GDP is estimated to have grown by 1.2 % and 1.5 % in 2019, respectively. The overall inflation in the Euro area averaged 1.2 % in 2019, a sharp decline from the previous year’s inflation rate of 1.7 %, which can be linked to the fall in energy prices and the lack of pass-through from robust wage growth to core inflation. The euro area labour market proved to be fairly resilient in 2019 given the background of relatively moderate economic growth. The unemployment rate has stayed close to or at 7.4% towards the end of the year, which is the lowest rate recorded since May 2008. In December 2019, the number of unemployed persons was 4.6% lower than one year before and 36.8% below the April 2013 peak.

2.2. BUDGETARY CONTINGENT LIABILITIES FOR FINANCIAL ASSISTANCE

The EU borrowing and lending activities for financial assistance programmes are non-budget operations. In general, funds raised are on-lent back-to-back to the beneficiary country, i.e. with the same coupon, maturity and amount. Notwithstanding the back-to-back methodology, the debt service of the funding instruments is a legal obligation of the EU, which will ensure that all payments are made fully and in a timely manner. The Commission has put procedures in place to ensure the repayment of borrowings even in case of a loan default.

Borrowings of the EU constitute direct and unconditional obligations of the EU and are guaranteed by the EU Member States (budgetary contingent liabilities). Borrowings undertaken to fund loans to countries outside the EU are covered by the Guarantee Fund for external actions. Should a beneficiary Member State default, the debt service will be drawn from the available treasury balance of the Commission, if possible. If that would not be possible, the Commission would draw the necessary funds from the Member States. EU Member States are legally obliged, according to the EU own resources legislation (Article 14 of Council Regulation 2014/609), to make available sufficient funds to meet the EU’s obligations. Thus investors are only exposed to the credit risk of the EU, not to that of the beneficiary of loans funded. ’Back-to-back' lending ensures that the EU budget does not assume any interest rate or foreign exchange risk.

For each country programme, the EP, the Council and the Commission decisions determine the overall granted amount, the number of instalments to be disbursed, and the maximum (average) maturity of the loan package. Subsequently, the Commission and the beneficiary country agree the loan/funding

Annual accounts of the European Union 2019

timing and maturities of issuances are dependent on the related EU lending activity. Funding is exclusively denominated in euro and the maturity spectrum is from 3 to 30 years.

The following table provides an overview of the planned reimbursement schedule in nominal value for outstanding EFSM and BOP loan amounts at 31 December 2019:

Latvia

Romania

Total

Ireland

EFSM

Portugal

Total

EUR billion

TOTAL

2021-- -3.06.89.89.8
2022-- --2.72.72.7
2023-- -2.01.53.53.5
2024-- -0.81.82.62.6
20250.20.22.4-2.42.6
2026-- -2.02.04.04.0
2027-- -1.02.03.03.0
2028-- -2.3-2.32.3
2029-- -1.00.41.41.4
2031-- --2.22.22.2
2032-- -3.0-3.03.0
2033-- -1.50.62.12.1
2035-- -2.0-2.02.0
2036-- --1.01.01.0
20381.81.81.8
2042-- -1.5

22.5
1.5

24.3
3.0

46.8
3.0
Total0.20.247.0

The Inter-governmental financial stability mechanisms European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM) are outside the EU Treaty framework and thus not included in the consolidated annual accounts of the EU.

2.3. BUDGETARY GUARANTEES

The EU has given the EIB Group guarantees on loans granted outside of the EU and on debt and equity operations covered by the EFSI guarantee. At 31 December 2019, the EU discloses in the notes to its consolidated financial statements (see note 4.1.1) contingent liabilities for both guarantees, while the amounts constituting present obligations are recognised as provisions and financial guarantee liabilities in the financial statements (see respectively notes 2.10 and 2.11.3 of the consolidated financial statements). In order to mitigate the risk that guarantee calls by the EIB Group could have on the EU budget, the EU has created dedicated guarantee funds, i.e. the Guarantee Fund for external actions and the EFSI Guarantee Fund.

The Guarantee Fund for external actions is provisioned by the EU budget so as to cover 9 % of the guaranteed loans outstanding at year-end for EIB external lending mandate activities to third countries. At 31 December 2019, the total asset value of EUR 2.6 billion covers an exposure of amounts disbursed of EUR 20.2 billion.

The EFSI Guarantee Fund started its activity in 2016. Pursuant to the amended EFSI Regulation (Regulation EU 2017/2396) the EFSI EU guarantee ceiling was increased to EUR 26 billion (from the initial EUR 16 billion) and the boundary for the guarantee fund decreased to 35 % (from the initial 50 %) of the total EU guarantee obligation. Therefore, the EFSI Guarantee Fund is now expected to reach a total amount of EUR 9.1 billion. The total assets that make up the EFSI Guarantee Fund at 31 December 2019 is EUR 6.7 billion and that covers an exposure of disbursed amounts of EUR 17.7 billion.

BOP

Annual accounts of the European Union 2019

Pursuant to EFSD Regulation (Regulation EU 2017/1601), the EFSD Guarantee of up to EUR 1.5 billion (further increased by external contributions) is to be made available to support investments in partner countries in Africa and in the European Neighbourhood. The EU discloses the EFSD Guarantee in the notes to its consolidated financial statements (see note 4.1.1) as a contingent liability. As at 31 December 2019, one EFSD guarantee agreement was effective, for a total cover limit of EUR 50 million, but no underlying operations were signed by the implementing partner. The EFSD Guarantee Fund has been established in order to cover potential future guarantee calls. Total contributions received into the fund as at 31 December 2019 amount to EUR 0.6 billion.

2.4. NEW ENTRANTS' RESERVE (NER) 300

The NER 300 fund originated from the sale of the Emission Trading Scheme allowances based on Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union. The fund belongs to the Member States who use the money to finance innovative low-carbon energy demonstration projects. The Commission manages the programme on behalf of the Member States, while the EIB is responsible for the asset management of the NER 300 Fund and acts as a technical advisor, under the Cooperation Agreement with the Commission. Given the limited role of the Commission in the decision-making process in NER 300 programme and the fact that the funds arising from the sale of the allowances are not due to the EU Budget, the NER 300 is excluded from the EU scope of consolidation (i.e. neither the revenues from the allowances nor the expenses for the projects financed are included in the EU accounts).

In 2017, the Member States decided (Commission Decision (EU) 2017/2172) that the NER 300 revenues, which were not fully used for low-carbon energy demonstration projects through grants, should be partially chanelled through financial instruments. In particular, NER 300 funds are used to provide guarantee to the EIB in relation to their loans for energy demonstration projects, in addition to the EU budget guarantee under H2020 and CEF financial instruments. Although those NER 300 funds have been pooled by the EIB together with the EU budget funds for asset management purposes, they continue to constitute an integral part of the NER 300 programme and the EU did not obtain control over them. Hence, the EU recognises only its share in those asset portfolios as available for sale financial assets (see note 2.4.1 of the consolidated financial statements).

The remaining NER 300 assets, not having been deployed for the low-carbon energy demonstration projects, shall - according to the Directive 2003/87/EC as amended in 2018 by the Directive (EU) 2018/410 - be used for innovation support in low-carbon technologies and processes, in addition to a pool of allowances that are to be made available for creation of an ‘Innovation Fund’. Following the Commission Delegated Regulation (EU) 2019/856, the Innovation Fund shall be managed by the Commission and the contribution from NER 300 when transferred to the EU budget will constitute external assigned revenue. Given that the Innovation Fund has not started its activities, nor have the NER 300 unused funds been transferred to the Commission in 2019, those funds have not been recognised as assets in the 2019 EU consolidated financial statements.

Annual accounts of the European Union 2019

353.

EUROPEAN UNION FINANCIAL YEAR 2019


BUDGETARY IMPLEMENTATION REPORTS AND EXPLANATORY NOTES

It should be noted that due to the rounding of figures into millions of euros, some financial data in the tables below may appear not to add-up.

Annual accounts of the European Union 2019

CONTENTS

354.

EU BUDGET RESULT ....................................................................................... 112


STATEMENTS OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS .................... 113

NOTES TO THE BUDGETARY IMPLEMENTATION REPORTS


115

1.

355.

THE EU BUDGET FRAMEWORK ................................................................. 115


1.1.

356.

MULTIANNUAL FINANCIAL FRAMEWORK 2014-2020



115

357.

1.2. MFF DETAILED HEADINGS (PROGRAMMES) ......................................... 116


358.

1.3. ANNUAL BUDGET


359.

1.4. REVENUE



360.

117 118


1.5. 1.6.

361.

CALCULATION OF THE BUDGET RESULT .............................................. 119


RECONCILIATION OF ECONOMIC RESULT WITH BUDGET RESULT .......... 120

2.

IMPLEMENTATION OF THE 2019 EU BUDGET – COMMENTARY


362.

2.1. REVENUE


363.

2.2. EXPENDITURE



3.

364.

IMPLEMENTATION OF EU BUDGET REVENUE



365.

3.1. SUMMARY OF THE IMPLEMENTATION OF EU BUDGET REVENUE


366.

4. IMPLEMENTATION OF EU BUDGET EXPENDITURE



4.1.

4.2. 4.3. 4.4. 4.5. 4.6.

MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS ............................................................................

MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS .................

367.

MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS



MFF: MOVEMENTS IN OUTSTANDING COMMITMENTS (RAL) ..................

MFF: OUTSTANDING COMMITMENTS BY YEAR OF ORIGIN .....................

DETAILED MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS


4.7. DETAILED MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS ..

4.8. DETAILED MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS ........

4.9. DETAILED MFF: MOVEMENTS IN OUTSTANDING COMMITMENTS (RAL) ...

4.10. DETAILED MFF: OUTSTANDING COMMITMENTS BY YEAR OF ORIGIN ......

368.

5. IMPLEMENTATION OF THE BUDGET BY INSTITUTION


369.

5.1. IMPLEMENTATION OF BUDGET REVENUE



5.2. 5.3.

IMPLEMENTATION OF COMMITMENT APPROPRIATIONS .........................

IMPLEMENTATION OF PAYMENT APPROPRIATIONS ...............................

6.

370.

IMPLEMENTATION OF THE AGENCIES' BUDGET



371.

6.1. BUDGET REVENUE



6.2.

372.

COMMITMENT AND PAYMENT APPROPRIATIONS BY AGENCY



373.

122 122 122 124 124 125


374.

125 126 127 128 129


375.

130 135 140 146 151 155 155 156 157 158 158 160


Annual accounts of the European Union 2019

EU BUDGET RESULT

376.

Note a b c d e


Revenue for the financial year

Payments against current year appropriations

377.

Payment appropriations carried over to year N+1


Cancellation of unused appropriations carried over from year N-1

Evolution of assigned revenue (B)-(A)

Unused appropriations at the end of current year (A) Unused appropriations at the end of previous year (B) Exchange rate differences for the year

Budget result

EUR million
163 918159 318
(157 428)(154 833)
(1 615)(1 675)
75106
(1 736)(1 114)
9 1447 408
7 4086 295
4(1)
3 2171 802

The budget result of the EU is returned to the Member States in 2020 through deduction of their amounts due. It is calculated in accordance with Article 1 i of Council Regulation No 608/2014 laying down implementing measures for the system of own resources. More information can be found under Calculation of the budget result.

a. Revenue for the financial year: refers to table 3.1 “Summary of the implementation of EU Budget Revenue”, column 8 “Total Revenue”.

b. Payments against current year appropriations: refer to table 4.3 “MFF – Implementation of Payment appropriations”, column 2 “Payments made from adopted budget and column 4 “Payments made from assigned revenue”.

c. Payment appropriations carried over to year N+1: refer to table 4.3 “MFF – Implementation of Payment appropriations”, column 7 automatic carry-overs plus column 8 carry-over by decision.

d. Cancellation of unused payment appropriations carried over from year N-1: takes into account the amount of payment appropriations carried over (automatically and on decision) at the end of previous year and current year’s “Payments made from carryovers” as in column 3 of table 4.3 “MFF – Implementation of Payment appropriations”.

e. Evolution of the total assigned revenue appropriations at year-end: calculates the difference of the amount of assigned revenue appropriations at the end of previous year (plus) and the amount of assigned revenue appropriations at the end of the current year (as in column 9 of table 4.3 “MFF – Implementation of Payment appropriations” - minus) to obtain the net variation of assigned revenue in the current year.

Exchange rate differences include realised and non-realised exchange rate differences.

f

f.

Annual accounts of the European Union 2019

STATEMENTS OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS

Budget revenue

378.

1 Own resources


11 - Sugar levies

12 - Customs duties

13 - VAT

14 - GNI

15 - Correction of budgetary imbalances

16 - Reduction of GNI based contribution of the Netherlands and Sweden

379.

3 Surpluses, balances and adjustments


Revenue accruing from persons working with the 4

institutions and other union bodies

Revenue accruing from the administrative operation of 5

the institutions

Contributions and refunds in connection with Union agreements and programmes Interests on late payments and fines Borrowing and lending operations Miscellaneous revenue

Total

380.

Initial budget


25

381.

Final adopted


Entitlements established

25

589

EUR million

382.

Revenue


146 305144 795147 056144 766
--(1)(1)
21 47121 47123 65621 365
17 73917 73917 77517 775
107 095105 585105 700105 700
--(81)(81)
--77
-1 8031 8111 805
1 6071 6071 5851 576

558

13013014 13412 577
11511518 5752 625
3333
1515178
148 199148 492183 771163 918

Budget expenditure: commitments by multiannual financial framework (MFF) heading

I

EUR million

MFF HeadingInitial Final adopted adopted budget budgetTotal

appropriations

available
Commitments made

383.

Smart and inclusive growth


1a: Competitiveness for growth and jobs

1b: Economic, social and territorial cohesion

384.

Sustainable growth: natural resources


of which: Market related expenditure and direct

payments

385.

Security and citizenship


Global Europe

Administration

of which: Administrative expenditure of the institutions

386.

