Language selector

Glossary

ABAC

Accrual based accounting. In 2006, the Commission produced the first set of accrual based accounts which recognise revenue when earned, rather than when collected. Expenses are recognised when incurred rather than when paid. This contrasts with cash basis accounting that recognises transactions and other events only when cash is received or paid.
accrual based accounting

accounting

The act of recording and reporting financial transactions, including the origination of the transaction, its recognition, processing, and summarisation in the financial statements.

accounting officer

Each Union institution appoints an accounting officer responsible for

  • proper implementation of payments
  • collection of revenue and recovery of amounts established as being receivable
  • preparing and presenting the accounts
  • keeping the accounts
  • laying down the accounting rules and methods and the chart of accounts
  • laying down and validating the accounting systems
  • validating systems laid down by the authorising officer to supply or justify accounting information
  • treasury management.

As a general rule, the accounting officer is alone empowered to manage monies and other assets. He or she shall be responsible for their safekeeping. (after Financial Regulation Article 61 OJ 16.9.2002 L 248).

Where is it mentioned on this website?

accounting officers

accrual accounting

Accrual accounting recognizes revenue when earned, rather than when collected. Expenses are recognized when incurred rather than when paid. This is contrasted with cash basis accounting that recognizes transactions and other events only when cash is received or paid.

Where is it mentioned on this website?

activity based budgeting (ABB)

Organisation of the budget appropriations and resources by purpose so as to allow people to see what policies are pursued, and within them, what activities make up the policies, how much money is spent on each of them, and how many people work on them.

Where is it mentioned on this website?

activity based budgeting ABB

agencies

A number of EU agencies have been established, with two main types:

  • executive agencies: organisations established in accordance with Council Regulation (EC) No 58/2003 (OJ L 11, 16.1.2003) with a view to being entrusted with certain tasks relating to the management of one or more Community programmes. These agencies are set up for a fixed period. Their location has to be at the seat of the European Commission (Brussels or Luxembourg).
  • decentralised agencies: body governed by European public law; it is distinct from the Community Institutions (Council, Parliament, Commission, etc.) and has its own legal personality. It is set up in order to accomplish a very specific technical, scientific or managerial task.

Where is it mentioned on this website?

executive agency executive agencies traditional agency traditional agencies national agency national agencies agency

agricultural duties

Mainly customs duties on imports of certain agricultural produce from non-EU countries (produce covered by an EU support regime ("common organisation of the market"), as well as levies (paid by producers) on sugar, isoglucose and inulin syrup.

Where is it mentioned on this website?

amending budget

Instrument adopted during the budget year to amend aspects of the adopted budget of that year.

Where is it mentioned on this website?

amending budgets

amending letter

Before the budget for the coming year is adopted, and ordinarily before Parliament's first reading of the draft budget, the Commission may present a letter of amendment to the draft budget on the basis of new information which was not available at the time that the draft budget was drawn up.

amending letters letter of amendment

annual activity reports (AAR)

Since the 2001 budget exercise for the Commission, and since 2003 for all Community institutions, the authorising officer by delegation must report to his/her institution on the performance of his/her duties in the form of an annual activity report together with financial and management information. This report indicates the results of the operations by reference to the objectives set, the risks associated with these operations and the way the internal control functions.

Where is it mentioned on this website?

annual activity report AAR annual activity reports

annuality

The budgetary principle according to which expenditure and revenue is programmed and authorised for one year, starting on 1 January and ending on 31 December.

appropriations

Budget funding. The budget forecasts both

  • commitments: legal pledges to provide finance, provided that certain conditions are fulfilled
  • payments: cash or bank transfers to the beneficiaries
  • differentiated appropriations: appropriations for commitments and payments often differ because multiannual programmes and projects are usually committed in the year they are decided and are paid over the years as the implementation of the programme and project progresses. Thus, if the EU budget increases, due for example to enlargement, commitments will increase before payments do. Not all projects and programmes are concluded, and appropriations for payments are therefore lower than for commitments.
  • non-differentiated appropriations: apply for administrative expenditure, for agricultural market support and direct payments. Furthermore, not all projects and programmes are concluded, and appropriations for payments are therefore lower than for commitments.

