Communication from the Commission to the European Parliament, the Council and the Court of Auditors — Annual accounts of the European Union — Financial year 2010
Date: 2011-11-14
Institutions: European Commission
Subjects: European Union, balance sheet, consolidated account, financial analysis, implementation of the budget, publication of accounts








C_2011332EN.01000101.xml










14.11.2011   


EN


Official Journal of the European Union


C 332/1





COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE COURT OF AUDITORS
ANNUAL ACCOUNTS OF THE EUROPEAN UNION — FINANCIAL YEAR 2010
2011/C 332/01
CONTENTS
Note accompanying the consolidated accounts







PART I:


Consolidated financial statements of the European Union and explanatory notes




Balance Sheet
Economic Outturn Account
Cashflow Table
Statement of changes in Net Assets
Notes to the financial statements







PART II:


Consolidated reports on implementation of the budget of the European Union and explanatory notes




Reports on implementation of the budget
Explanatory notes to the reports on implementation of the budget

NOTE ACCOMPANYING THE CONSOLIDATED ACCOUNTS

The consolidated annual accounts of the European Union for the year 2010 have been prepared on the basis of the information presented by the institutions and bodies under Article 129.2 of the Financial Regulation applicable to the general budget of the European Union. I hereby declare that they were prepared in accordance with Title VII 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 a true and fair view of the financial position of the European Union in all material aspects.


Philippe TAVERNE

Accounting Officer of the Commission



PART I

Consolidated financial statements of the European Union and explanatory notes

CONTENTS
Balance Sheet
Economic Outturn Account
Cashflow Table
Statement of changes in Net Assets
Notes to the financial statements:






1.

Significant accounting policies









2.

Notes to the Balance Sheet









3.

Notes to the Economic Outturn Account









4.

Notes to the Cashflow table









5.

Contingent Assets & Liabilities and other disclosures









6.

Financial corrections and recoveries









7.

Financial risk management









8.

Related party disclosures









9.

Events after the balance sheet date









10.

Consolidated entities









11.

Non-consolidated entities




BALANCE SHEET









EUR millions




 


Note


31.12.2010


31.12.2009
(restated)




NON-CURRENT ASSETS:




Intangible assets



2.1



108


72




Property, plant and equipment



2.2



4 813


4 859




Long-term investments



2.3



2 555


2 379




Loans



2.4



11 640


10 764




Long-term pre-financing



2.5



44 118


41 544




Long-term receivables



2.6



40


55




 


 


63 274


59 673




CURRENT ASSETS:




Inventories



2.7



91


77




Short-term investments



2.8



2 331


1 791




Short-term pre-financing



2.9



10 078


9 436




Short-term receivables



2.10



13 501


8 958




Cash and cash equivalents



2.11



22 063


23 372




 


 


48 064


43 634




TOTAL ASSETS


 


111 338


103 307




NON-CURRENT LIABILITIES:




Employee benefits



2.12



(37 172)


(37 242)




Long-term provisions



2.13



(1 317)


(1 469)




Long-term financial liabilities



2.14



(11 445)


(10 559)




Other long-term liabilities



2.15



(2 104)


(2 178)




 


 


(52 038)


(51 448)




CURRENT LIABILITIES:




Short-term provisions



2.16



(214)


(213)




Short-term financial liabilities



2.17



(2 004)


(40)




Accounts payable



2.18



(84 529)


(93 884)




 


 


(86 747)


(94 137)




TOTAL LIABILITIES


 


(138 785)


(145 585)




NET ASSETS


 


(27 447)


(42 278)




Reserves



2.19



3 484


3 323




Amounts to be called from Member States (1)




2.20



(30 931)


(45 601)




NET ASSETS


 



(27 447)




(42 278)





See notes 2.5.2, 2.9.2, 2.10.3 and 3.4.1 for details of the restatement of certain 2009 figures





ECONOMIC OUTTURN ACCOUNT









EUR millions




 


Note


2010


2009
(restated)




OPERATING REVENUE




Own resource and contributions revenue



3.1



122 328


110 537




Other operating revenue



3.2



8 188


7 532




 


 