Compensations


Negative reserve and deficit carried over from the

previous financial year

Special Instruments

Total

80 52780 62792 79490 536
23 33523 43527 82625 782
57 19257 19264 96964 754
59 64259 64262 84660 600
43 19243 19244 80643 962
3 7873 7874 0653 874
11 31911 62513 45413 111
9 9439 94310 77610 371
4 1154 1154 5504 371

577

165 796

565

166 189

618

184 554

295

178 787

1

2

Annual accounts of the European Union 2019

Budget expenditure: payments by multiannual financial framework (MFF) heading

I

387.

MFF Heading


Smart and inclusive growth

1a: Competitiveness for growth and jobs

1b: Economic, social and territorial cohesion

388.

Sustainable growth: natural resources


of which: Market related expenditure and direct

payments

389.

Security and citizenship


Global Europe

Administration

of which: Administrative expenditure of the

institutions

390.

Compensations


Negative reserve and deficit carried over from the

previous financial year

Special Instruments

Total

391.

Initial adopted budget


412

148 199

392.

Final adopted budget


Total

appropriations

available

647

148 492

671

170 679

EUR million

393.

Payments made


67 55767 82382 55375 535
20 52220 26126 04421 748
47 03547 56156 51053 787
57 40057 83761 25259 521
43 11643 11344 93343 885
3 5273 2913 5753 256
9 3588 95310 93310 108
9 9459 94211 69410 381
4 1154 1155 1074 377

295

159 096

1

2

Annual accounts of the European Union 2019

NOTES TO THE BUDGETARY IMPLEMENTATION REPORTS 1. THE EU BUDGET FRAMEWORK

The budgetary accounts are kept in accordance with the Financial Regulation (FR). The general budget is the instrument which provides for and authorises the Union's revenue and expenditure every year, within the ceilings and other provisions laid down in the Multiannual Financial Framework in line with the legislative acts concerning multiannual programmes adopted under that framework.

1.1. MULTIANNUAL FINANCIAL FRAMEWORK 2014-2020

EUR million

394.

1. Smart and inclusive


1. Smart and inclusive

growth

1.a Competitiveness for growth and jobs
52 75677 98669 30473 51276 42079 92483 661513 563
16 56017 66618 46719 92521 23923 08225 191142 130
1.b Economic, social
and territorial36 19660 32050 83753 58755 18156 84258 470371 433
cohesion
2. Sustainable growth: natural resources
49 85764 69264 26260 19160 26760 34460 421420 034
of which: market
related expenditure43 77944 19043 95144 14644 16343 88143 888307 998
and direct payments
3. Security and citizenship
1 7372 4562 5462 5782 6562 8012 95117 725
4. Global Europe
8 3358 7499 1439 4329 82510 26810 51066 262
5. Administration
8 7219 0769 4839 91810 34610 78611 25469 584
of which:
Administrative expenditure of the7 0567 3517 6798 0078 3608 7009 07156 224
institutions
6. Compensations
29------29
8. Negative reserve
--------
9. Special Instruments
--------
Commitment appropriations121 435162 959154 738155 631159 514164 123168 7971 087 197

Total payment

135 762 140 719 130 694 126 492 154 355 166 709 172 420 1 027 15

appropriations

The above table shows the Multiannual Financial Framework (MFF) ceilings at current prices. 2019 was the penultimate financial year covered by the MFF 2014-2020. The overall ceiling for commitment appropriations for 2019 was EUR 164 123 million, equivalent to 1.00 % of the EU GNI, whilst the corresponding ceiling for payment appropriations was EUR 166 709 million, or 1.01 % of the EU GNI valid throughout the budgetary year 2019.

New flexibility provisions have been agreed for the 2014-2020 MFF. One of the new provisions is a possibility to transfer unspent margins (up until the caps set by the regulation) under the payment ceilings to the following years – via the Global Margin for Payments in the framework of the technical adjustment of the MFF for the following year. Therefore, the unspent amount from 2016 (EUR 13 991 million in current prices), 2017 (EUR 16 414 million in current prices) and 2018 (EUR 210 million out of the calculated EUR 11 386 million due to the capping) was transferred to the years 2018-2020 and the ceilings of 2016-2020 were adjusted accordingly. On 15 May 2019 the Commission adopted a Communication on technical adjustment of the financial framework for 2020 in line with movements in GNI (ESA 2010) (COM(2019)310).

395.

2014


396.

2015


397.

2016


398.

2017


399.

2018


400.

2019


401.

2020


Total

Annual accounts of the European Union 2019

An explanation of the various headings of the MFF is given below:

Heading 1 – Smart and inclusive growth

This heading is divided into two separate, but interlinked components:

1a Competitiveness for growth and jobs, encompassing expenditure on research and innovation,

education and training, Connecting Europe Facility, social policy, the internal market and accompanying policies.

1b Economic, social and territorial cohesion, designed to enhance convergence of the least developed Member States and regions, to complement the EU strategy for sustainable development outside the less prosperous regions and to support inter regional cooperation.

Heading 2 – Sustainable growth: natural resources

Heading 2 includes the common agricultural and fisheries policies, and the environmental measures, in particular the Life + programme.

Heading 3 – Security and citizenship

Heading 3 (Security and citizenship) reflects the growing importance attached to certain fields where the EU has been assigned particular tasks – justice and home affairs, border protection, immigration and asylum policy, public health and consumer protection, culture, youth, information and dialogue with citizens.

Heading 4 – Global Europe

Heading 4 covers all external action, including development cooperation, humanitarian aid, pre-accession and neighbourhood instruments. The EDF remains outside of the EU budget and is not part of the MFF.

402.

Heading 5 - Administration


This heading covers administrative expenditure for all institutions, pensions and the European Schools. For the Institutions other than the Commission, these costs make up the totality of their expenditure.

403.

Heading 6 - Compensations


In accordance with the political agreement that new Member States should not become net-contributors to the budget at the very beginning of their membership, compensation was foreseen under this heading. This amount was available as transfers to these Member States to balance their budgetary receipts and contributions.

Heading 9 – Special instruments

Flexibility mechanisms enable the EU to mobilise the necessary funds to react to unforeseen events such as crisis and emergency situations. Their scope, financial allocation and operating modalities are provided for in the MFF regulation and the Interinstitutional Agreement. In the current context of reduced expenditure, they also ensure that budgetary resources can respond to evolving priorities, so that every euro is used where it is most needed. Most of the flexibility mechanisms are therefore kept outside the MFF and the funding can be mobilised above the expenditure ceilings.

1.2. MFF DETAILED HEADINGS (PROGRAMMES)

The headings of the MFF are further broken down into detailed headings, corresponding to the main spending programmes (e.g. Horizon 2020, Erasmus+ etc.). Underlying legal bases for budget implementation are adopted at this programme level. Programmes are the commonly used structure for reporting on implementation and results. Tables by programme are available in the budgetary implementation reports (see tables 4.6 - 4.10 below).

Annual accounts of the European Union 2019

1.3. ANNUAL BUDGET

Every year, the Commission estimates all the Institutions' revenue and expenditure for the year and draws up a draft budget which it sends to the budgetary authority. On the basis of this draft budget, the Council sets out its position, which is then the subject of negotiations between the two arms of the budgetary authority. The President of the EP declares that the joint draft has been finally adopted, thus making the budget enforceable. During the year in question, amending budgets are adopted. The task of executing the budget is mainly the responsibility of the Commission.

The budget structure for the Commission consists of administrative and operational appropriations. The other Institutions have only administrative appropriations. Furthermore, the budget distinguishes between two types of appropriations: non-differentiated and differentiated. Non-differentiated appropriations are used to finance operations of an annual nature (which comply with the principle of annuality). Differentiated appropriations are used in order to reconcile the principle of annuality with the need to manage multiannual operations. Differentiated appropriations are split into commitment and payment appropriations:

- commitment appropriations: cover the total cost of the legal obligations entered into for the current financial year for operations extending over a number of years. However, budgetary commitments for actions extending over more than one financial year may be broken down over several years, into annual instalments, where the basic act so provides.

- payment appropriations: cover expenditure arising from commitments entered into in the current financial year and/or earlier financial years.

In the accounts, the types of funding are grouped into two main items:

Final adopted budget appropriations; and Additional appropriations containing:

- Carry-overs from previous year (the financial regulation allows for a limited number of cases to carry unspent amounts from the previous year into the current year); and

- Assigned revenue arising from reimbursements, contributions from third parties/countries to EU programmes and work performed for third parties are assigned directly to the corresponding expenditure budget lines and constitute the third pillar of funding.

All funding types together form the available appropriations.

Annual accounts of the European Union 2019

1.4. REVENUE

404.

1.4.1. Own resources revenue


The vast majority of revenue comes from own resources, which consist of the following categories:

Traditional own resources (TOR): usually account for +/- 14 % of own resource revenue.

Value added tax (VAT) based resource: usually accounts for around 12 % of own resource revenue.

Gross national income (GNI) based resource: usually accounts for +/- 74 % of own resource revenue.

The allocation of own resources is made in accordance with the rules laid down in the Council Decision No. 2014/335/EU, Euratom of 26 May 2014 on the system of the EU's own resources (ORD 2014). This decision has entered into force on 1 October 2016 and applied retroactively from 1 January 2014.

The total amount of own resources allocated to the Union to cover annual appropriations for payments shall not exceed 1.20 % of the sum of all the Member States' GNIs.

405.

1.4.2. Traditional own resources (TOR)


Traditional own resources (TOR) consist of customs duties (levied on imports from third countries) and sugar levies (paid by sugar producers to finance expenditure on the sugar common organisation of the market) levied on economic operators and collected by Member States on behalf of the EU. However, Member States keep 20 % as a compensation for their collection costs. All established traditional own resource amounts must be entered in one or other of the accounts kept by the competent authorities:

- In the ordinary accounts provided for in Article 6 i of Regulation No 609/2014: all amounts recovered or guaranteed.

- In the separate accounts provided for also in the above mentioned Article: all amounts not yet recovered and/or not guaranteed; amounts guaranteed but challenged may also be entered in this account.

Traditional own resources must be entered in the Commission's account with the treasury or national central bank by the Member State at the latest on the first working day following the 19th day of the second month following the month during which the entitlement was established (or recovered in the case of the separate account).

406.

1.4.3. Value added tax (VAT)


Value added tax (VAT) is levied on Member States' VAT bases, which are harmonised for this purpose in accordance with EU rules. However, the VAT base is capped at 50 % of each Member State’s GNI. The uniform VAT rate applied is fixed at 0.30 % except for the period 2014-2020 in which the rate of call for Germany, the Netherlands and Sweden was fixed at 0.15 %.

407.

1.4.4. Gross national income (GNI)


The resource based on gross national income (GNI) is used to finance the part of the budget not covered by any other sources of revenue. The same percentage rate is levied on each Member States' GNI, which is established in accordance with EU rules.

VAT and GNI-based resources are determined on the basis of forecasts of relevant bases made when the draft budget is being prepared. These forecasts are subsequently revised and updated during the budget year in question by means of an amending budget. Differences between the amounts due by the Member

Annual accounts of the European Union 2019

actual VAT and GNI bases during the subsequent four years, unless a reservation is issued. These reservations have to be seen as potential claims on the Member States for uncertain amounts as their financial impact cannot be estimated with accuracy. When the exact amount can be determined, the corresponding VAT and GNI-based resources are called either in connection with the VAT and GNI balances exercise or by individual calls for funds.

408.

1.4.5. UK correction


A budgetary imbalance correction mechanism in favour of the United Kingdom (reducing their own resource payments while increasing the payments of other Member States) was instituted by the European Council in Fontainebleau (June 1984). Germany, Austria, Sweden and Netherlands benefit from a reduced financing of the UK correction (restricted to one quarter of their normal share).

409.

1.4.6. Gross reduction


The European Council of 7-8 February 2013 concluded that Denmark, the Netherlands and Sweden should benefit from gross reductions in their annual contributions based on GNI for the period 2014-2020 while Austria only benefited from gross reductions for the period 2014-2016. The annual reductions are as follows: Denmark EUR 130 million, the Netherlands EUR 695 million and Sweden EUR 185 million.

1.5. CALCULATION OF THE BUDGET RESULT

The budget result of the EU is returned to the Member States during the following year through deduction of their amounts due for that year.

The amounts of own resources entered in the accounts are those credited during the course of the year to the accounts opened in the Commission's name by the governments of the Member States. Revenue comprises also, in the case of a surplus, the budget result for the previous financial year. The other revenue entered in the accounts is the amount actually received during the course of the year.

For the purposes of calculating the budget result for the year, expenditure comprises payments made against the year's appropriations plus any of the appropriations for that year that are carried over to the following year. Payments made against the year's appropriations means payments that are made by the Accounting Officer by 31 December of the financial year. For the EAGF, payments are those effected by the Member States between 16 October N-1 and 15 October N, provided that the Accounting Officer was notified of the commitment and authorisation by 31 January N+1. EAGF expenditure may be subject to a conformity decision following controls in the Member States.

The budget result comprises two elements: the result of the EU and the result of the participation of the EFTA countries belonging to the European Economic Area (EEA). In accordance with Article 1 i of Regulation No 608/2014 laying down implementing measures for the system of own resources, this result represents the difference between:

- total revenue received for the financial year; and

- total payments made against current year's appropriations plus the total amount of that year's appropriations carried over to the following year.

The following are added to or deducted from the resulting figure:

- the net balance of cancellations of payment appropriations carried over from previous years and any payments which, because of fluctuations in the euro rate, exceed non-differentiated appropriations carried over from the previous year;

- the evolution of assigned revenue; and

- the net exchange rate gains or losses recorded during the year.

Annual accounts of the European Union 2019

implementation reports and those carried over to the following year in the year N-1 budget implementation reports. Appropriations made available again following the repayment of payments on account are disregarded when calculating the budget result.

Payment appropriations carried over include: automatic carry-overs and carry-overs by decision. The cancellation of unused payment appropriations carried over from the previous year shows the cancellations of appropriations carried over automatically and by decision.