Where is it mentioned on this website?

appropriation commitment commitments payment payments differentiated appropriations differentiated appropriation non-differentiated appropriations non-differentiated appropriation

audit

  • auditing standards: each institution determines, in accordance with its specific features and requirements, the scope of the internal auditors' mission and the objectives and procedures for the exercise of the internal audit function with due respect to international internal audit standards.
  • external auditor: the external auditor for the EU institutions is the European Court of Auditors.
  • internal audit: audit performed within an entity by its staff rather than an independent certified public accountant; the function of internal auditor (IA) is incompatible with that of authorising officer and accounting officer. The IA is designated by the institution, which it must advise on dealing with risks, by issuing independent opinions on the quality of management and control systems and issuing recommendations for improvement.

Where is it mentioned on this website?

auditing audits external audit external audits internal audit internal audits auditing standards

authorising officer

is responsible in each institution for implementing revenue and expenditure in accordance with the principles of sound financial management and for ensuring that the requirements of legality and regularity are complied with.

Where is it mentioned on this website?

authorising officers

balance of payments

A balance of payments (BoP) is a document that summarises the economic transactions of a country with the rest of the world during a particular period of time. The economic transactions involve goods, services and income. Any transaction that makes money to flow into a country is a credit to its BoP account, while any transaction that makes money to flow out of a country is a debit. Transactions are operated by individuals, businesses and government agencies in that country and those in the rest of the world.

transaction BoP credit debit

basic act

Act of secondary law (regulation, directive or decision) laying down the objectives and conditions for budget implementation.

Where is it mentioned on this website?

basic acts legal base

budget

Annual financial plan, drawn up according to budgetary principles, that provides forecasts and authorises, for each financial year, an estimate of future costs and revenue and expenditures and their detailed description and justification, the latter included in budgetary remarks.

budgets

budgetary authority

Institutions with decisional powers on budgetary matters: the European Parliament and the Council of Ministers

Where is it mentioned on this website?

budgetary balances

The difference between what a country receives from and pays into the EU budget.

There are many possible methods of calculating budgetary balances. In its annual report on allocated expenditure, the Commission uses a method based on the same principles as the calculation of the correction of budgetary imbalances granted to the United Kingdom (the UK rebate).

It is, however, important to point out that constructing estimates of budgetary balances is merely an accounting exercise of the purely financial costs and benefits that each Member State derives from the Union and it gives no indication of many of the other benefits gained from EU policies such as those relating to the internal market and economic integration, not to mention political stability and security.

Where is it mentioned on this website?

budgetary balance

budgetary principles

principles according to which the budget is to be implemented.

budgetary principles in detail:

cancellation of appropriations

Appropriations cancelled may no longer be used in a given budget year.
cancellation of appropriation

call rate

Percentage used as a basis for calculating national contributions to the budget

Where is it mentioned on this website?

Capping (of the VAT resource)

The maximum VAT base to be taken into account in calculating the rate of call is set at 50 % of each Member State’s GNI (‘capping of the VAT resource’). For the period 2007–13 the rate of call of the VAT resource is set at 0.225 % for Austria, 0.15 % for Germany and 0.10 % for the Netherlands and Sweden.
cap the VAT resource

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 very strict conditions, be exceptionally carried over for use during the following year.
carry over carried over

ceiling

Limits of expenditure or revenue fixed by law or by agreement, such as in the own resources decision or in the multiannual financial framework. The latter defines an annual ceiling for each expenditure heading in commitment appropriations and an annual global ceiling for payment appropriations.