130 516


118 069




OPERATING EXPENSES




Administrative expenses



3.3



(8 614)


(8 133)




Operating expenses



3.4



(103 764)


(102 504)




 


 


(112 378)


(110 637)




SURPLUS FROM OPERATING ACTIVITIES


 



18 138




7 432





Financial revenue



3.5



1 178


835




Financial expenses



3.6



(661)


(594)




Movement in employee benefits liability



2.12



(1 003)


(683)




Share of net deficit of joint ventures & associates



3.7



(420)


(103)





ECONOMIC OUTTURN FOR THE YEAR



 


17 232


6 887




See notes 2.5.2, 2.9.2, 2.10.3 and 3.4.1 for details of the restatement of certain 2009 figures.





CASHFLOW TABLE









EUR millions




 


Note


2010


2009
(restated)





Economic outturn for the year



 



17 232




6 887






Operating activities




4.2



 


 




Amortisation


 


28


22




Depreciation


 


358


448




(Reversal of) impairment losses on investments


 


0


(17)




(Increase)/decrease in loans


 


(876)


(7 199)




(Increase)/decrease in long-term pre-financing


 


(2 574)


(12 521)




(Increase)/decrease in long-term receivables


 


15


(10)




(Increase)/decrease in inventories


 


(14)


7




(Increase)/decrease in short-term pre-financing


 


(642)


827




(Increase)/decrease in short-term receivables


 


(4 543)


2 962




Increase/(decrease) in long-term provisions


 


(152)


128




Increase/(decrease) in long-term financial liabilities


 


886


7 210




Increase/(decrease) in other long-term liabilities


 


(74)


(48)




Increase/(decrease) in short-term provisions


 


1


(134)




Increase/(decrease) in short-term financial liabilities


 


1 964


(79)




Increase/(decrease) in accounts payable


 


(9 355)


4 207




Prior year budgetary surplus taken as non cash revenue


 


(2 254)


(1 796)





Other non-cash movements



 


(149)


54





Increase/(decrease) in employee benefits liability



 


(70)


(313)





Investing activities




4.3



 


 




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


 


(374)


(464)




(Increase)/decrease in long-term investments


 


(176)


(284)




(Increase)/decrease in short-term investments


 


(540)


(239)





NET CASHFLOW



 



(1 309)




(352)





Net increase/(decrease) in cash and cash equivalents


 


(1 309)


(352)




Cash and cash equivalents at the beginning of the year



2.11



23 372


23 724




Cash and cash equivalents at year-end



2.11



22 063


23 372




See notes 2.5.2, 2.9.2, 2.10.3 and 3.4.1 for details of the restatement of certain 2009 figures.





STATEMENT OF CHANGES IN NET ASSETS











EUR millions




 


Reserves (A)


Amounts to be called from Member States (B)


Net Assets = (A)+(B)




Fair value reserve


Other reserves


Accumulated Surplus/(Deficit)


Economic outturn of the year





BALANCE AS AT 31 DECEMBER 2008




41




3 074




(63 225)




12 686




(47 424)





Movement in Guarantee Fund reserve


 


196


(196)


 


0




Fair value movements


28


 


 


 


28




Other (restated)


 


(1)


28


 


27




Allocation of the economic outturn 2008


 


(15)


12 701


(12 686)


0




Budget result 2008 credited to Member States


 


 


(1 796)


 


(1 796)




Economic outturn for the year (restated)


 


 


 


6 887


6 887





BALANCE AS AT 31 DECEMBER 2009 (restated)




69




3 254




(52 488)




6 887




(42 278)





Movement in Guarantee Fund reserve


 


273


(273)


 


0




Fair value movements


(130)


 


 


 


(130)




Other


 


4


(21)


 


(17)




Allocation of the economic outturn 2009 (restated)


 


14


6 873


(6 887)


0




Budget result 2009 credited to Member States


 


 


(2 254)


 


(2 254)




Economic outturn for the year


 


 


 


17 232


17 232





BALANCE AS AT 31 DECEMBER 2010




(61)




3 545




(48 163)




17 232




(27 447)






NOTES TO THE FINANCIAL STATEMENTS

CONTENTS






1.

Significant accounting policies









2.