1.6. RECONCILIATION OF ECONOMIC RESULT WITH BUDGET RESULT

ECONOMIC RESULT OF THE YEAR

4 796

EUR million 2018

13 918

Revenue

Entitlements established in current year but not yet collected Entitlements established in previous years and collected in current year Accrued revenue (net)_____________________________________________

Expenses

Accrued expenses (net)

Expenses prior year paid in current year

Net-effect pre-financing

Payment appropriations carried over to next year

Payments made from carry-overs & cancellation of unused payment

Movement in provisions

Other____________________________________________________________

Economic result Agencies and ECSC i.L.

(6 193) 8 656 3 341

(6 220)

9 331

(4 015)

5 804(904)
8 3944 511
(3 832)(6 086)
(10 981)(8 634)
(3 532)(2 941)
1 9242 098
3 8013 567
(3 076)(4 175)
(7 304)(11 660)
(79)448

BUDGET RESULT OF THE YEAR

3 217

1 802

In accordance with the Financial Regulation, the economic result of the year is calculated on the basis of accrual accounting principles (EU Accounting Rules), while the budget result is based on modified cash accounting rules. As the economic result and the budget result cover the same underlying transactions – the exception being the other (non-budgetary) sources of revenue and expenditure of the agencies and the ECSC in Liquidation which are included in the economic result only (see note 6) – the reconciliation of the economic result of the year with the budget result of the year serves as a useful consistency check.

410.

Reconciling items - Revenue


The actual budgetary revenue for a financial year corresponds to the revenue collected from entitlements established in the course of the year and amounts collected from entitlements established in previous years. Therefore the entitlements established in the current year but not yet collected are to be deducted from the economic result for reconciliation purposes as they do not form part of budgetary revenue. On the contrary the entitlements established in previous years and collected in current year must be added to the economic result for reconciliation purposes.

The accrued revenue mainly consists of accrued revenue for agriculture, own resources, interests and dividends. Only the net effect, i.e. accrued revenue for current year minus reversal accrued revenue from previous year, is taken into consideration.

411.

Reconciling items - Expenditure


The accrued expenses mainly consists of accruals made for year-end cut-off purposes, i.e. eligible expenses incurred by beneficiaries of EU funds but not yet reported to the Commission. Only the net-

Annual accounts of the European Union 2019

prior years are part of current year's budgetary expenditure and therefore must be added to the economic result for reconciliation purposes.

The net effect of pre-financing is the combination of i the new pre-financing amounts paid in the current year and recognised as budgetary expenditure of the year and i the clearing of the prefinancing through eligible costs accepted during the current year. The latter represent an expense in accrual terms but not in the budgetary accounts since the payment of the initial pre-financing had already been considered as a budgetary expenditure at the time of its payment.

As well as the payments made against the year's appropriations, the appropriations for that year that are carried forward to the next year also need to be taken into account in calculating the budget result for the year (in accordance with Article 1 i of Regulation No 608/2014). The same applies for the budgetary payments made in the current year from carry-overs from previous years, and the cancellation of unused payment appropriations.

The movement in provisions relates to year-end estimates made in the financial statements (employee benefits mainly) that do not impact the budgetary accounts. Other reconciling amounts comprise different elements such as asset amortisation/depreciation, asset acquisitions, capital lease payments and financial participations for which the budgetary and accrual accounting treatments differ.

Reconciling item – Economic result Agencies and ECSC in Liquidation

The budget result of the year is a non-consolidated figure and does not include the other (non-budgetary) sources of revenue and expenditure of the consolidated agencies and the ECSC i.L. (see note 6). To reconcile the economic result of the year – a consolidated figure which includes these amounts – with the budgetary result of the year, the whole consolidated economic result of the year of the agencies and the ECSC i.L. is presented as a reconciling item.

Annual accounts of the European Union 2019

2. IMPLEMENTATION OF THE 2019 EU BUDGET – COMMENTARY

2.1. REVENUE

In the initial adopted EU budget, signed by the President of the European Parliament on 12 December 2018, the amount of payment appropriations was EUR 148 199 million and the amount to be financed by own resources totalled EUR 146 305 million. The revenue and expenditure estimates in the initial budget are typically adjusted during the budgetary year, such modifications being presented in amending budgets. Adjustments in the GNI-based own resources ensure that budgeted revenue matches exactly budgeted expenditure. In accordance with the principle of equilibrium, budget revenue and expenditure (payment appropriations) must be in balance.

During 2019, three amending budgets were adopted. Taking them into account, the final adopted revenue for 2019 amounted to EUR 148 492 million and the total financed by own resources was EUR 144 795 million. The main factor for the reduction of Member States' contributions in 2019 was the surplus from the previous financial year (EUR 1 803 million) slightly counterbalanced by a net increase of payment appropriations (EUR 293 million).

As far as the own resources result is concerned, the collection of traditional own resources was very close to the forecasted amounts.

The final Member States' VAT and GNI payments also correspond closely to the final budgetary estimate. The differences between the forecasted amounts and the amounts actually paid are due to the differences between the euro rates used for budgetary purposes and the rates in force at the time when the Member States outside the EMU actually made their payments.

For the VAT and GNI balances, the rules are set out in Article 10 b of the Making Available Regulation (Regulation 609/2014). The procedure does not entail a budgetary amendment and therefore the Commission directly requests the Member States to pay the net amounts. The impact for the EU budget was close to zero due to this netting system.

The heading 'Contributions and refunds in connection with EU agreements and programmes' concerns mainly revenue from financial corrections (ESIF, EAGF and EAFRD), the participation of third countries in research programmes, the clearance of accounts in agricultural funds and other contributions and refunds to EU programmes/activities. A substantial part of this total is made up of earmarked revenue, which typically gives rise to the entering of additional appropriations on the expenditure side. In 2019, these contributions totalled EUR 12.6 billion.

The revenue from fines relates mainly to fines in the field of competition.

2.2. EXPENDITURE

The EU budget has an important role to support the delivery of the Union's policies and priorities. Despite its limited amount, representing around 2 % of all public spending in the Union, it complements national budgets and has a clear focus on investment and additionality. It is a key tool among the wide set of European-level policy and regulatory instruments, to implement policy priorities which all EU members have agreed upon, translated into a Multiannual Financial Framework containing the different programmes and maximum expenditure ceilings.

The EU budget for 2019, adopted on 12 December 2018, confirms that the EU is directing money to where the needs are. In 2019, and in line with the European Commission proposal of May 2018, the biggest part of the EU budget went to stimulate the creation of jobs, especially for young people, and to boost growth, strategic investments and convergence. The EU has also continued supporting the efforts to effectively deal with the migration challenge, both inside and outside the EU.

412.

2019 was the sixth year of the current 2014-2020 Multiannual Financial Framework (MFF). The implementation of almost all programmes was at cruising speed except new programmes or actions for


Annual accounts of the European Union 2019

In line with the annual evolution foreseen in the MFF, appropriations proposed in the draft budget were set at EUR 165.6 billion (3.1 % higher when compared to the 2018 budget) in commitments, and EUR 148.7 billion (2.7 % higher) in payments, corresponding to 1.00 % and 0.90 % of EU gross national income (GNI), respectively.

All headings reached high levels of implementation in 2019. The 2019 implementation for all types of appropriations (budget, carry-overs from previous year and assigned revenue) was 97 % for commitments and 93 % for payments. Implementation rates excluding assigned revenue show full implementation in 2019 (99.4 % in commitments and 98.4 % in payments).

Outstanding commitments (RAL, committed amounts not yet paid for) stood at EUR 297.7 billion at the end of 2019. An increase from the 2018 level had been expected, given the difference between budgeted commitment and payment appropriations (EUR 17.7 billion) in the adopted budget and taking into account the fact that an increase in outstanding commitments constitutes a normal evolution, as commitment appropriations increase every year as foreseen in the Multiannual Financial Framework. The final increase reached EUR 16.5 billion.

Annual accounts of the European Union 2019

3. IMPLEMENTATION OF EU BUDGET REVENUE

3.1. SUMMARY OF THE IMPLEMENTATION OF EU BUDGET REVENUE

413.

Own resources


Surpluses, balances and adjustments

Revenue accruing from persons working

with the institutions and other union

bodies

Revenue accruing from the

administrative operation of the

institutions

Contributions and refunds in connection

with Union agreements and programmes

Interests on late payments and fines Borrowing and lending operations Miscellaneous revenue

Total

Income appropriations

414.

Initial Final


adopted adopted

budget budget

415.

144 795 1 803


416.

146 305


417.

1 607


418.

1 607


Entitlements established

419.

Current year


420.

147 013 1 811


421.

1 576


Carried

5=3+4

422.

44 147 056 1 811


10

423.

1 585


Revenue

Receipts as % of budget
On

entitlements

of current year
On entitlements carried overTotal
8=6+79=8/2
144 754 1 80512144 766 1 805100 % 100 %

424.

1 566


10

425.

1 576


98 %

EUR million

426.

Outstanding


10=5-8

427.

2 291


7

10

252557019589546125582 229 %31
13013013 56456914 13412 27929812 5779 674 %1 557
1151155 45613 11918 5752 3552712 6252 283 %15 949
333-33-3110 %-
1515891771852 %9
148 199148 492170 00113 770183 771163 314604163 918110 %19 853


428.

Title


Total

over

1


4

5

Annual accounts of the European Union 2019

4. IMPLEMENTATION OF EU BUDGET EXPENDITURE

4.1. MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS

EUR million

Commitment appropriations

Payment appropriations

MFF HeadingBudget appropriationsAdditional appropriationsTotal approp. availableBudget appropriationsAdditional appropriationsTotal

approp.

available
Initial adopted budgetAmending budgets & transfersFinal adopted budgetCarryoversAssigned revenueInitial adopted budgetAmending budgets & transfersFinal adopted budgetCarryoversAssigned revenue
9=7+8■b2=9+
1Smart and inclusive growth80 52710080 627012 16692 79467 55726667 82313114 60082 553
1a: Competitiveness for growth and jobs23 33510023 43504 39027 82620 522(260)20 2611185 66426 044
1b: Economic, social and territorial cohesion57 192-57 192-7 77764 96947 03552647 561138 93556 510
2Sustainable growth: natural59 642-59 6424602 74562 84657 40043757 8376722 74361 252
of which: Market related expenditure and direct payments43 192-43 1924601 15544 80643 116(3)43 1136651 15544 933
3Security and citizenship3 78703 787-2794 0653 527(237)3 29192763 575
4Global Europe11 31930611 625341 79513 4549 358(406)8 953641 91610 933
5Administration9 94309 943183210 7769 945(2)9 94291683611 694
of which: Administrative expenditure of the institutions4 115-4 1154354 5504 115-4 1155544375 107
6Compensations

Negative reserve and deficit
------------
8carried over from the previous financial year——~———~—~~—~
9Special Instruments

Total
577(12)5653024618412236647024671
165 796394166 18952517 840184 554148 199294148 4921 79220 394170 679


Annual accounts of the European Union 2019

4.2. MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS

EUR million

429.

1 Smart and inclusive growth


1a: Competitiveness for growth and jobs

1b: Economic, social and territorial cohesion

430.

Sustainable growth: natural 2


resources

of which: Market related

expenditure and direct

payments

431.

3 Security and citizenship


432.

4 Global Europe


433.

5 Administration


of which: Administrative expenditure of the institutions

434.

6 Compensations


Negative reserve and deficit

435.

8 carried over from the previous financial year


436.

9 Special Instruments


Total

Total appropr. available

4 550

437.

from


final

adopted

budget

Commitments made

438.

rom from


rry- assigned Tot

Appropriat. carried over to 2020

439.

assigned


carryovers by decision

80 54009 9965=2+3

90 536
92 79498 %2 074
27 82623 40602 37625 78293 %2 013
64 96957 134-7 62064 754100 %60
62 84659 1614381 00160 60096 %1 330
44 80642 71843880743 96298 %348
4 0653 737-1373 87495 %142
13 45411 622341 45413 11197 %340
10 7769 797157410 37196 %255

4 033

440.

618 295


184 554 165 153

338

4 371

96 %

295

473 13 161 178 787

94

48 % 8

97 % 4 149

441.

36 2 110


3 2 016

33 93

442.

467 1 797


467

815

443.

94 102


598 4 747

444.

from


final

adopted

budget

Appropriations lapsing

445.

from from


carry- assigned T

52 27

25

14

175

438

21

21

30

51

97 1

96

414

14250-0
3412-0
25514603
948203

16

530

=10+ 11 +12

149 28

121

449

29

50

2

149

85

221

1 019


%

446.

Total


revenue

revenue

revenue

12

8

1

0

Annual accounts of the European Union 2019

4.3. MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS

447.

MFF Heading


Smart and inclusive 1

growth

1a: Competitiveness

for growth and jobs

1b: Economic, social and territorial cohesion

448.

Sustainable growth: 2


natural resources

of which: Market

related expenditure

and direct payments

449.

Security and 3


citizenship

450.

4 Global Europe


451.

5 Administration


of which: Administrative expenditure of the institutions

452.

6 Compensations


Negative reserve and

deficit carried over 8

from the previous

financial year

Total appropr. from final

available adopted

453.

budget


82 553 26 044

56 510

454.

61 252


67 637 20 090

47 547

455.

57 163


44 933 42 449

456.

3 575 3 153


457.

10 933 8 908


458.

11 694 9 048


5 107

3 571

Payments made

459.

from from


carry- assigned

113 102

10

637

631

7

60

850

515

806

96

460.

1 140


482

291

Appropriations carried over to 2020

461.

3+4


7 785 75 535 91 %

1 555 21 748 84 %

6 230 53 787 95 %

1 721 59 521 97 %

43 885 98 %

3 256 91 % 10 108 92 % 10 381 89 %

4 377 86 %

462.

automat . carryovers


151 138

13

198

190

9

39

748

463

carryovers by decis.

3 3

467

467

349

463.

180 772 349


143

EUR million

Appropriations lapsing

464.

assigned


465.

6 813 6 967


4 108 4 249

2 705 2 718

466.

1 023 1 687


1 006

188

811

467.

1 098


605

468.

from


final

adopted

budget

32 30

2

9

7

129

6

146

82

fromfrom
carry-assignedTotal
oversrevenue
121314=11+
18152
16148
204
35-44
34-42
20131
4414
664216

39

124

Special Instruments6712950-29544 %1-89352016368
Total170 679146 2031 66711 225159 09693 %1 1454709 14410 75967512525825


%

469.