Where is it mentioned on this website?

ceilings

Common Customs Tariff

The external tariff applied to products imported into the Union.
CCT

controlling operations/internal control

Process designed to provide reasonable assurance regarding achievement of various management objectives, such as the fulfilment of legal acts, or reliability of financial actions and reports.

Where is it mentioned on this website?

controlling operatins internal control

discharge (budgetary discharge)

The decision by which the European Parliament, on the basis of the recommendation from the Council and the declaration of assurance provided by the Court of Auditors, closes the life of an annual budget exercise. It covers the accounts of all the Communities' revenue and expenditure, the resulting balance and the assets and liabilities of the Communities shown in the balance sheet.

Where is it mentioned on this website?

discharge budgetary discharge

earmarked revenue

Revenue earmarked for a specific purpose, such as income from foundations, subsidies, gifts and bequests, including the earmarked revenue specific to each institution (Article 18 of the financial regulation).

Ecofin

The Economic and Financial Affairs Council is, together with the Agriculture Council and the General Affairs Council, one of the oldest configurations of the Council. It is commonly known as the Ecofin Council, or simply ‘Ecofin’ and is composed of the economics and finance ministers of the Member States, as well as budget ministers when budgetary issues are discussed. It meets once a month.
Economic and Financial Affairs Council

emergency aid reserve

emergency aid reserve funding foreseen in a blocked reserve in the budget that can be called upon by transfer when duly justified for emergencies or crises, and used if the budgetary authority agrees. A second reserve for Community loans and loan guarantees is also foreseen in the Financial Regulation.

Where is it mentioned on this website?

EU-6, EU-9, EU-12, EU-15, EU-25, EU-27

EU-27 means the EU as constituted in 2007: Belgium (BE), Bulgaria (BG), Czech Republic (CZ), Denmark (DK), Germany (DE), Estonia (EE), Greece (EL), Spain (ES), France (FR), Ireland (IE), Italy (IT), Cyprus (CY), Latvia (LV), Lithuania (LT), Luxembourg (LU), Hungary (HU), Malta (MT), Netherlands (NL), Austria (AT), Poland (PL), Portugal (PT), Romania (RO), Slovenia (SI), Slovakia (SK), Finland (FI), Sweden (SE), United Kingdom (UK)

EU-25 means the EU as constituted in 2004: BE CZ DK DE EE EL ES FR IE IT CY LV LT LU HU MT NL AT PL PT SI SK FI SE UK

EU-15 means the EU as constituted in 1995: BE DK DE EL ES FR IE IT LU NL AT PT FI SE UK

EU-12 means the EU as constituted in 1986: BE DK DE EL ES FR IE IT LU NL PT UK

EU-10 means the EU as constituted in 1981: BE DK DE EL FR IE IT LU NL UK

EU-9 means the EU as constituted in 1973: BE DK DE FR IE IT LU NL UK

EU-6 means the EU as constituted in 1957: BE DE FR IT LU NL

EU-6EU-9EU-12EU-15EU-25EU-27

European Currency Unit (ECU)

European Currency Unit, a currency medium and unit of account created to act as the reserve asset and accounting unit of the European Monetary System, replaced by the euro. The value of the ECU was calculated as a weighted average of a basket of specified amounts of European Union (EU) currencies.
ECU European Currency Unit

European Development Fund (EDF)

EDF is the main instrument for Community aid for development cooperation in the African, Caribbean and Pacific (ACP) countries and the Overseas Countries and Territories (OCT). The EDF is governed by its own Financial Regulation and is managed outside the General Budget. The EDF is funded from direct contributions from Member States. The rates of contributions differ from those of the General Budget and are agreed in negotiations.

Where is it mentioned on this website?