Notes to the Balance Sheet









3.

Notes to the Economic Outturn Account









4.

Notes to the Cashflow table









5.

Contingent assets & liabilities and other disclosures









6.

Financial corrections and recoveries









7.

Financial risk management









8.

Related party disclosures









9.

Events after the balance sheet date









10.

Consolidated entities









11.

Non-consolidated entities



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

The consolidated accounts of the European Union cover the accounts of the European Union, the European Atomic Energy Community and the European Coal & Steel Community (in Liquidation). These accounts are kept in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 (OJ L 248, 16.9.2002), on the Financial Regulation applicable to the general budget of the European Union and Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of this Financial Regulation.
In accordance with article 133 of the Financial Regulation, the European Union has prepared its 2010 consolidated financial statements on the basis of accrual-based accounting rules that are derived from International Public Sector Accounting Standards (IPSAS) or by default, International Financial Reporting Standards (IFRS). 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 establish a uniform set of rules for accounting, valuation and presentation of the accounts with a view to harmonising the process for drawing up the financial statements and consolidation. The accounts are kept in Euro on the basis of the calendar year.
1.2.   ACCOUNTING PRINCIPLES

The objective of the 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, 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. Article 124 of the Financial Regulation sets out the accounting principles to be applied in drawing up the financial statements:






—


going concern basis;










—


prudence;










—


consistent accounting methods;










—


comparability of information;










—


materiality;










—


no netting;










—


reality over appearance;










—


accrual-based accounting.




Preparation of the consolidated financial statements in accordance with the above mentioned rules and principles requires management to make estimates that affect the reported amounts of certain items in the consolidated balance sheet and in the consolidated economic outturn account, as well as the related disclosures of contingent assets and liabilities.
1.3.   CONSOLIDATION


Scope of consolidation

The consolidated financial statements of the EU comprise all significant controlled entities (institutions and agencies), associates and joint ventures, this being 43 controlled entities, 5 joint ventures and 4 associates. The complete list of consolidated entities can be found in note 10. In comparison with 2009, the scope of consolidation has been extended by 3 controlled entities (one institution, two agencies), one associate and one joint venture. The impact of the additions on the consolidated financial statements is not material.

Controlled entities

The decision to include an entity in the scope of consolidation is based on the control concept. Controlled entities are all entities over which the European Union has, directly or indirectly, the power to govern the financial and operating policies so as to be able to benefit from these entities′ activities. This power must be presently exercisable. 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 European Union are: creation of the entity through founding treaties or secondary legislation, financing of the entity from the general budget, the existence of voting rights in the governing bodies, audit by the European Court of Auditors and discharge by the European Parliament. It is clear that an assessment at entity level needs to be done in order to decide whether one or all of the criteria listed above are sufficient to trigger control.
Under this approach, the EU's institutions (except the ECB) and agencies (excluding the agencies of the former 2nd pillar) are considered as under the exclusive control of the EU and are therefore included in the consolidation scope. Furthermore the European Coal and Steel Community in Liquidation (ECSC) is also considered as a controlled entity.
All material inter-company transactions and balances between EU controlled entities are eliminated, while unrealised gains and losses on inter-entity transactions are not material and have therefore not been eliminated.

Joint ventures

A joint venture is a contractual arrangement whereby the European Union and one or more parties (the ‘venturers’) undertake an economic activity which is subject to joint control. Joint control is the contractually agreed sharing of control, directly or indirectly, over an activity embodying service potential.
Participations in joint ventures are accounted for using the equity method initially recognised at cost. The European Union's interest in the results of its jointly controlled entities is recognised in the EU economic outturn account, and its interest in the movements in reserves is recognised in the EU reserves. The initial cost plus all movements (further contributions, share of results and reserve movements, impairments, and dividends) give the book value of the joint venture in the EU accounts at the balance sheet date.
Unrealised gains and losses on transactions between the European Union and its jointly controlled entities are not material and have therefore not been eliminated. The accounting policies of joint ventures may differ from those adopted by the European Union for like transactions and events in similar circumstances.