Total


revenue

overs

revenue

10=7+


3

7

8

9

11

470.

8+9


0

0

3

0

9

Annual accounts of the European Union 2019

4.4. MFF: MOVEMENTS IN OUTSTANDING COMMITMENTS (RAL)

EUR million

471.

MFF Heading


Smart and inclusive growth 1a: Competitiveness for growth and jobs

1b: Economic, social and territorial cohesion

472.

Sustainable growth: natural


resources

of which: Market related

expenditure and direct payments

473.

Security and citizenship


Global Europe

Administration

of which: Administrative

expenditure of the institutions

474.

Compensations


Negative reserve and deficit

carried over from the previous

financial year

Commitments outstanding at the end of previous year

Commitments of the current year

475.

Commitm. carried forward from previous year


Decommitm./ Revaluations/ Cancellations

Payments

Commitm. outstanding at year-end

Commitm.

476.

made


during the

year

Payments

4=1+2+35
206 991(1 360)(66 413)139 21790 536(9 122)
37 006(738)(13 367)22 90125 782(8 380)
169 985(622)(53 046)116 31764 754(742)
40 047(253)(15 133)24 66160 600(44 387)
359(6)(235)11743 962(43 650)
5 834(269)(1 934)3 6323 874(1 323)
27 352(1 200)(6 918)19 23413 111(3 190)
961(97)(859)510 371(9 522)
587(69)(515)24 371(3 861)

commitm.

477.

Cancellation of


Commitm.

outstanding

commitm.

478.

outstanding


at the end of

479.

which cannot


at year-end

the year

480.

be carried over


=5+6+7

9=4+

(4)81 410220 627
(4)17 39740 298
(0)64 012180 329
(0)16 21340 874
-313430
-2 5516 183
(0)9 92029 154
(1)849854
0510511
Special Instruments0(0)(0)-295(295)-11
Total281 185(3 179)(91 257)186 749178 787(67 838)(5)110 944297 693


Total

1


1

2

Annual accounts of the European Union 2019

4.5. MFF: OUTSTANDING COMMITMENTS BY YEAR OF ORIGIN

EUR million

481.

MFF Heading


Smart and inclusive growth

1a: Competitiveness for growth and jobs

1b: Economic, social and territorial cohesion

482.

Sustainable growth: natural resources


of which: Market related expenditure and direct payments

483.

Security and citizenship


Global Europe

Administration

of which: Administrative expenditure of the institutions

484.

Special Instruments


Total

< 2013

485.

2018 2019


1 4283 6402 1394 68312 47645 92468 92481 414220 627
4729211 1751 6083 1335 42710 16017 40240 298
9562 7199643 0759 34340 49658 76364 012180 329
681302851 3162 6857 60312 57516 21340 874
---133776313430
331820534331 2231 8512 5526 183
9099581 0101 8513 2534 9736 2319 97029 154
--0-012851854
0000000511511
------011
2 4384 7463 4537 90418 84659 72389 583110 999297 693

The set up of the new Commission involved an internal re-organisation of services. Re-allocating the related transactions resulted in a shift of outstanding amount between years. The overall amount of outstanding commitments remains unchanged.


486.

2013


487.

2014


488.

2015


489.

2016


490.

2017


Total

1

2

9

Annual accounts of the European Union 2019

4.6. DETAILED MFF: BREAKDOWN & CHANGES IN COMMITMENT & PAYMENT APPROPRIATIONS

EUR million

Commitment appropriationsPayment appropriationsTotal approp. available
Budget appropriationsAdditional appropriationsTotal approp. availableBudget appropriationsAdditional appropriations
ProgrammeInitial adopted budgetAmending budgets & transfersFinal adopted budgetCarryoversAssigned revenueInitial adopted budgetAmending budgets & transfersFinal adopted budgetCarryoversAssigned revenue
23=1+2456=3 + 4+5789=7+8101112=9+ 10+11
European Fund Strategic Investments (EFSI)187-187-1903771 02211 023-1901 213
European satellite navigation (EGNOS/Galileo)691-691-1288199237099322531 248
International Thermonuclear Reactor (ITER)4072409-49458617(58)559049608
European Earth Observation Progr (Copernicus)861-861-218826021603214619
European Solidarity Corps (ESC)143-14308151120(12)10878123
European Defense Industrial
Development Programme245-245--245147(145)2--2
(EDIDP)
Nuclear Safety and Decommissioning144-144--144158(1)157--157
Horizon 202012 3128012 392-2 65215 04310 972(160)10 812733 76714 652
Euratom Research and Training Programme3740374-115488370(3)36719153539
Competitiveness enterprises and SME's (COSME)3670367-4741425225277386365
Education, Training and Sport (Erasmus+)

Employment and Social Innovation (EaSI)
2 766202 786-4843 2712 563462 60976013 217
136-136-5118711810129150180
Customs, Fiscalis and Anti-Fraud135-135-111461341135010145
CEF - Energy949-949-44993327(1)32613331
CEF - Transport2 640-2 640-822 7221 223921 3141181 334
CEF - Information &
Communications Technology175-175-5180152(33)11804123
(ICT)


1

Annual accounts of the European Union 2019

EUR million

Commitment appropriationsPayment appropriations
Additional Budget appropriations

appropriations Total
Additional Budget appropriations

appropriations
Total
ProgrammeInitial Amending Final approp. Initial Amending Final

Carry- Assigned Carry- Assigned adopted budgets & adopted available adopted budgets & adopted

overs revenue overs revenue budget transfers budget budget transfers budget
approp. available
1 2 3=1+2 4 5 6 =3+ 7 8 9=7+8 10 11 10+11

491.

Energy projects for economic recovery (EERP)


Decentralised agencies

Other actions and programmes

Pilot projects and preparatory

actions

Specific competences of the

Commission

Regional convergence (Less

developed regions)

Transition regions

Competitiveness (More developed

regions)

Outermost and sparsely

populated regions

Cohesion fund

European territorial cooperation

Technical assistance

European Aid to the Most Deprived (FEAD)

Youth Employment initiative

Connecting Europe Facility (CEF)

Pilot projects and preparatory actions

Total MFF Heading 1

European Agricultural Guarantee Fund (EAGF)

Agricultural Fund Rural Development (EAFRD)

European Maritime and Fisheries Fund (EMFF)

---0061(61)--3535
383(4)37927406382(2)379-27406
194(2)193473665165(1)1641391556
97(0)97198100(32)68-169
128413341371153118-4122
27 875927 8853 65431 53924 04220624 248-4 30428 551
5 84955 8548066 6604 370(271)4 099-1 1185 217
8 649278 6761 1519 8277 442287 470-1 3828 852
231-2312225317638215-28242
9 754-9 7541 80111 5557 7064008 107-1 6959 801
1 973-1 9732352 2081 1912561 447-2561 703
240-2402242213(25)187122202
568-5682359140111412094506
350(41)30981390632(109)523-56579
1 700-1 70011 701852(8)843-2845
4-40411(0)11-011
80 52710080 627 012 16692 79467 55726667 82313114 60082 553
43 192-43 192 4601 15544 80643 116(3)43 1136651 15544 933
14 727-14 7271 35616 08313 14836213 51021 35614 868
942_9422181 160571816521218871


2

Annual accounts of the European Union 2019

EUR million

Commitment appropriationsPayment appropriations
Additional Budget appropriations

appropriations Total
Additional Budget appropriations

appropriations
Total
ProgrammeInitial Amending Final approp. Initial Amending Final

Carry- Assigned Carry- Assigned adopted budgets & adopted available adopted budgets & adopted

overs revenue overs revenue budget transfers budget budget transfers budget
approp. available
1 2 3=1+2 4 5 6 =3+ 7 8 9=7+8 10 11 10+11

492.

Fisheries Partnership Agreements


(SFPAs) and Fisheries

Management Organisations

(RFMOs)

Environment and climate action

(LIFE)

Decentralised agencies

Other actions and measures

Pilot projects and preparatory actions

Specific Actions

Total MFF Heading 2

Asylum, Migration and Integration Fund (AMF)

Consumer

Creative Europe

Emergency Support within the Union (IES)

Internal Security Fund

IT systems

Justice

Rights, Equality and Citizenship

Union Civil protection Mechanism

Europe for Citizens

Food and feed

Health

Decentralised agencies

148

493.

558 61


14

494.

59 642


495.

1 121


29

245

0

533

0

45

66

150

29

290

68

496.

1 090


(1)

148

497.

559 61


12

-59 642
701 191
-29
-245
-0
(0)533
(0)-
(0)45
-66
45)105
-29
-290
-68
25)1 066

460

148

142

142

142

75673421335446365
87061(2)59-868
01220(14)6-06
---00--0
2 74562 84657 40043757 8376722 74361 252
171 20895321974117992
130243271128
142581957202114217
0070(10)600060
148681664(162)5021146649
---00-00
145389471148
267584620264
410982(13)69-372
02929(4)250025
4294239224215247
371613641267
851 151998(87)911-85996


0

1

3

Annual accounts of the European Union 2019

EUR million

Commitment appropriationsPayment appropriations
Additional Budget appropriations

appropriations Total
Additional Budget appropriations

appropriations
Total
ProgrammeInitial Amending Final approp. Initial Amending Final

Carry- Assigned Carry- Assigned adopted budgets & adopted available adopted budgets & adopted

overs revenue overs revenue budget transfers budget budget transfers budget
approp. available
1 2 3=1+2 4 5 6 =3+ 7 8 9=7+8 10 11 10+11

498.

Pilot projects and preparatory actions


Specific Actions Total MFF Heading 3 Pre-accession assistance (IPA II)

Macro-financial Assistance (MFA)

Guarantee Fund for External Actions

Union Civil Protection Mechanism

EU Aid Volunteers initiative (EUAV)

Fund for Sustainable Development (EFSD) European Neighbourhood Instrument (ENI) Development Cooperation Instrument (DCI)

Partnership Instrument (PI)

Democracy and Human Rights (EIDHR)

Stability and Peace (IcSP)

Humanitarian aid

Common Foreign and Security

Policy (CFSP)

Nuclear Safety Cooperation

(INSC)

Decentralised agencies

Other actions and programmes

Pilot projects and preparatory actions

15-15-01518(10)8-08
106-106-0106100(0)9910101
3 78703 787-2794 0653 527(237)3 29192763 575
2 423(29)2 394-7393 1331 708(325)1 38255621 950
27(27)0--027(17)10--10
----110110----110110
24(11)13-11321(10)11-111
20(1)19-01916(3)13-013
25-25-12915425-2525429479
2 677612 738-412 7792 06012 0614412 106
3 190153 205-833 2872 796(219)2 578161232 716
154(5)149-101591003613609145
197(18)179-2181159316332167
3770377-11388321(3)31939331
1 6523151 966344242 4251 6031371 74063712 117
3358343-413843063309053362
34-34-03441(6)361036
20-20-02120-20-021
84(3)81-205286734770206282
6(4)2-028(1)7-17


4

Annual accounts of the European Union 2019

EUR million

Commitment appropriationsPayment appropriations
Additional Budget appropriations

appropriations Total
Additional Budget appropriations

appropriations
Total
ProgrammeInitial Amending Final approp. Initial Amending Final

Carry- Assigned Carry- Assigned adopted budgets & adopted available adopted budgets & adopted

overs revenue overs revenue budget transfers budget budget transfers budget
approp. available
1 2 3=1+2 4 5 6 =3+ 7 8 9=7+8 10 11 10+11

499.

Specific Actions Total MFF Heading 4 Pensions European schools


Decentralised agencies

Pilot projects and preparatory

actions

Commission administrative

expenditure

Administrative expenditure of

Other Institutions

Total MFF Heading 5 Compensations Total MFF Heading 6 Negative reserve Deficit carried over Total MFF Heading 8

Emergency Aid Reserve (EAR)

European Globalisation Adjustment Fund (EGF) European Union Solidarity Fund (EUSF)

Total MFF Heading 9

Total

75580-08174(6)68-068
11 31930611 625341 79513 4549 358(406)8 953641 91610 933
2 004(2)2 002-02 0022 004(2)2 002-02 002
191(11)181-12193191(11)181212195
4-4-046(2)4106
3 629123 64113854 0273 629113 6403593864 385
4 115-4 11504354 5504 115-4 1155544375 107
9 943(0)9 943183210 7769 945(2)9 94291683611 694
352(306)46--46352
176-176-2419910
5029434430-37350
577(12)5653024618412
165 796394166 18952517 840184 554148 199

500.

352 - - 352


1 0 24 25

501.

245 295 - - 295


502.

236 647 0 24 671


294 148 492 1 792 20 394 170 679


5

6

8

9

Annual accounts of the European Union 2019

4.7. DETAILED MFF: IMPLEMENTATION OF COMMITMENT APPROPRIATIONS

EUR million

503.

Programme


Total appropr. from final

available adopted

504.

budget


European Fund Strategic Investments (EFSI)

European satellite navigation (EGNOS/Galileo)

International Thermonuclear Reactor (ITER)

European Earth Observation Progr (Copernicus)

European Solidarity Corps (ESC)

European Defense Industrial

Development Programme

(EDIDP)

Nuclear Safety and

Decommissioning

Horizon 2020

Euratom Research and Training Programme

Competitiveness enterprises and SME's (COSME)

Education, Training and Sport (Erasmus+)

505.

Employment and Social Innovation (EaSI) Customs, Fiscalis and Anti-Fraud


CEF - Energy

CEF - Transport

CEF - Information & Communications Technology (ICT)

377187
819691
458409
882861
151143
245245
144144
15 04312 391
488371
414367
3 2712 786
187135
146135
993949
2 7222 639

Commitments made

506.

from from


carry- assigned Tota

Appropriat. carried over to 2020

507.

assigned


overs by decision

190377100 %-
8277394 %46
1742693 %32
21882100 %0
414898 %3
-245100 %-
-144100 %-
1 41713 80892 %1 234
5142286 %64
3139896 %15
2733 06094 %211
2515985 %26
814398 %3
44992100 %1
772 716100 %4

508.

from


final

adopted

budget

Appropriations lapsing

509.

from from


carry- assigned

-0
460
320
0_
-0
1 2340
670
150
211-
262
30
10
41
-0
11
00
00

180

171

175

98 %


carry-

%

510.

