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Discharge procedure

Questions and answers

What is the 'discharge' procedure?

Discharge is the final approval of the implementation of the budget for a specific year (following the audit and the finalisation of the annual accounts). It closes a specific financial year.

Who grants the discharge and based on what criteria?

The discharge is granted by the European Parliament on a recommendation from the Council. Before taking its decision, the Parliament examines the accounts and the annual evaluation report prepared by the Commission along with the European Court of Auditors' ('the Court') annual report on how the budget has been spent and any relevant special reports from the Court. During the discharge procedure, relevant Commissioners reply to written questions from the Committee on Budgetary Control in the European Parliament and appear in the committee for an exchange of views.

The discharge is one of the means of the European Parliament and the Council to hold the Commission accountable for the implementation of the EU budget.

The European Parliament can grant, postpone or refuse a discharge. A granted discharge also entails the formal closure of the related accounts for a given year (currently 2014).

Does the European Parliament vote on the discharge of the EU budget as a whole?

No, the European Parliament votes individually on the discharge of every EU institution, each of which has its own independent section of the EU budget. Moreover, the European Parliament votes individually on the discharge of agencies, Joint Undertakings and the European Development Fund.

What happens if the European Parliament postpones the discharge for a given institution?

If the European Parliament postpones the discharge, it may ask the relevant institution or body to provide it with additional information before voting on a final decision later in the year.

What is the role of the European Court of Auditors?

The European Court of Auditors is the independent external auditor of the European Union. It shall examine the account of all EU institutions/bodies and provide an annual statement of assurance on the reliability of the accounts (are the books in order?) and the legality and regularity of the underlying transactions (were all payments made in line with the rules?). The Court presents its annual statement of assurance and the related observations in its annual report which the European Parliament takes into account when deciding to grant discharge.

The Court also adopts special reports on particular topics, focusing on performance issues, e.g. have spending and policy objectives been met?

How are the Member States involved in the discharge procedure?

Before the European Parliament takes its decision on discharge, the Council adopts a recommendation whether discharge shall be granted to the EU institution or body in question. The Council prepares this recommendation on the basis of an examination of the Court's annual report and special reports as well as the accounts and annual evaluation report prepared by the Commission.

What is the experience from the past? Does the European Parliament normally grant discharge to the Commission?

For the past 17 years, the European Parliament has granted discharge to Commission for the implementation of the EU budget.

The last time the Parliament refused to grant a discharge was in 1998, on financial year 1996. This led to the establishment of a group of five independent experts whose first report on Allegations of Fraud, Mismanagement and Nepotism in the Commission led to the resignation of the Santer Commission. The Commission subsequently addressed the weaknesses identified by this group in a comprehensive reform which inter alia led to an overhaul of the Commission's internal control system.

What does the full budget cycle look like?

At the beginning of a year, the European Commission, the European Parliament and the CouncilĀ  exchange views on the priorities for the following year's budget. Before the summer, the Commission presents the related draft EU budget so the Council can adopt its position during the summer months and the Parliament express its opinion at the beginning of the autumn.

In case of disagreement between the European Parliament and the Council, a specific Conciliation Committee is convened. It has 21 days to agree on a joint text, which both institutions need afterwards to approve for the budget to be adopted. If the Council rejects the budget, the European Parliament can approve it on its own, but this requires that three-fifths of the Members of Parliament (MEPs) present vote in favour, and that these three-fifths represent at least 50% of all MEPs. In all other cases the conciliation procedure fails and the Commission must present a new draft budget.

If the European Parliament and the Council do not agree on a budget before the start of a financial year, negotiations continue during the year. In the meantime, the system of 'provisional twelfths' applies.

Every summer, the Commission presents information on how the EU budget of the preceding year was spent. The European Court of Auditors publishes the results of its independent audit in autumn, which marks the start of the discharge procedure. Each Commissioner may then be invited to provide detailed account to the European Parliament about how the budget in her/his respective area was spent.

The Council issues its recommendation to the European Parliament usually in February.

The Budgetary Control Committee of the European Parliament (CONT) votes on the discharge by the end of March.

The final vote by the European Parliament’s Plenary takes place at the end of spring.

What does the Commission do to make sure the EU budget is well spent?

The Commission has launched the “EU Budget Focused on Results” initiative to further improve spending, increase accountability, transparency and ensure maximum added value for EU citizens of the EU budget. The initiative covers both performance issues (are EU funds providing value added?) and compliance issues (is the EU budget spent in accordance with the relevant rules?).

The Commission, in cooperation with Member States, also takes measures to protect the EU budget via preventive actions such as the interruption or suspension of payments and corrective actions such as financial corrections and recoveries. Over the last five years, corrective measures represented on average 2.4% of all payments made from the EU budget.

The Commission is also working on simplifying the rules. To support this effort, the Commission created last year the High Level Group on simplification.

How does the European Court of Auditors prepare its report?

Throughout the year, the Court looks at projects and other activities paid for by the EU budget. Through its audits the Court identifies payments which were not made in line with the relevant rules, and classifies these errors as either quantifiable (i.e. with a potential financial impact) or not. The impact of the quantifiable errors is then extrapolated to reach an estimated level of error, which the Court assigns to headings in the multi-annual financial framework (i.e. grouping together several spending programmes in the same area, e.g. cohesion, transport and energy), and to the EU budget as a whole. If the estimated level of error in a spending area of the EU budget is below 2%, this area is classified as considered free from material error. If the estimated level of error reaches or exceeds 2%, the spending area is classified as affected by material error.

What is the estimated level of error which has been found in the EU budget so far?

The level of error estimated by the European Court of Auditors varies between spending areas e.g. for the financial year 2014, the estimated level of error was below 2% for administrative expenditure but above 2% for other spending areas. The Court reported an estimated level of error of 4.4% for the EU budget as a whole.

Do errors mean that money has been lost or wasted?

No, errors do not mean that money was lost or wasted. They do not mean that the projects have not been properly implemented and that the EU citizens are not benefiting from them.

Is a large part of the EU budget affected by fraud?

Not at all! Fraud is different from errors, it is an intentional deception and criminal action. Fraud is estimated to affect 0.2% of all EU budget spending. The Commission has zero tolerance of fraud and is determined to bring this figure down as much as possible. The Commission and the Court report any suspicions of fraud with EU money to the European Anti-fraud Office (OLAF).

As a general rule, the Court only refers very few cases per year to OLAF on suspicions of fraud out of the more than a thousand cases it looks at.

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