Associates

Associates are entities over which the European Union have, directly or indirectly, significant influence but not control. It is presumed that significant influence is given if the European Commission holds directly or indirectly 20 % or more of the voting rights.
Participations in associates are accounted for using the equity method, initially recognised at cost. The European Union's share of its associates′ results is recognised in the EU economic outturn account, and its share of movements in reserves is recognised in the EU reserves. The initial cost plus all movements (further contributions, share of results and reserve movements, impairments, and dividends) give the book value of the associate in the EU accounts at the balance sheet date. Distributions received from an associate reduce the carrying amount of the asset. Unrealised gains and losses on transactions between the European Union and its associates are not material and have therefore not been eliminated.
The accounting policies of associates may differ from those adopted by the European Union for like transactions and events in similar circumstances. In cases where the European Union holds 20 % or more of an investment capital fund, the EU does not seek to exert significant influence. Such funds are therefore treated as financial instruments categorised as available-for-sale and the equity method is not applied.

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

The funds of the Sickness Insurance Scheme for staff of the European Union, the European Development Fund and the Participant's Guarantee Fund are managed by the Commission on their behalf, however since these entities are not controlled by the European Union they are therefore not consolidated in its accounts – see note 11 for further details on the amounts concerned.
1.4.   BASIS OF PREPARATION

1.4.1.   
Currency and basis for conversion



Functional and reporting currency

The financial statements are presented in millions of euros, the euro being the European Union's functional and reporting currency.

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 translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the economic outturn account.
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 exchange rates applying on 31 December:

EURO Exchange Rates








Currency


31.12.2010


31.12.2009




BGN


1,9558


1,9558




CZK


25,0610


26,4730




DKK


7,4535


7,4418




EEK


15,6466


15,6466




GBP


0,8607


0,8881




HUF


277,9500


270,4200




LVL


0,7094


0,7093




LTL


3,4528


3,4528




PLN


3,9750


4,1045




RON


4,2620


4,2363




SEK


8,9655


10,2520




CHF


1,2504


1,4836




JPY


108,6500


133,1600




USD


1,3362


1,4406




Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale that relate to a translation difference are recognised in the economic outturn account. Translation differences on non-monetary financial assets and liabilities held at fair value through profit or loss are recognised in the economic outturn account. Translation differences on non-monetary financial assets classified as available-for-sale are included in the fair value reserve.
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 reliable information available. Significant estimates include, but are not limited to, amounts for employee benefit liabilities, provisions, financial risk on inventories and accounts receivables, accrued income and charges, contingent assets and liabilities, and degree of impairment of intangible assets and property, plant and equipment. Actual results could differ from those estimates. Changes in estimates are reflected in the period in which they become known.
1.5.   BALANCE SHEET

1.5.1.   
Intangible assets


Acquired computer software licences are stated at historical cost less accumulated amortisation and impairment losses. The assets are amortised on a straight-line basis over their estimated useful lives. Internally developed intangible assets are capitalised when the relevant criteria of the EU accounting rules are met. The costs capitalisable 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.
1.5.2.   
Property, plant and equipment


All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition or construction 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 European Union and its cost can be measured reliably. Repairs and maintenance costs are charged to the economic outturn account during the financial period in which they are incurred. As the European Union does not borrow money to fund the acquisition of property, plant and equipment, there are no borrowing costs related to such purchases.
Land and works of art are not depreciated as they are 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 to their residual values over their estimated useful lives, as follows:

Depreciation rates







Type of asset


Straight line depreciation rate




Buildings


4 %




Plant, machinery and equipment


10 % to 25 %




Furniture


10 % to 25 %




Fixtures and fittings


10 % to 33 %




Vehicles


25 %




Computer hardware


25 %




Other tangible assets


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 economic outturn account.