Total


Total

revenue

overs

revenue

revenue


2

3

8

10


12


1

0

3

3

0

4

0

0

4

0

4

Annual accounts of the European Union 2019

EUR million

511.

Programme


Energy projects for economic recovery (EERP)

Decentralised agencies

Other actions and programmes

Pilot projects and preparatory

actions

Specific competences of the

Commission

Regional convergence (Less developed regions)

Transition regions

Competitiveness (More developed regions)

Outermost and sparsely populated regions

Cohesion fund

European territorial cooperation

Technical assistance

European Aid to the Most Deprived (FEAD)

Youth Employment initiative

Connecting Europe Facility

(CEF)

Pilot projects and preparatory

actions

Total MFF Heading 1

European Agricultural Guarantee Fund (EAGF)

Agricultural Fund Rural Development (EAFRD)

Total appropr. availableCommitments madeAppropriat. carried over to 2020

carry-assigned

overs by Total revenue

decision
from final adopted budgetfrom carryoversfrom assigned revenueTotal%from

final

adopted

budget
4+410
0-----0-0-
406360-1637693 %10-1019
665193-11230446 %361-3610
9897-198100 %0-00
137132-213498 %2-21
31 53927 877-3 56731 444100 %43-438
6 6605 851-8066 657100 %0-03
9 8278 674-1 1309 804100 %8-81
253231-22253100 %----
11 5559 752-1 77511 527100 %(0)21-
2 2081 973-2162 18999 %7-70
242228-022894 %1-112
591567-23590100 %---1
390277-8135892 %-3232-
1 7011 700--1 700100 %1-1-
44--497 %0-0-
92 79480 54009 99690 53698 %2 074362 11052
44 80642 71843880743 96298 %3484678158

Appropriations lapsing

512.

from from


carry- assigned

overs revenue

21

513.

16 083


514.

14 725


40

515.

14 765


92 %

903

903

97

413

019
00
-0
01
4351
-3
1415
2626
1212
113
01

516.

149 29


415


517.

Total



11

12

2


Annual accounts of the European Union 2019

EUR million

518.

Programme


European Maritime and Fisheries Fund (EMFF)

Fisheries Partnership Agreements (SFPAs) and Fisheries Management Organisations (RFMOs)

Environment and climate action (LIFE)

Decentralised agencies

Other actions and measures

Pilot projects and preparatory actions

Specific Actions

Total MFF Heading 2

Asylum, Migration and Integration Fund (AMF)

Consumer

Creative Europe

Emergency Support within the Union (IES)

Internal Security Fund

IT systems

Justice

Rights, Equality and Citizenship

Union Civil protection Mechanism

Europe for Citizens Food and feed

Total appropr. from final

available adopted

519.

budget


520.

1 160 940


148

521.

567 70


12

148

522.

559 59


12

62 84659 161
1 2081 184
3029
258245
00
681533
4545
6766
10970
2929
294290

Commitments made

523.

from from


carry- assigned Tota

overs revenue

Appropriat. carried over to 2020

438

524.

assigned


carryovers by decision

from

final

adopted

budget

Appropriations lapsing

525.

from from


carry- assigned

overs revenue

1421 08293 %75752
-148100 %----
5564100 %2-20
76795 %1-12
-12100 %0-00
-------
1 00160 60096 %1 3304671 79714
91 19299 %9-97
130100 %0-00
1025599 %4-40
-038 %0-00
6459788 %84-840
04599 %0-00
16799 %1-10
37367 %1-135
02999 %0-00
329299 %2_20

21

4449
-7
00
-0
00
-0
00
00
035
-0
00


%

526.

Total


Total

revenue


3

11

12

1

3

0

0

3

Annual accounts of the European Union 2019

EUR million

527.

Programme


Health

Decentralised agencies

Pilot projects and preparatory actions

Specific Actions Total MFF Heading 3

Pre-accession assistance (IPA II)

Macro-financial Assistance (MFA)

Guarantee Fund for External Actions

Union Civil Protection Mechanism

EU Aid Volunteers initiative (EUAV)

Fund for Sustainable Development (EFSD)

European Neighbourhood Instrument (ENI)

Development Cooperation Instrument (DCI)

Partnership Instrument (PI)

Democracy and Human Rights (EIDHR)

Stability and Peace (IcSP)

Humanitarian aid

Common Foreign and Security

Policy (CFSP)

Nuclear Safety Cooperation

(INSC)

Total appropr. from final

available adopted

528.

budget


Commitments made

529.

from from


carry- assigned Tota

overs revenue

Appropriat. carried over to 2020

Appropriations lapsing

530.

assigned


carryovers by decision

from

final

adopted

budget

+4
7168-271100 %000
1 1511 059-441 10296 %41417
1515--1599 %000
106106-0106100 %000
4 0653 737-1373 87495 %14214250
3 1332 393-6012 99496 %1381381
00--097 %--0
110--10310394 %77-
1313-01399 %00-
1919-019100 %000
15425-709561 %6060-
2 7792 738-312 769100 %10100
3 2873 204-583 26299 %25250
159149-715698 %330
181179-117999 %110
388377-10387100 %110
2 4251 966344122 41299 %1313-
384343-1736094 %24240
3434__34100 %000
fromfrom
carry-assignedTotal
oversrevenue
-00
-07
-00
--0
-050
_01


%

531.

Total


revenue


4

0

0

0

0

Annual accounts of the European Union 2019

EUR million

Total appropr. availableCommitments madeAppropriat. carried over to 2020

carry-assigned

overs by Total revenue

decision
Programmefrom final adopted budgetfrom carryoversfrom assigned revenueTotal%from

final

adopted

budget
4+410
Decentralised agencies2120-021100 %0-0-
Other actions and programmes28681-14522679 %60-600
Pilot projects and preparatory actions21--147 %011-
Specific Actions8180-081100 %0-0-
Total MFF Heading 413 45411 622341 45413 11197 %34013412
Pensions2 0021 990-01 99099 %0-012
European schools193181-1019199 %2-20
Decentralised agencies----------
Pilot projects and preparatory actions44--4100 %----
Commission administrative

expenditure

Administrative expenditure of

Other Institutions
4 0273 58912253 81695 %159-15951
4 5504 03303384 37196 %9409482
Total MFF Heading 510 7769 797157410 37196 %255_255146

Appropriations lapsing

532.

from from


carry- assigned

overs revenue

Compensations Total MFF Heading 6 Negative reserve Deficit carried over Total MFF Heading 8

Emergency Aid Reserve (EAR)

European Globalisation Adjustment Fund (EGF) European Union Solidarity Fund (EUSF)

Total MFF Heading 9

Total

46------4646
1991--10 %8-8
373295--29579 %-4949
618295--29548 %894102
184 554165 15347313 161178 78797 %4 1495984 747

175

175

438

533.

30 30


51

16

16

530


534.

0 0


2

12

0

0

52

85

149

191

30

221

1 019


535.

Total



11

12

0

5

6

8

9

Annual accounts of the European Union 2019

4.8. DETAILED MFF: IMPLEMENTATION OF PAYMENT APPROPRIATIONS

EUR million

536.

Programme


European Fund

Strategic Investments

(EFSI)

European satellite

navigation

(EGNOS/Galileo)

International

Thermonuclear Reactor

(ITER) European Earth

Observation Progr

(Copernicus)

European Solidarity Corps (ESC) European Defense Industrial Development PNruocgleramr Smaef e (tEyD aInDdP ) Decommissioning

537.

Horizon 2020


Euratom Research and Training Programme

Competitiveness enterprises and SME's (COSME)

Education, Training and Sport (Erasmus+)

538.

Employment and Social Innovation (EaSI) Customs, Fiscalis and Anti-Fraud


Total appropr. from final

available adopted

539.

budget


540.

1 248


608

619

539

Payments made

541.

from from


carry- assigned T

overs revenue

Appropriations carried over to 2020

542.

1 213 1 023


991

558

601

123105
20
157157
14 65210 731

331

163

48

17

14

65

17

782

42

543.

automat . carry overs


1 186 98 %

1 04183 %2
57595 %1
617100 %2
10989 %3
07 %2
157100 %-
11 57879 %81

390

72 %

33

carryovers assigned by revenue decis.

27

205

32

544.

2 983


111

545.

from


final

adopted

budge

Appropriations lapsing

546.

from from


carry- assigned

overs revenue

27

207

32

(0)

547.

11 +


+13

100404
20--0
-0--0
6508110
460202
36527435333090 %2—33360000
2172 60272482 85789 %7-3533600001
1801260312972 %1-47482103
1451330413795 %0_6620_2


%

548.

Total



4

6=5/1

7

8

9

11

12

13

0

0

1

2

0

0

0

2

0

2

0

0

4

0

7

3

Annual accounts of the European Union 2019

EUR million

549.

Programme


Total appropr. from final

available adopted

550.

budget


Payments made

551.

from from


carry- assigned T

overs revenue

Appropriations carried over to 2020

552.

automat . carry overs


5=2+m
CEF - Energy33132513330100 %1
CEF - Transport1 3341 3121141 327100 %2
CEF - Information & Communications1231180412299 %0
TEencehrgnyo lporgoyje(cICtsT )f o r economic recovery35--353599 %0
(EERP)

Decentralised agencies
406361-1637793 %0
Other actions and programmes556162110626848 %1
Pilot projects and preparatory actions6964-16594 %0
Specific competences of the Commission122116-311997 %0
Regional convergence (Less developed28 55124 248-3 28127 52996 %0
regions) Transition regions5 2174 099-1 0535 15199 %0
Competitiveness (More developed regions) Outermost and sparsely populated8 852 2427 470 215-982 98 452 22395 % 92 %0 0
regions Cohesion fund9 8018 107-6868 79390 %0
European territorial cooperation1 7031 447-991 54691 %0
Technical assistance20217310118491 %13
European Aid to the Most Deprived (FEAD)506412092504100 %0
Youth Employment initiative579523-2654995 %0

carryovers assigned by revenue decis.


285

553.

from


final

adopted

budge

Appropriations lapsing

554.

from from


carry- assigned

overs revenue

■0=7+

11
46
01
00
1010

287

00
11
1 0231 023
6666
400400
1919
1 0081 008
157157
114
22
3030


0

555.

0 0


556.

19 1


4

2


13

14=11+

557.

0 1 0


558.

19 1


4

2


%

559.

Total


0

0

0

0

0

Annual accounts of the European Union 2019

EUR million

560.

Programme


Connecting Europe Facility (CEF) Pilot projects and preparatory actions

Total MFF Heading 1

European Agricultural

561.

2 Guarantee Fund


(EAGF)

Agricultural Fund Rural

Development (EAFRD)

European Maritime and Fisheries Fund (EMFF)

Fisheries Partnership

Agreements (SFPAs)

aEndv i rFoi snhmereinets and

Mcliamnatgeemacetniotn (LIFE)

562.

Organisations (RFMOs) Decentralised agencies


Other actions and

measures

Pilot projects and

preparatory actions

Specific Actions

Total MFF Heading 2

Asylum, Migration and 3

Integration Fund (AMF)

Consumer

Creative Europe

Emergency Support within the Union (IES)

Internal Security Fund

Total appropr. from final

available adopted

563.

budget


Payments made

564.

from from


carry- assigned T

overs revenue

Appropriations carried over to 2020

Appropriations lapsing


845

11

565.

82 553


566.

44 933


567.

14 868


871

142

365

68

6

0

568.

61 252


992

28

217

60

649

843

11

569.

67 637


570.

42 449


571.

13 505


651

142

350

59

6

0

572.

57 163


878

26

200

60

500

573.

113 631


574.

2 1


575.

637 1 0 1 0 1


2

0

576.

7 785


806

705

197

5

7

577.

1 721 8 1 8 0 27


automat . carry overs

845 100 %

11 96 %

75 535 91 %

43 885 98 %

14 213 96 %

848

97 %

142 100 %

359 99 %

67 98 %

6 100 %

0 100 %

59 521 97 %

886 89 %

27 97 %

209 96 %

60 100 %

529 81 %

578.

0 151


190

2

1

579.

0 4 0 0 0 0 198 1 1 2 0 1


carryovers assigned by revenue decis.

580.

3 467


467


349

650

21

581.

1 1


582.

0 0


from

final

adopted

budge


583.

6 813 6 967


584.

1 006


652

22

585.

5 1


586.

0 32


7

2

fromfrom
carry-assignedTotal
oversrevenue
14=11+a
---
--0
18152
34-42
0_2
--0-
1 0231 687935
911951
0100
6800
0000
11812000

0

0

(0)

0

587.

44 95 0 0 0 0



%

588.

Total


3

0

0

0

4

0

0

0

Annual accounts of the European Union 2019

EUR million

589.

Programme


Total appropr. from final

available adopted

590.

budget


Payments made

591.

from from


carry- assigned T

overs revenue

Appropriations carried over to 2020

3+4
IT systems00-00100 %
Justice4846004796 %
Rights, Equality and Citizenship6461016298 %
Union Civil protection Mechanism7242-24461 %
Europe for Citizens2525002598 %
Food and feed2472411424699 %
Health6763126597 %
Decentralised agencies996905-4494995 %
Pilot projects and preparatory actions87--784 %
Specific Actions101991010099 %
Total MFF Heading 33 5753 1537963 25691 %
Pre-accession assistance (IPA II)1 9501 37552021 58381 %
Macro-financial Assistance (MFA)1010--10100 %
Guarantee Fund for External Actions110--10310394 %
Union Civil Protection Mechanism119-1982 %
EU Aid Volunteers initiative (EUAV)1313-013100 %
Fund for Sustainable Development (EFSD)479252527532568 %

592.

automat . carry overs


carryovers assigned by revenue decis.


593.

0 154


■0=7+

594.

from


final

adopted

budge


Appropriations lapsing

595.

from from


carry- assigned

overs revenue

110
110
1127
000
110
120
41416
001
010
180188129
3603661

596.