European Developement Fund EDF

European External Action Service (EEAI)

The Lisbon Treaty (2009) led to major developments in the area of external action, with the creation of the post of High Representative of the Union for Foreign Affairs and Security Policy, and the establishment of the EU's diplomatic arm, the European External Action Service (EEAS). The EEAS assists the High Representative in ensuring the consistency and coordination of the Union's external action as well as by preparing policy proposals and implementing them after their approval by the Council. It also assists the President of the European Council and the President as well as the Members of the Commission in their respective functions in the area of external relations and ensures close cooperation with the Member States. The network of EU delegations around the world is part of the EEAS structure.
EEAI

evaluations

Tools to provide a reliable and objective assessment of how efficient and effective interventions have been or are expected to be (in the case of ex ante evaluation). Commission services assess to what extent they have reached their policy objectives, and how they could improve their performance in the future.
evaluation

exchange difference

The difference resulting from the exchange rates applied to the transactions concerning countries outside the euro area (euro area countries: BE, DE, EE, EL, ES, FR, IE, IT, CY, LU, MT, NL, AT, PT, SI, SK, FI).
exchange differences

expenditure allocated

EU expenditure that it is possible to allocate to individual Member States. Non-allocated expenditure concerns notably expenditure paid to beneficiaries in third countries. Allocation of expenditure by country is necessary in order to calculate budgetary balances.
allocated expenditure

financial assistance

In the EU context, "financial assistance" means financial support (grants, loans etc) provided by the European institutions to help:

  • EU member countries keep stable the sum of their financial transactions with the rest of the world (balance of payments)
  • EU countries in severe economic or financial difficulties
  • candidate countries preparing to join the EU
  • projects to promote democracy, human rights and conflict prevention in countries outside the EU.

More information

financial framework

Multiannual spending plan that translates into financial terms the Union's policy priorities. It sets

  • limits on European Union expenditure over a fixed period and thus imposes budgetary discipline
  • annual maximum amounts (ceilings) of commitments for the main categories of expenditure (called headings) and an overall payments ceiling.

The financial framework is now set in the Interinstitutional agreement, adjusted each year to take account of the movements of gross national income and may also be revised by agreement between the signatories. The Lisbon Treaty envisages the Council Regulation laying down the Multiannual Financial Framework It should not be confused with the financial framework included in legislative co-decisions, fixing an amount for the programme concerned during the life of that programme.

Where is it mentioned on this website?

multiannual financial framework

financial perspective

Another term, most commonly used over 1988-2006, for the financial framework.

Where is it mentioned on this website?

financial perspectives

flexibility instrument

Established in the interinstitutional agreement of 17 May 2006, the flexibility instrument permits the budgetisation of 200 million € each year for matters that could not otherwise be financed in each budget year. The portion of this amount which is not used during a year may be used in the following two years

Where is it mentioned on this website?

flexibility instruments

financial regulation

Sets out the operating principles and basic rules governing the EU budget. Deals thoroughly with budget implementation and control issues, which are not fully covered in the EU treaties.

Where is it mentioned on this website?

financial regulations

Financial transparency system (FTS)

Database of beneficiaries of the roughly €10bn paid out each year by the Commission in the form of grants and other aid.

Where is it mentioned on this website?

Financial transparency system FTS

general accounts

General accounts are used to prepare the balance sheet and economic outturn.

Where is it mentioned on this website?

grants

Direct financial contributions, by way of donation, from the budget in order to finance either an action intended to help achieve an objective part of a EU policy or the functioning of a body which pursues an aim of general European interest or has an objective forming part of a EU policy.

Where is it mentioned on this website?

grant

gross domestic product (GDP) at market prices

Final result of the production activity of resident producer units. It corresponds to the economy's total output of goods and services, less intermediate consumption, plus taxes less subsidies on products.

gross domestic product (GDP) gross domestic product GDP

gross national income (GNI) at market prices

Represents total primary income receivable by resident institutional units: compensation of employees, taxes on production and imports less subsidies, property income (receivable less payable), operating surplus and mixed income. Gross national income equals GDP (see above) minus primary income payable by resident units to non-resident units plus primary income receivable by resident units from the rest of the world.