Leases

Leases of tangible assets, where the European Union has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The rental obligations, net of finance charges, are included in other liabilities (long and short-term.) The interest element of the finance cost is charged to the economic outturn account over the lease period so as to produce a constant periodic interest rate on the remaining balance of the liability for each period. The assets held under finance leases are depreciated over the shorter of the assets′ useful life and the lease term.
Leases where the lessor retains a significant portion of the risks and rewards inherent to ownership are classified as operating leases. Payments made under operating leases are charged to the economic outturn account on a straight-line basis over the period of the lease.
1.5.3.   
Impairment of non-financial assets


Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable 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. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. If the reasons for impairments recognised in previous years no longer apply, the impairment losses are reversed accordingly.
1.5.4.   
Investments



Participations in Associates and Joint Ventures

Participations in associates and joint ventures are accounted for using the equity method. The costs of equity are adjusted to reflect the share of increases or reductions in net assets of the associates and joint ventures that are attributable to the European Union after initial recognition if there are indications of impairment and written down to the lower recoverable amount if necessary. The recoverable amount is determined as described under 1.5.3. If the reason for impairment ceases to apply at a later date, the impairment loss is reversed to the carrying amount that would have been determined had no impairment loss been recognised.

Investments in Venture Capital Funds


Classification and measurement

Investments in Venture Capital Funds are classified as available-for-sale assets (see 1.5.5) and accordingly, are carried at fair value with gains and losses arising from changes in the fair value (including translation differences) recognised in the fair value reserve.

Fair value considerations

Since they do not have a quoted market price in an active market, investments in Venture Capital Funds are valued on a line-by-line basis at the lower of cost or attributable net asset value (‘NAV’). Unrealised gains resulting from the fair value measurement are recognised through reserves and unrealised losses are assessed for impairment so as to determine whether they are recognised as impairment losses in the economic outturn account or as changes in the fair value reserve.
1.5.5.   
Financial assets



Classification

The European Union classifies their financial assets in the following categories: financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; and available-for-sale financial assets. The classification of the financial instruments is determined at initial recognition and re-evaluated at each balance sheet date.
(i)   Financial assets at fair value through profit or loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by the European Union. Derivatives are also categorised 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. They are included in non-current assets, except for maturities within 12 months of the balance sheet date.
(iii)   Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the European Union has the positive intention and ability to hold to maturity. During this financial year, the European Union 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 time period in which the EU intends to dispose of them. Investments in unconsolidated entities and other equity investments (e.g. Risk Capital Operations) that are not accounted for using the equity method are also classified as available-for sale-financial assets.

Initial recognition and measurement

Purchases and sales of financial assets at fair value through profit or loss, held-to-maturity and available-for-sale are recognised on trade-date – the date on which the European Union commits to purchase or sell the asset. Loans are recognised when cash is advanced to the borrowers. Financial instruments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or losses are initially recognised at fair value and transaction costs are expensed in the economic outturn account.
The fair value of a financial asset on initial recognition is normally the transaction price (i.e. the fair value of the consideration received). However, when a long-term loan that carries no interest or an interest below market conditions is 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 on borrowed funds 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 can only borrow funds for the purpose of lending at the same rate (e.g. BOP) or a reduced rate compared to the commercial market (e.g. EFSM in 2011). 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 European Commission for fair valuing its lending operations under EFSM, BOP and other such loans, should be the interest rate charged.










—


In addition, for BOP, Euratom and MFA 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 economic outturn account.




Financial instruments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the European Union has transferred substantially all risks and rewards of ownership.

Subsequent measurement







(i)


Financial assets at fair value through profit or loss are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the ‘financial instruments at fair value through profit or loss’ category are included in the economic outturn account in the period in which they arise.










(ii)


Loans and receivables and held-to-maturity investments 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 economic outturn account.










(iii)


Held to maturity – the EU currently holds no held to maturity investments.










(iv)


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 assets are recognised in the fair value reserve. When assets classified as available-for-sale are sold or impaired, the cumulative fair value adjustments previously recognised in the fair value reserve are recognised in the economic outturn account. Interest on available-for-sale financial assets calculated using the effective interest method is recognised in the economic outturn account. 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), the European Union 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 cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.
In cases where the fair value of investments in equity instruments that do not have quoted market price in an active market cannot be reliably measured, these investments are valued at cost less impairment losses.