0 154



13

14=11+

597.

1 0


598.

27 0 0 0 6 1 0 131 2



%

599.

Total


4

7

7

0

2

2

Annual accounts of the European Union 2019

EUR million

600.

Programme


Total appropr. from final

available adopted

601.

budget


Payments made

602.

from from


carry- assigned T

overs revenue

Appropriations carried over to 2020

603.

European Neighbourhood Instrument (ENI)


Development Cooperation Instrument (DCI)

Partnership Instrument (PI)

Democracy and Human Rights (EIDHR) Stability and Peace (IcSP)

Humanitarian aid

Common Foreign and Security Policy (CFSP) Nuclear Safety Cooperation (INSC)

Decentralised agencies

Other actions and programmes Pilot projects and preparatory actions

Specific Actions Total MFF Heading 4 5 Pensions

European schools

Decentralised agencies

604.

2 106


605.

2 716


145

167

331

606.

2 117


362

36

21

282

7

68

607.

10 933


608.

2 002


195

609.

2 055 4


610.

2 564


134

159

315

611.

1 734


308

35

20

76

7

68

612.

8 908


613.

1 990


181

14

22

48

4

0

7

324

31

614.

0 123


615.

60 1 140


616.

2 10


automat . carry overs


617.

3+4


2 080 99 %

2 627 97 %

138

95 %

162 97 %

324 98 %

2 064 97 %

340 94 %

36 98 %

21 100 %

199 71 %

7 93 %

68 100 %

10 108 92 %

1 990 99 % 192 99 %

618.

3 4 6 0 1


0

619.

0 0 0 39 0 0


carryovers assigned by revenue decis.

620.

6 13



19

73

25

86

621.

from


final

adopted

budge


Appropriations lapsing

622.

from from


carry- assigned

overs revenue

14
26
4753
2222
01
83830
000
000
7728116
0012
330


13

14=11+

-0
11
00
414
-12
_0


%

623.

Total


4

0

0

1

0

2

1

3

0

0

3

3

1

0

2

3

0

0

0

0

0

0

0

0

4

Annual accounts of the European Union 2019

EUR million

624.

Programme


Pilot projects and preparatory actions Commission administrative Administrati ve expenditure of Other

625.

Total MFF Heading 5 6 Compensations


Total MFF Heading 6 8 Negative reserve

Deficit carried over

Total MFF Heading 8

9

Total appropr. from final

available adopted

626.

budget


Emergency Aid Reserve (EAR) European Globalisation Adjustment Fund (EGF) European Union Solidarity Fund (EUSF)

Total MFF Heading 9

Total

Payments made

627.

from from


carry- assigned T

overs revenue


6

628.

4 385


629.

5 107 11 694



630.

4 3 303 3 571 9 048


352-
250
295295
671295

1

631.

332 515 850



632.

0 182 291 482



4

633.

3 817


634.

4 377 10 381


Appropriations carried over to 2020

77 % 87 % 86 % 89 %

635.

automat . carry overs


636.

0 285 463 748


170 679 146 203 1 667 11 225 159 096

--0
--0
--0
--0
01 %1
295100 %0
29544 %1
09693 %1 145

carryovers assigned by revenue decis.


■0=7+

637.

from


final

adopted

budge


Appropriations lapsing

638.

from from


carry- assigned

overs revenue

-001
2044895226
1436058239
3491 09814666

13

1

639.

3 4


470

--352--
890016
--1--
89352016
9 14410 75967512525

14=11+

1

640.

79 124 216


352

16

1

368

825


%

641.

Total


0

0

0

Annual accounts of the European Union 2019

4.9. DETAILED MFF: MOVEMENTS IN OUTSTANDING COMMITMENTS (RAL)

642.

Programme


Commitments outstanding at the end of previous year

Commitm.

643.

carried forward


from previous

year

Decommitm./ Revaluations/ Cancellations

Payments

Commitm. outstanding at year-end

Commitments of the current year

Commitm.

644.

made


during the

year

Payments

Cancellation

of commitm.

645.

which cannot


be carried

Commitm. outstanding at year-end

EUR million

Total

commitm.

outstanding

at the end of

the year

646.

European Fund Strategic


Investments (EFSI)

European satellite navigation

(EGNOS/Galileo)

International Thermonuclear Reactor

(ITER)

European Earth Observation Progr

(Copernicus)

European Solidarity Corps (ESC)

European Defense Industrial Development Programme (EDIDP)

Nuclear Safety and Decommissioning

Horizon 2020

Euratom Research and Training

Programme

Competitiveness enterprises and

SME's (COSME)

Education, Training and Sport

(Erasmus+)

647.

Employment and Social Innovation


(EaSI)

Customs, Fiscalis and Anti-Fraud CEF - Energy

CEF - Transport

CEF - Information & Communications Technology (ICT)

648.

Energy projects for economic recovery (EERP)


Decentralised agencies

Other actions and programmes

2 714(0)(1 015)1 698377(171)-2061 905
1 224(0)(724)500773(316)-456957
1 454(0)(519)935426(56)(0)3701 305
243(1)(230)12882(387)-495507
17(0)(6)10148(103)-4555
----245(0)-245245
596(0)(128)468144(29)-115583
20 541(412)(7 640)12 49013 808(3 938)(4)9 86622 356
275(11)(145)119422(245)(0)176295
943(19)(296)628398(33)-365993
855(62)(387)4063 060(2 469)-591997
222(22)(95)105159(34)-125230
175(6)(98)71143(39)-103175
2 072(14)(320)1 738992(9)-9832 721
4 241(75)(1 277)2 8902 716(51)-2 6665 556
448(12)(116)321175(7)-169490
254(48)(35)172----172
52-(36)15376(341)-3651
404(30)(173)200304(95)-210410


649.

over


1

2


7


1

Annual accounts of the European Union 2019

650.

Programme


Pilot projects and preparatory

actions

Specific competences of the

Commission

Regional convergence (Less

developed regions)

Transition regions

Competitiveness (More developed

regions)

Outermost and sparsely populated

regions

Cohesion fund

European territorial cooperation

Technical assistance

European Aid to the Most Deprived (FEAD)

Youth Employment initiative

Connecting Europe Facility (CEF)

Pilot projects and preparatory actions

Total MFF Heading 1

European Agricultural Guarantee

Fund (EAGF)

Agricultural Fund Rural Development

(EAFRD)

European Maritime and Fisheries

Fund (EMFF)

Fisheries Partnership Agreements

(SFPAs) and Fisheries Management

Organisations (RFMOs)

Environment and climate action

(LIFE)

Decentralised agencies

Commitments outstanding at the end of previous year

Commitments of the current year

Commitm.

651.

carried forward


from previous

year

Decommitm./ Revaluations/ Cancellations

Payments

Commitm. outstanding at year-end

Commitm.

652.

made


during the

year

Payments

Cancellation

of commitm.

653.

which cannot


be carried

Commitm. outstanding at year-end

EUR million

Total

commitm.

outstanding

at the end of

the year

107(8)(48)5198(17)
169(18)(80)72134(39)
85 194(494)(27 428)57 27231 444(101)
18 502(24)(5 139)13 3386 657(12)
26 523(52)(8 380)18 0929 804(72)
588-(205)384253(18)
25 851(3)(8 404)17 44411 527(389)
4 502(2)(1 536)2 9642 189(10)
251(21)(96)134228(89)
1 304(1)(483)820590(21)
1 655(13)(527)1 114358(22)
5 595(11)(838)4 7451 700(7)
20(1)(10)84(0)
206 991(1 360)(66 413)139 21790 536(9 122)
359(6)(235)11743 962(43 650)
34 594(38)(13 714)20 84214 765(499)
3 280(73)(826)2 3821 082(22)
15(2)(6)8148(136)
1 768(131)(342)1 294564(17)
3(0)(3)-67(64)

(0)

(4)

(0)

9=4+8
81131
95166
31 34388 615
6 64519 984
9 73227 824
234618
11 13828 582
2 1785 142
139273
5691 390
3371 450
1 6946 439
312
81 410220 627
313430
14 26635 108
1 0593 441

12

654.

548 3


19

655.

1 841 3



over

7

2

Annual accounts of the European Union 2019

Commitments outstanding at the end of previous year

Commitments of the current year

656.

Programme


Other actions and measures

Pilot projects and preparatory actions

Specific Actions

Total MFF Heading 2

Asylum, Migration and Integration Fund (AMF)

Consumer

Creative Europe

Emergency Support within the Union (IES)

Internal Security Fund

IT systems

Justice

Rights, Equality and Citizenship

Union Civil protection Mechanism

Europe for Citizens

Food and feed

Health

Decentralised agencies

Pilot projects and preparatory actions

Specific Actions Total MFF Heading 3 Pre-accession assistance (IPA II)

Commitm.

657.

carried forward


from previous

year

Decommitm./ Revaluations/ Cancellations

Payments

Commitm. outstanding at year-end


Commitm.

658.

made


during the

year

Payments

Cancellation

of commitm.

659.

which cannot


be carried

28(3)(6)1912(0)
0(0)(0)---
40 047(253)(15 133)24 66160 600(44 387)
2 662(98)(750)1 8141 192(136)
40(1)(18)2230(10)
219(8)(96)115255(113)
62(0)(60)20(0)
1 746(103)(525)1 118597(4)
46(36)(0)10--
90(2)(30)5845(16)
105(1)(45)5967(18)
43(3)(17)2273(27)
21(1)(11)929(14)
319(9)(178)132292(68)
133(1)(51)8271(14)
242(0)(85)1571 102(864)
24(3)(7)1415(1)
82(2)(63)17106(37)
5 834(269)(1 934)3 6323 874(1 323)
7 425(355)(1 414)5 6562 994(169)

660.

Commitm. outstanding at year-end



(0)

12

EUR million

Total

commitm.

outstanding

at the end of

the year

9=4+8

31

16 21340 874
1 0572 870
2043
141256
02
5931 711
-10
2987
49108
4567
1524
225357
56138
238395
1429
6986
2 5516 183
2 8268 481


661.

over



2

3

5

6

7

3


Annual accounts of the European Union 2019

Commitments outstanding at the end of previous year

Commitments of the current year

662.

Programme


Macro-financial Assistance (MFA) Guarantee Fund for External Actions Union Civil Protection Mechanism

EU Aid Volunteers initiative (EUAV)

Fund for Sustainable Development

(EFSD)

European Neighbourhood Instrument

(ENI)

Development Cooperation

Instrument (DCI)

Partnership Instrument (PI)

Democracy and Human Rights (EIDHR)

Stability and Peace (IcSP)

Humanitarian aid

Common Foreign and Security Policy (CFSP)

Nuclear Safety Cooperation (INSC) Decentralised agencies

Other actions and programmes

Pilot projects and preparatory actions

Specific Actions Total MFF Heading 4 5 Pensions

European schools Decentralised agencies

Commitm.

663.

carried forward


from previous

year

Decommitm./ Revaluations/ Cancellations

Payments

Commitm. outstanding at year-end

Commitm.

664.

made


during the

year

Payments

Cancellation

of commitm.

665.

which cannot


be carried

Commitm. outstanding at year-end

EUR million

Total

commitm.

outstanding

at the end of

the year

9=4+8
45(0)(10)350--035
----103(103)---
15(2)(4)913(5)-817
22(0)(3)1919(10)-928
325-(241)8495(84)-1095
7 833(526)(1 713)5 5942 769(367)-2 4017 995
8 755(187)(2 298)6 2693 262(329)-2 9339 203
386(3)(118)264156(21)-135400
358(8)(115)235179(47)-133367
627(13)(206)408387(118)(0)268676
893(36)(552)3052 412(1 511)(0)9011 205
266(49)(130)88360(210)-150238
107(3)(24)8034(12)-22102
----21(21)-00
152(8)(38)105226(161)-65171
16(3)(6)61(0)-17
126(4)(46)7681(21)-59135
27 352(1 200)(6 918)19 23413 111(3 190)(0)9 92029 154
----1 990(1 990)(0)--
2-(2)-191(190)-00


666.

over



Annual accounts of the European Union 2019

Commitments outstanding at the end of previous year

Commitments of the current year

667.

Programme


Pilot projects and preparatory

actions

Commission administrative

expenditure

Administrative expenditure of Other

Institutions

Total MFF Heading 5 6 Compensations

Total MFF Heading 6

668.

8 Negative reserve Deficit carried over Total MFF Heading 8


669.

9 Emergency Aid Reserve (EAR)


Commitm.

670.

carried forward


from previous

year

671.

6 366 587 961


Decommitm./ Revaluations/ Cancellations

Payments

Commitm. outstanding at year-end

Commitm.

672.

made


during the

year

Payments

Cancellation

of commitm.

673.

which cannot


be carried

-(4)24(0)
(28)(337)03 816(3 480)
(69)(515)24 371(3 861)
(97)(859)510 371(9 522)
European Globalisation Adjustment

Fund (EGF)

European Union Solidarity Fund

(EUSF)
0(0)(0)—1 295(0) (295)
Total MFF Heading 9

Total
0

281 185
(0)

(3 179)
(0)

(91 257)
186 749295

178 787
(295)

(67 838)

674.

Commitm. outstanding at year-end


EUR million

Total

commitm.

outstanding

at the end of

the year

4

335

675.

0 510


849

9=4+8

676.

6 335 511 854


(5)

110 944

297 693


677.

over



2

7

1

1

1

1

Annual accounts of the European Union 2019

4.10. DETAILED MFF: OUTSTANDING COMMITMENTS BY YEAR OF ORIGIN

EUR million

678.

Programme


European Fund Strategic Investments (EFSI)

European satellite navigation (EGNOS/Galileo)

International Thermonuclear Reactor (ITER)

European Earth Observation Progr (Copernicus)

European Solidarity Corps (ESC)

European Defense Industrial Development Programme (EDIDP)

Nuclear Safety and Decommissioning

Horizon 2020

Euratom Research and Training Programme

Competitiveness enterprises and SME's (COSME)

Education, Training and Sport (Erasmus+)

679.