GNI has widely replaced Gross National Product (GNP) as an indicator of income. In the area of the EU budget this change took effect as from the year 2002. In order to maintain unchanged the cash value of the ceiling of EU revenue, referred to as the 'own resources ceiling,' the ceiling had to be recalculated in percentage terms. It is now established at 1.23 % of GNI.

gross national income (GNI) gross national income GNI

headings

Headings in the financial framework are groups of EU activities in broad categories of expenditure

Where is it mentioned on this website?

heading

impact assessment

A tool to analyse the potential benefits and costs of different policy options to tackle a particular problem.
impact assessments

implementing rules

Implementing rules lay down detailed rules for the implementation of the Financial Regulation. They are set out in a Commission Regulation adopted after consulting all institutions and cannot alter the Financial Regulation upon which they depend.

Where is it mentioned on this website?

Interinstitutional Agreement (IIA)

Interinstitutional Agreement (IIA) on budgetary discipline and sound financial management: the IIA is adopted by common agreement of the European Parliament, the Council and the Commission and contains the table of the financial framework, as well as the rules to implement it.

Where is it mentioned on this website?

Interinstitutional Agreement Interinstitutional Agreement (IIA) on budgetary discipline and sound financial management Interinstitutional Agreement on budgetary discipline and sound financial management IIA

irregularities

Irregularities mean any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure.

irregularity

legal base / legal basis

Legal base or basis is, as a general rule, a law based on an article in the Treaty giving competence to the Community for a specific policy area and setting out the conditions for fulfilling that competence including budget implementation. Certain Treaty articles authorise the Commission to undertake certain actions, which imply spending, without there being a further legal act

Where is it mentioned on this website?

legal basis legal base

Lisbon treaty

letter of amendment

Before the budget for the coming year is adopted, and ordinarily before Parliament's first reading of the draft budget, the Commission may present a letter of amendment to the draft budget on the basis of new information which was not available at the time that the draft budget was drawn up.

amending letter letter of amendment

macroeconomic equilibrium

The situation where there is no tendency for change. The economy can be in equilibrium at any level of economic activity.

macrofinancial assistance

Form of financial support to neighbouring regions, which is mobilised on a case-by-case basis with a view to helping the beneficiary countries in dealing with serious but generally short-term balance-of-payments or budget difficulties. It takes the form of medium-/long-term loans or grants (or an appropriate combination thereof) and generally complements financing provided in the context of an International Monetary Fund’s reform programme.

outturn

Any of the three possible outcomes of the budget resulting from the difference between revenue and expenditure: a positive difference (surplus), a negative difference (deficit) and no difference (i.e. zero, or perfect balance between revenue and expenditure).
alternative alternative

own resources

Revenue flowing automatically to the European Union budget, pursuant to the treaties and implementing legislation, without the need for any subsequent decision by national authorities.

Where is it mentioned on this website?

policy area

Organisation of the budget appropriations and resources by purpose so as to allow people to see what policies are pursued, and within them, what activities make up the policies, how much money is spent on each of them, and how many people work on them (see also "activity based budgeting")

Where is it mentioned on this website?

policy areas

Public Internal Financial Control (PIFC)

"Public Internal Financial Control" is an overall and comprehensive internal control system performed by the Government, aiming to ensure that the financial management and control environment of its national budget centres (including foreign funds) complies with the relevant legislation, budget descriptions, transparency, and the principles of sound financial management: efficiency, effectiveness and economy. PIFC comprises all measures to control all government income, expenditure, assets, and liabilities. It includes decentralised functionally independent internal audit as a management tool and centralised coordination and harmonisation of financial management and control as well as internal audit systems.

Where is it mentioned on this website?