Impairment of financial assets

The European Union assesses at each balance sheet date whether there is objective evidence that a financial asset is impaired. A financial asset is impaired and impairment losses are incurred 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 cash flows of the financial asset that can be reliably estimated.
(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 cash flows (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 economic outturn account. 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 cash flows of a collateralised financial asset reflects the cash flows 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 economic outturn account.
(b)   Assets carried at fair value

In the case of equity investments classified as available-for-sale, 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 economic outturn account – is removed from reserves and recognised in the economic outturn account. Impairment losses recognised in the economic outturn account on equity instruments are not reversed through the economic outturn account. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale 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 economic outturn account.
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 European Union would incur to acquire the asset on the reporting date.
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 pre-financing agreement. The float or advance is repaid or used for the purpose for which it was provided during the period defined in the agreement. If the beneficiary does not incur eligible expenditures, he has the obligation to return the pre-financing advance to the European Union. The amount of the pre-financing is reduced (wholly or partially) by the acceptance of eligible costs and amounts returned, and this amount is recognised as an expense.
At year-end, outstanding pre-financing amounts are valued at the original amount(s) paid less: amounts returned, eligible amounts expensed, estimated eligible amounts not yet cleared at year-end, and value reductions.
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.
1.5.8.   
Receivables


Receivables are carried at original amount less write-down for impairment. A write-down for impairment of receivables is established when there is objective evidence that the European Union will not be able to collect all amounts due according to the original terms of receivables. 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 economic outturn account. 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 below concerning the treatment of accrued income at year-end.
1.5.9.   
Cash and cash equivalents


Cash and cash equivalents are financial instruments and defined as current assets. They include cash at hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.
1.5.10.   
Employee benefits



Pension obligations

The European Union operates defined benefit pension plans. Whilst staff contribute from their salaries one third of the expected cost of these benefits, the liability is not funded. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date. The defined benefit obligation is calculated by actuaries 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.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised immediately in the economic outturn account. Past-service costs are recognised immediately in economic outturn account, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.

Post-employment sickness benefits

The European Union provides health benefits to its employees through the reimbursement of medical expenses. A separate fund has been created for the day-to-day administration. Both current employees, pensioners, widowers and their beneficiaries benefit from the system. The benefits granted to the "inactives" (pensioners, orphans, etc.) are classified as "Post-Employment Employee Benefits". Given the nature of these benefits, an actuarial calculation is required. The liability in the balance sheet is determined on a similar basis as that for the pension obligations (see above).
1.5.11.   
Provisions


Provisions are recognised when the European Union 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 expenditures 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).
1.5.12.   
Financial liabilities


Financial liabilities are classified as financial liabilities at fair value through profit or loss or as financial liabilities carried at amortised cost (borrowings). 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 economic outturn account over the period of the borrowings using the effective interest method.
They are classified as non-current liabilities, except for maturities less than 12 months after the balance sheet date. 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 European Union and then recharged to the beneficiary of the loan are directly recognised in the economic outturn account.
Financial liabilities categorised at fair value through profit or loss include derivatives when their fair value is negative. They follow the same accounting treatment as financial assets at fair value through profit or loss, see note 1.5.5.

1.5.13.   
Payables


A significant amount of the payables of the EU are not related to the purchase of goods or services – instead they are unpaid cost claims from beneficiaries of grants or other EU funding. They are recorded as payables for the requested amount when the cost claim is received and, after verification, accepted as eligible by the relevant financial agents. At this stage they 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 European Union.
1.5.14.   
Accrued and deferred income and charges


According to the European Union accounting rules, transactions and events are recognised in the financial statements 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 reflect a true and fair view.
Revenue is also accounted for in the period to which it relates. 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 (i.e. by reference to a treaty), an accrued income 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.
1.6.   ECONOMIC OUTTURN ACCOUNT

1.6.1.   
Revenue



Non-exchange revenue

This makes up the vast majority of the EU's revenue and includes mainly direct and indirect taxes and own resource amounts. In addition to taxes the European Union may also receive payments from other parties, such as duties, fines and donations.

GNI based resources and VAT resources

Revenue is recognised for the period for which the European Union 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.

Traditional own resources

Receivables 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 European Union 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 (25 %). In addition, a value reduction is recognised for the amount of the estimated recovery gap in the economic outturn account.