Employment and Social Innovation (EaSI)


Customs, Fiscalis and Anti-Fraud

CEF - Energy

CEF - Transport

CEF - Information & Communications Technology (ICT)

680.

Energy projects for economic recovery (EERP)


Decentralised agencies

Other actions and programmes

Pilot projects and preparatory actions

Specific competences of the Commission

Regional convergence (Less developed regions)

Transition regions

Competitiveness (More developed regions)

Outermost and sparsely populated regions

Cohesion fund

< 2013 2013 2014

681.

2015 2016 2017 2018


----441 6912061 905
0--3011121338456957
-348---2663213701 305
---0336495507
------104555
-------245245
-354177103105107115583
2713858231 1871 9883 2194 6159 86622 356
8121993051176295
513741384153231365993
0012041106237591997
-01762764125230
--0171252103175
2-1831822565136019832 721
2391414877241 5432 6665 556
0-201211060115172490
172-------172
-----1503651
1110816154199210410
01-1493681131
00135194395166
6652 1844241 3884 25919 72428 62831 34388 615
37-853141 3825 2306 2916 64519 984
533631295321 1146 5029 3989 73227 824
--61627113221234618
1541221222527936 0619 94011 13828 582


682.

2019


Total

1

Annual accounts of the European Union 2019

EUR million

683.

Programme


European territorial cooperation

Technical assistance

European Aid to the Most Deprived (FEAD)

Youth Employment initiative

Connecting Europe Facility (CEF)

Pilot projects and preparatory actions

Total MFF Heading 1

European Agricultural Guarantee Fund (EAGF)

Agricultural Fund Rural Development (EAFRD)

European Maritime and Fisheries Fund (EMFF)

Fisheries Partnership Agreements (SFPAs) and Fisheries Management Organisations (RFMOs)

Environment and climate action (LIFE)

Decentralised agencies

Other actions and measures

Pilot projects and preparatory actions

Specific Actions

Total MFF Heading 2

Asylum, Migration and Integration Fund (AMF)

Consumer

Creative Europe

Emergency Support within the Union (IES)

Internal Security Fund

IT systems

Justice

Rights, Equality and Citizenship

Union Civil protection Mechanism

Europe for Citizens

Food and feed

48

684.

0 1 428


685.

0 12


56

50

686.

3 640


87

43

-099861 8712 1785 142
024172963139273
-3963343885691 390
-1054002283813371 450
1974411 2451 2831 5791 6946 439
-0143312
1394 68312 47645 92468 92481 414220 627
-133776313430
1981 1492 1486 41310 93414 26635 108
253429111 0221 0593 441
---351219
841621902365245481 841
_____33

13

12

31

681302851 3162 6857 60312 57516 21340 874
311232677247961 0572 870
001117122043
-10192085141256
----20002
157361013376515931 711
----0-10-10
24351215162987
72349132149108
--1125144567
00000271524
1235143473225357


687.

2013


688.

2014


689.

2015


690.

2016


691.

2017


692.

2018


693.

2019


Total

2

0

1

0

2

3

3

Annual accounts of the European Union 2019

EUR million

694.

Programme


Health

Decentralised agencies

Pilot projects and preparatory actions

Specific Actions

Total MFF Heading 3

Pre-accession assistance (IPA II)

Macro-financial Assistance (MFA)

Guarantee Fund for External Actions

Union Civil Protection Mechanism

EU Aid Volunteers initiative (EUAV)

Fund for Sustainable Development (EFSD)

European Neighbourhood Instrument (ENI)

Development Cooperation Instrument (DCI)

Partnership Instrument (PI)

Democracy and Human Rights (EIDHR)

Stability and Peace (IcSP)

Humanitarian aid

Common Foreign and Security Policy (CFSP)

Nuclear Safety Cooperation (INSC)

Decentralised agencies

Other actions and programmes

Pilot projects and preparatory actions

Specific Actions

Total MFF Heading 4

Pensions

European schools

Decentralised agencies

Pilot projects and preparatory actions

423513233156138
---0-42115238395
00122171429
0-0012146986
331820534331 2231 8512 5526 183
1793562196461 0961 5181 6422 8268 481
-----305035
--22123817
--63144928
------841095
4552663454529811 3021 7702 4247 995
2473033396089621 7382 0492 9569 203
592123466298135400
451423315698137367
101323365797172268676
--81018751949011 205
1-181852917150238
3571113142722102
------(0)00
4071528213065171
1-0202117
011311223759135
9099581 0101 8513 2534 9736 2319 97029 154


695.

2013


696.

2014


697.

2015


698.

2016


699.

2017


700.

2018


701.

2019


Total

4

5

0

0

0

0

2

6

1

4

Annual accounts of the European Union 2019

EUR million

702.

Programme


Commission administrative expenditure

Administrative expenditure of Other Institutions

Total MFF Heading 5

Compensations

Total MFF Heading 6

Negative reserve

Deficit carried over

Total MFF Heading 8

Emergency Aid Reserve (EAR)

European Globalisation Adjustment Fund (EGF)

< 20132013201420152016201720182019Total
000 000 00 00 0335 511335 511
--0-012851854
---------
European Union Solidarity Fund (EUSF)
Total MFF Heading 9

Total
2 4384 7463 4537 90418 84659 72389 5831

110 999
1

297 693

The set up of the new Commission involved an internal re-organisation of services. Re-allocating the related transactions resulted in a shift of outstanding amount between years. The overall amount of outstanding commitments remains unchanged.


6

8

9

1

1

Annual accounts of the European Union 2019

5. IMPLEMENTATION OF THE BUDGET BY INSTITUTION

5.1. IMPLEMENTATION OF BUDGET REVENUE

703.

Institution


Income appropriations

704.

Initial Final


adopted adopted

budget budget

Entitlements established

705.

Current Carried


Tota year over

On

entitlem.

706.

of current


year

Revenue

On

entitlem.

707.

carried


Receipts as % of budget

EUR million

708.

Outstanding


European Parliament171171207222282016208121 %21
European Council and Council55557317572173132 %2
Commission147 824148 117169 32213 747183 069162 644596163 240110 %19 829
Court of Justice5656550555505598 %0
Court of Auditors222222-2222022103 %0
Economic and Social Committee12121701717017134 %0
Committee of the Regions10101201212012121 %0
Ombudsman1110110190 %-
European Data Protection Supervisor1110110187 %-
European External Action Service464629012902881289623 %2
Total148 199148 492170 00113 770183 771163 314604163 918110 %19 853

The consolidated reports on the implementation of the general budget of the EU include, as in previous years, the budget implementation of all Institutions since within the EU budget a separate budget for each Institution is established.

The budget and implementation of Agencies are not consolidated within the EU budget and are not included in the EU budget reports. The Commission subsidy paid to the agencies however is part of the EU budget. In this budgetary part of the annual accounts, only the subsidy paid from the Commission budget to the Agencies is taken into consideration.

Concerning the EEAS, it should be noted that, in addition to its own budget, it also receives contributions from the Commission of EUR 152.7 million (2018: EUR 141.7 million) and the EDF and the Trust Funds of EUR 63.1 million (2018: EUR 70.1 million). These contributions cover the costs of Commission's staff in the delegations financed under the EDF and the Trust Funds including assigned revenue generated in the year from these contributions. These budget credits are put at the disposal of the EEAS (as assigned revenue) to cover primarily the costs of Commission staff working in the EU delegations, these delegations being administratively managed by the EEAS.


709.

Total


over

Annual accounts of the European Union 2019

5.2. IMPLEMENTATION OF COMMITMENT APPROPRIATIONS

EUR million

Total appropriat.Commitments madeAppropriations carried over to 2020

from carry-
Appropriations lapsing
from finalfromfromfrom finalfromfrom
Institutionavailableadoptedcarry-assignedTotal%assignedovers byTotaladoptedcarry-assignedTotal
budgetoversrevenuerevenuedecisionbudgetoversrevenue
5=2+3+ 46=5/1789=7+810111213=10+ 11 +12
European Parliament2 0831 9730602 03398 %23023240226
European Council and Council62153702556291 %14014450045
Commission180 004161 12047312 823174 41697 %4 0555984 65335651527934
Court of Justice4314240142599 %1016006
Court of Auditors1471440014498 %0003003
Economic and Social Committee1431360414098 %0003003
Committee of Regions101980210099 %1010000
Ombudsman1111001192 %0001001
European Data-protection Supervisor1715001592 %00010-1
European External Action Service996694024694094 %550550001
Sum:184 554165 15347313 161178 78797 %4 1495984 747438515301 019


Annual accounts of the European Union 2019

5.3. IMPLEMENTATION OF PAYMENT APPROPRIATIONS

EUR million

710.

Institution


European Parliament

European Council and Council

Commission Court of Justice

Court of Auditors

Economic and Social Committee

Committee of Regions

Ombudsman

European Data-protection Supervisor

European External Action Service

Total

Total approp. availabl

711.

2 382 682 165 573 452 155 151 110 12


19

712.

1 143


from

final

adopted

budget

713.

1 699


484

714.

142 633


399

138

128

88

10

13

610

Payments made

715.

from from


carry- assigned

overs revenue

Appropriations carried over to 2020

284

53

716.

1 152


18

717.

7 7 8 0


2

135

718.

52 24 10 934 1 0 3 1 0


0

210

170 679 146 203 1 667 11 225

5=2+3+4

2 035 85 %

562 82 %

154 719 93 %

418 93 %

144 93 %

138 91 %

97 88 %

11 90 %

15 81 %

956 84 %

159 096 93 %

719.

automatic carryovers


274

53

682

25

7

8

11

0

2

84

1 145

720.

carryovers by decision


721.

0 0 470 0 0 0 0 0


0

0

470

722.

from assigned revenue


723.

31 15


10=7+8 +9

724.

305 67


725.

9 001 10 154


726.

25 7 9


727.

13 0


2

728.

93 177


9 144 10 759

Appropriations lapsing
from

final

adopted

budget
from carryoversfrom assigne

d revenue
Total
11121314=11+12 +13
2415241
457053
5928622700
6308
3103
3204
0101
1001
10-2
010011
67512525825


%

729.

Total


e

6=5/ 1

1

2


7


8


9

Annual accounts of the European Union 2019

6. IMPLEMENTATION OF THE AGENCIES' BUDGET

The agencies’ revenue and expenditure, as shown in the reports 6.1 and 6.2 below, are not consolidated as such within the EU budget. In this budgetary part of the annual accounts, only the subsidy paid from the Commission budget to the Agencies is taken into consideration.

The EU budget implementation reports do indeed include the subsidy paid from the EU budget to the agencies as commitment and payment appropriations, when applicable.

The agencies’ reports below show an overview of the Agencies, both decentralised (also known as traditional agencies) and executive agencies, and of their revenue (6.1) and expenditure (6.2).

Other sources of revenue and their related expenditure are not added into the EU budget accounts. Each agency presents its own set of annual accounts.

6.1. BUDGET REVENUE

EUR million

730.

Agency


Agency for Operational Management of Large-Scale IT Systems

Agency for the Cooperation of Energy Regulators

Body of European Regulators for Electronic Communications

Community Plant Variety Office

Consumers, Health, Agriculture and Food Executive Agency

Education, Audiovisual and Culture Executive Agency

European Agency for Safety and Health at Work

European Asylum Support Office

European Banking Authority

European Border and Coast Guard Agency

European Centre for Disease Prevention and Control

European Centre for the Development of Vocational Training

European Chemicals Agency

European Environment Agency

European Fisheries Control Agency

European Food Safety Authority

European Global Navigation Satellite Systems (GNSS) Agency

European Institute for Gender Equality

European Institute of Innovation and Technology

European Insurance and Occupational Pensions Authority

European Maritime Safety Agency

European Medicines Agency

European Monitoring Centre for Drugs and Drug Addiction

European Research Council

European Securities and Markets Authority

European Training Foundation

European Union Agency for Criminal Justice Cooperation

European Union Agency for Cybersecurity

European Union Agency for Law Enforcement Cooperation

European Union Agency for Law Enforcement Training

European Union Agency for Railways

Funding MFF sub-headingFinal adopted budgetRevenue received
3138140
1a1616
1a66
N/A1818
31111
1a, 3, 45151
1a1616
3103103
1a4546
3333350
35959
1a1919
1a, 2116112
25252
21717
38080
1a36768
388
1a416416
1a2727
1a7997
3347340
31618
1a5252
1a4547
42121
33940
1a1617
3138143
3917
1a2829

Annual accounts of the European Union 2019

731.

Agency


European Union Intellectual Property Office

Executive Agency for Small and Medium-sized Enterprises

Foundation for Improvement of Living and Working Conditions

Fusion for Energy Joint Undertaking

Innovation and Networks Executive Agency

Research Executive Agency

Translation Centre for the Bodies of the European Union

Total

732.

Funding MFF sub-heading


N/A

1a

1a

1a

1a

5

5

733.

Final adopted budget


EUR million

734.

Revenue received


252259
4949
2122
576729
2929
7676
4737
3 6264 533

735.

Type of revenue


Commission subsidy Fee income Other income

Total

Final adopted budgetAmounts received
1 4591 471
726732
1 4412 331
3 6264 533

Annual accounts of the European Union 2019

6.2. COMMITMENT AND PAYMENT APPROPRIATIONS BY AGENCY

EUR million

Commitment Payment
Agencyappropriations appropriations

Total Total

Commit. Payments appropr. appropr.

made made available available

736.