Public Internal Financial Control PIFC

public procurement rules

Rules governing the award of contracts by public administration. The principles of Public procurement Directive that Member States must transpose into national law are also applicable to the contracts of the Community institutions

Where is it mentioned on this website?

public procurement

recoveries

Entitlements vis-à-vis the Community's debtors. Authorising Officers establish third parties' debts towards the Community and instruct the accounting officer to recover money due. Actual recovery of amounts due to the Community may take different forms: voluntary payment by the debtor, offsetting of mutual debts, resort to a financial guarantee or enforcement action (either directly through a Community decision in accordance with Art 256 ECT or following an enforcement title obtained before the competent jurisdiction).

Where is it mentioned on this website?

reserve

Apart from the emergency aid reserve and the reserve relating to Community loans and loan guarantees to third countries, the budgetary authority may place funding in reserve which may be released by transfer upon the fulfilment of conditions, such as the adoption of a legal base.

Where is it mentioned on this website?

revenue

Income from all sources that finances the budget.

Almost all revenue into the EU budget is in the form of own resources, of three kinds:

  • traditional own resources': duties that are charged on imports of products originating from a non-EU state;
  • the resource based on value added tax (VAT);
  • the resource based on gross national income (GNI).

The budget also receives other revenue, such as income from third countries for participating in EU programmes, the unused balance from the previous year, taxes paid by EU staff, competition fines, interest on late payments, and so on.

Where is it mentioned on this website?

sound financial management

Budgetary principle according to which budget appropriations must be used according to economy, efficiency and effectiveness.

Where is it mentioned on this website?

statement of assurance (DAS)

The European Court of Auditors provides the European Parliament and the Council each year with a statement of assurance (DAS - from "Déclaration d'Assurance", in French) as to the reliability of the accounts of all revenue and expenditure of the Community and the legality and regularity of the underlying transactions.

Where is it mentioned on this website?

statement of assurance DAS

sugar levies

Mainly customs duties on imports of certain agricultural produce from non-EU countries (produce covered by an EU support regime ("common organisation of the market"), as well as levies (paid by producers) on sugar, isoglucose and inulin syrup.

Where is it mentioned on this website?

surplus

Positive difference between revenue and expenditure (see outturn) which has to be returned to the Member States.

transparency

The budgetary principle of transparency was established in the Financial Regulation adopted in 2002 to stress several publication obligations on the part of the Commission. The adopted budget must be published without delay on its website, in the Official Journal, consolidated financial statements & financial management reports of the institutions to be published in the Official Journal.

Where is it mentioned on this website?

treasury

The Commission has bank accounts with Member State Treasuries, Central Banks and commercial banks and these make up the treasury.

Where is it mentioned on this website?

Treaty of Lisbon

The Treaty of Lisbon amends the EU's two core treaties, the Treaty on European Union and the Treaty establishing the European Community. The latter is renamed the Treaty on the Functioning of the European Union. In addition, several Protocols and Declarations are attached to the Treaty.

Where is it mentioned on this website?

Want to know more?

Lisbon Treaty

unit of account (UA)

Unit of account, also known as European Unit of Account (EUA), a book-keeping device for recording the relative value of payments into and from EC accounts, replaced by the European currency unit (ECU) which has been replaced by the euro.
UAunit of account

UK correction

At the Fontainebleau European Council in France on 25 and 26 June 1984, the then 10 Member States (Germany, Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, the Netherlands and the UK) agreed on the rebate to be granted to the UK to reduce its contribution to the EU budget.
UK correctionq

value added tax (VAT)

Indirect tax, expressed as a percentage applied to the selling price of most goods and services. At each stage of the commercial chain, the seller charges VAT on sales but owes the administration this amount of tax minus the VAT paid on purchases made in the course of business. This process continues until the final consumer, who pays VAT on the whole value of what is purchased. VAT is broadly harmonized in the European Union but Member States may fix their own rates of tax, within parameters set at Community level, and also enjoy a limited option to tax or not to tax certain goods and services.

Where is it mentioned on this website?

value added tax VAT
Did you find what you were looking for?
Thank you for your feedback!