Agency for Operational Management of Large-Scale IT Systems


Agency for the Cooperation of Energy Regulators

Body of European Regulators for Electronic Communications

Community Plant Variety Office

Consumers, Health, Agriculture and Food Executive Agency

Education, Audiovisual and Culture Executive Agency

European Agency for Safety and Health at Work

European Asylum Support Office

European Banking Authority

European Border and Coast Guard Agency

European Centre for Disease Prevention and Control

European Centre for the Development of Vocational Training

European Chemicals Agency

European Environment Agency

European Fisheries Control Agency

European Food Safety Authority

European Global Navigation Satellite Systems (GNSS) Agency

European Institute for Gender Equality

European Institute of Innovation and Technology

European Insurance and Occupational Pensions Authority

European Maritime Safety Agency

European Medicines Agency

European Monitoring Centre for Drugs and Drug Addiction

European Research Council

European Securities and Markets Authority

European Training Foundation

European Union Agency for Criminal Justice Cooperation

European Union Agency for Cybersecurity

European Union Agency for Law Enforcement Cooperation

European Union Agency for Law Enforcement Training

European Union Agency for Railways

European Union Aviation Safety Agency

European Union Fundamental Rights Agency

European Union Intellectual Property Office

355178219133
16161916
6665
20191916
11111311
51515649
16152117
1099411896
48455446
357346446318
59597058
18182019
115112130110
73609259
17172017
81818879
1 1643251 211560
88108
558481425415
27273127
11110512198
375362412345
18171917
52525451
48475347
21212120
39394440
17161813
155150169144
17122114
30303229
256189267163
24232923
455249477240

Annual accounts of the European Union 2019

737.

Agency


Foundation for Improvement of Living and Working Conditions

Fusion for Energy Joint Undertaking

Innovation and Networks Executive Agency

Research Executive Agency

Translation Centre for the Bodies of the European Union

Total

Commitment appropriations

738.

Total


appropr. available

739.

23 730 29 76 46


5 678

740.

Commit. made


741.

22 728 29 76 43


4 225

EUR million

Payment

appropriations

742.

Total


Payments appropr.

743.

made available


744.

26 761 30 82 49


5 806

745.

21 739 29 75 42


4 253

CommitmentEUR million

Payment
Type of expenditureappropriations

Total

Commit. appropr.

made available
appropriations

Total

Payments appropr.

made available

746.

Staff


Administrative

Operational

Total

1 2691 2511 2881 246
430414502387
3 9792 5614 0162 621
5 6784 2255 8064 253

Annual accounts of the European Union 2019

GLOSSARY

747.

Actuarial assumptions


Assumptions used to calculate the costs of future events that affect the pension liability.

748.

Actuarial gains and losses


For a defined benefit scheme, the changes in actuarial deficits or surpluses. They arise as a result of differences between the previous actuarial assumptions and what has actually occurred and due to effects of changes in actuarial assumptions.

749.

Administrative appropriations


Administrative appropriations cover the running costs of the Institutions and entities (staff, buildings, office equipment).

750.

Adopted budget


Draft budget becomes the adopted budget as soon as it is approved by the Budgetary Authority.

751.

Amending budget


Decision adopted during the budget year to amend (increase, decrease, transfer) aspects of the adopted budget of that year.

752.

Amounts to be called from Member States


These represent expenses incurred during the reporting period that will need to be funded by future budgets, i.e. by the EU Member States. This is a consequence of the co-existence of accruals based financial statements and a cash based budget.

753.

Annual Activity Report (AAR)


Annual Activity Reports indicate the results of operations by reference to objectives set, associated risks and the internal control structure, inter alia. Since the 2001 budget exercise for the Commission and since 2003 for all European Union institutions, the ‘authorising officer by delegation’ must submit an AAR to his/her institution on the performance of his/her duties, together with financial and management information.

754.

Appropriations


Budget funding. The budget forecasts both commitments and payments (cash or bank transfers to the beneficiaries). Appropriations for commitments and payments often differ (differentiated appropriations) because multi annual programmes and projects are usually fully committed in the year they are decided and are paid over the years as the implementation of the programme and project progresses. Non-differentiated appropriations apply to administrative expenditure, for agricultural market support and direct payments and commitment appropriations equal payment appropriations.

755.

Assigned revenue


Dedicated revenue received to finance specific items of expenditure. The main source of external assigned revenue is financial contributions from third countries to programmes financed by the Union. The main source of internal assigned revenue is revenue from third parties in respect of goods, services or work supplied at their request; revenue arising from the repayment of amounts wrongly paid and revenue from the sale of publications and films.

Annual accounts of the European Union 2019

756.

Available for sale financial assets


All financial assets (except derivatives) that are according to International Public Sector Accounting Standards measured at fair value and for which the changes in fair value are to be recognised in a reserve in net assets until derecognition (or impairment).

757.

Budget line


As far as the budget structure is concerned, revenue and expenditure are shown in the budget in accordance with a binding nomenclature which reflects the nature and purpose of each item, as imposed by the budgetary authority. The individual headings (title, chapter, article or line) provide a formal description of the nomenclature.

758.

Cancellation of appropriations


Unused appropriations that may no longer be used.

759.

Carryover of appropriations


Exception to the principle of annuality in so far as appropriations that could not be used in a given budget year may, under strict conditions, be exceptionally carried over for use during the following year.

760.

Commitment


Legal pledge to provide finance subject to certain conditions. The EU commits itself to reimbursing its share of the costs of an EU funded project. Today’s commitments are tomorrow’s payments. Today’s payments are yesterday’s commitments.

761.

Commitment appropriation


Commitment appropriations cover the total cost of legal obligations (contracts, grant

agreements/decisions) that could be signed in the current financial year.

762.

Current service cost


The increase in scheme liabilities arising from service in the current financial year.

763.

Decommitment


An act whereby a previous commitment (or part of it) is cancelled.

764.

Defined benefit scheme


A pension or other retirement benefit scheme where the scheme rules define the benefits independently of the contributions payable, and the benefits are not directly related to the investments of the scheme. The scheme may be funded or unfunded.

765.

Derivatives


Financial instruments whose value is linked to changes in the value of another financial instrument, an indicator or a commodity. In contrast to the holder of a primary financial instrument (e.g. a government bond), who has an unqualified right to receive cash (or some other economic benefit) in the future, the holder of a derivative has only a qualified right to receive such a benefit. An example of a derivative is currency forward contract.

766.

Direct management


Mode of budget implementation. Under direct management the budget is implemented directly by Commission services, Executive Agencies or Trust Funds.

767.

Discount rate


Annual accounts of the European Union 2019

768.

Effective interest rate


The rate that discounts estimated future cash receipts or payments over the expected life of the financial asset or financial liability to the net carrying amount of the asset or liability.

769.

Financial assets or liabilities at fair value through surplus or deficit


All financial assets or liabilities that are according to International Public Sector Accounting Standards measured at fair value and for which the changes in fair value are to be recognised in surplus or deficit of the period (i.e. derivatives).

770.

Financial correction


The purpose of financial corrections is to protect the EU budget from the burden of erroneous or irregular expenditure. For expenditure under shared management, the task of recovering incorrect payments is primarily the responsibility of the Member State.

A confirmed financial correction has been accepted by the Member State concerned. A decided financial correction has been adopted by a Commission decision and is always a net correction, where the Member State is required to reimburse irregular funds to the EU budget, thus leading to a definitive reduction of the allocated envelope to the Member State concerned. Confirmed and decided financial corrections are reported in this publication as one category.

An implemented financial correction has corrected the observed irregularity.

771.

Indirect management


Mode of budget implementation. Under indirect management the Commission confers tasks of budget implementation to bodies of EU law or national law.

772.

Interruptions and suspensions


If the Commission finds, based on its own work or the information reported by audit authorities, that a Member State has failed to remedy serious shortcomings in the management and control systems and/or to correct irregular expenditure which had been declared and certified, it may interrupt or suspend payments.

773.

Irregularity


An irregularity is an act which does not comply with EU rules and which has a potentially negative impact on EU financial interests, but which may be the result of genuine errors committed either by beneficiaries claiming funds or by the authorities responsible for making payments. If an irregularity is committed deliberately, it constitutes fraud.

774.

Lapsing appropriations


Unused appropriations to be cancelled at the end of the financial year. Lapsing means the cancellation of all or part of the authorisation to make expenditures and/or incur liabilities which is represented by an appropriation. Only for Joint Undertakings, as specified in their Financial Rules, any unused appropriations may be entered in the estimate of revenue and expenditure of up to the following three financial years (the so-called "N+3" rule). Hence, lapsing appropriations for JUs could be reactivated until financial year "N+3"

775.

Outstanding commitments


As the Reste à Liquider (RAL), they represent the amount where a budgetary commitment has been made but the subsequent payment is not yet done. They represent payment obligations for the EU for future years and stem directly from the existence of multi annual programmes and the dissociation between commitment and payment appropriations.

Annual accounts of the European Union 2019

776.

Own resources


Represent the main funding for the EU institutions and bodies and are defined in the own resources regulation 609/2014. Own resources comprise GNI-based resources, VAT-based resources and traditional own resources.

777.

Payment appropriations


Payment appropriations cover expenditure due in the current year, arising from legal commitments entered in the current year and/or earlier years.

778.

Pre-financing


A payment intended to provide the beneficiary with a float. It may be split into a number of payments in accordance with the provisions of the underlying contract, decision, agreement or the basic legal act. The float or advance is either used for the purpose for which it was provided during the period defined in the agreement or it is repaid.

779.

Preventive measure


Preventive measures, which are at the Commission’s disposal to protect the EU budget when it is aware of potential deficiencies, include suspensions and interruptions of payments from the EU budget to the operational programme.

780.

Reste à Liquider (RAL)


As the Outstanding commitments, it represents the amount where a budgetary commitment has been made but the subsequent payment is not yet done. They represent payment obligations for the EU for future years and stem directly from the existence of multi annual programmes and the dissociation between commitment and payment appropriations.

781.

Shared management


Mode of budget implementation. Under shared management budget implementation tasks are delegated to Member States. About 80 % of the EU expenditure falls under this implementation mode.

782.

Traditional own resources


These represent revenue for the EU and are part of the own resources which fund the activities of the EU. Traditional own resources are defined in the own resource regulation 609/2014 and comprise customs duties and sugar levies.

783.

Transfers (between budget lines)


Transfers between budget lines imply the relocation of appropriations from one budget line to another, in the course of the financial year, and thereby they constitute an exception to the budgetary principle of specification. They are, however, expressly authorised by the Treaty on the Functioning of the European Union under the conditions laid down in the Financial Regulation (FR). The FR identifies different types of transfers depending on whether they are between or within budget titles, chapters, articles or headings and require different levels of authorisation.

Annual accounts of the European Union 2019

LIST OF ABBREVIATIONS

784.

AAR Annual Activity Report


AMIF Asylum, Migration and Integration Fund

AOD Authorising Officers by Delegation

ATM Air Traffic Management

BOP Balance of Payments

BUFI Fund Budget Fines Fund

CAP Common Agricultural Policy

CCS LGF Cultural and Creative Sector Guarantee Facility

CEF Connecting Europe Facility

CEF DI Connecting Europe Facility Debt Instrument

CF Cohesion Fund

CIP Competitiveness and Innovation Framework Programme

COM European Commission

COSME Competitiveness of Enterprises and Small and Medium-sized Enterprises

COSO Committee of Sponsoring Organizations of the Treadway Commission

CPR Common Provisions Regulation

D&WM Decommissioning and Waste Management

785.

EAFRD European Agricultural Fund for Rural Development


EAGF European Agricultural Guarantee Fund

EAR European Union Accounting Rule

EaSI Employment and Social Innovation

EBRD European Bank for Reconstruction and Development

ECA European Court of Auditors

ECB European Central Bank

ECOFIN Economic and Financial Affairs Council

ECSC i.L. European Coal and Steel Community in Liquidation

EDF European Development Fund

Annual accounts of the European Union 2019

786.

EEA European Economic Area


EEAS European External Action Service

EFSD European Fund for Sustainable Development

EFSE European Fund for Southeast Europe

EFSF European Financial Stability Facility

EFSI European Fund for Strategic Investments

EFSM European Financial Stabilisation Mechanism

EFTA European Free Trade Association

EGNOS European Geostationary Navigation Overlay System

EIB European Investment Bank

EIF European Investment Fund

ElectriFI Electrification Financing Initiative

ELM External Lending Mandate

EMFF European Maritime and Fisheries Fund

EMU Economic and Monetary Union

ENEF Enterprise Expansion Fund

ENIF Enterprise Innovation Fund

ENPI European Neighbourhood and Partnership Instrument

EP European Parliament

ERDF European Regional Development Fund

ERI EIB Resilience Initiative

ESA European Space Agency

ESF European Social Fund

ESIF European Structural and Investment Funds

ESM European Stability Mechanism

ETF European Technology Start up Facility 1998

EU European Union

EUMETSAT European Organisation for the Exploitation of Meteorological Satellites

Euratom European Atomic Energy Community

FIFO First-in, First-out

FR

FSDA

GDP

GNI

GNSS

H2020

IIW

IMF

IPSAS

IT

ITER

JRC

JU

LGTT

MAP

MEP

MFA

MFF

MSME

ORD

PBI

PF4EE

PGF

PPP

PSEO

RAL

RSFF

RTD

S&P

787.

SANAD


Annual accounts of the European Union 2019 EU Financial Regulation

788.

Financial Statement Discussion and Analysis Gross Domestic Product Gross National Income


Global Navigation Satellite Systems Horizon 2020

Infrastructure and Innovation Window International Monetary Fund

International Public Sector Accounting Standards Information Technology

International Thermonuclear Experimental Reactor Joint Research Centre Joint Undertaking

Loan Guarantee Instrument for TEN-T projects

Multi Annual Program - Medium Enterprise Financial Inclusion Programme Member of the European Parliament Macro Financial Assistance Multiannual Financial Framework Micro, Small and Medium Enterprise Own Resources Decision Project Bond Initiative

Private Finance for Energy Efficiency Instrument Participants Guarantee Fund Public-Private Partnership

Pension Scheme of European Officials

"Reste à Liquider" (Outstanding Commitments) Risk Sharing Finance Facility

Research, Technological Development and Demonstration Standard & Poor's Financial Services LLC MENA Fund for Micro-, Small and Medium Enterprises

Annual accounts of the European Union 2019

789.

SEMED


SIUGI

SME

SMEW

TFEU

TOR

TRDI

VAT

Southern and Eastern Mediterranean Micro, Small and Middle sized Entreprises Financial Inclusion Programme

SME Initiative Uncapped Guarantee Instrument

Small and Medium-sized Enterprise(s)

SME Window (Small and Medium-sized Enterprises Window)

Treaty on the Functioning of the European Union

Traditional Own Resources

Temporary Rural Development Instrument

Value Added Tax