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. If there are doubts about the undertaking's solvency, a value reduction on the entitlement is recognised. After the decision to impose a fine, the debtors have two months from the date of notification:






—


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




However, even if appealed, the principal of the fine must be paid within the time limit of three months laid down as the appeal does not have suspensory effect (Article 278 of the EU Treaty) or, under certain circumstances and subject to the agreement of the Commission's Accounting Officer, it may present a bank guarantee for the amount instead.
If the undertaking appeals against the decision, and has already provisionally paid the fine, the amount is disclosed as a contingent liability. However, since an appeal against an EU decision by the addressee does not have suspensory effect, the cash received is used to clear the receivable. If a guarantee is received instead of payment, the fine remains as a receivable. 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, then the receivable outstanding is written-down as required. The accumulated interest received by the European Union on the bank accounts where received payments are deposited is recognised as revenue, and any contingent liability is increased accordingly.

Exchange revenue

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.

Interest income and expense

Interest income and expense are recognised in the economic outturn account 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 income or interest expense over the relevant period. When calculating the effective interest rate, the European Union estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but do 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 income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Dividend income

Dividend income is recognised when the right to receive payment is established.
1.6.2.   
Expenditure


Exchange expenses arising from the purchase of goods and services are recognised when the supplies are delivered and accepted by the European Union. They are valued at original invoice cost. Non-exchange expenses are specific to the European Union and account for the majority of its expenditure. 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 a contract 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 already due to the beneficiaries but not yet reported are estimated and recorded as accrued expenses.
1.7.   CONTINGENT ASSETS AND LIABILITIES

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 European Union. A contingent asset is disclosed when an inflow of economic benefits or service potential is probable.
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 European Union; or a present obligation that arises from past events but is not recognised 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.
The accounting policies of the European Commission are the same as those applied by the European Union and are outlined in the note 1 of the consolidated annual accounts of the EU.
2.   NOTES TO THE BALANCE SHEET

NON CURRENT ASSETS

2.1.   INTANGIBLE ASSETS







EUR millions




 


Amount




Gross carrying amount at 31 December 2009


171




Additions


60




Disposals


(2)




Other changes


7





Gross carrying amount at 31 December 2010




236





Accumulated amortisation at 31 December 2009


(99)




Amortisation charge for the year


(28)




Disposals


1




Other changes


(2)





Accumulated amortisation at 31 December 2010




(128)






Net carrying amount at 31 December 2010




108






Net carrying amount at 31 December 2009




72





The above amounts relate primarily to computer software.
2.2.   PROPERTY, PLANT & EQUIPMENT














EUR millions




 


Land and buildings


Plant and equipment


Furniture and vehicles


Computer hardware


Other tangible assets


Finance leases


Assets under construction


TOTAL




Gross carrying amount at 31 December 2009


3 972


460


215


475


182


2 655


231


8 190




Additions


47


44


20


42


15


10


114


292




Disposals


(37)


(125)


(30)


(81)


(27)


(1)


—


(301)




Transfers between asset categories


(1)


0


0


1


11


0


(10)


1




Other changes


46


113


21


46


33


(1)


—


258





Gross carrying amount at 31 December 2010




4 027




492




226




483




214




2 663




335




8 440





Accumulated depreciation at 31 December 2009


(1 742)


(355)


(155)


(359)


(108)


(612)


 


(3 331)




Depreciation charge for the year


(127)


(37)


(21)


(60)


(17)


(96)


 


(358)




Depreciation written back


—


—


—


2


—


—


 


2




Disposals


31


122


27


77


27


0


 


284




Transfers between asset categories


1


1


0


0


(1)


0


 


1




Other changes


(31)


(113)


(18)


(38)


(25)


0


 


(225)





Accumulated depreciation at 31 December 2010




(1 868)




(382)




(167)




(378)




(124)




(708)



 


(3 627)





Net carrying amount at 31 December 2010




2 159




110




59




105




90




1 955




335




4 813






Net carrying amount at 31 December 2009




2 230




105




60




116




74




2 043




231




4 859





Charges still to be paid in respect of finance leases and similar entitlements are shown in long-term and short-term liabilities in the balance sheet (see also notes 2.15 and 2.18.1). They break down as follows:

FINANCE LEASES
















EUR millions




Description


Cumulative charges (A)


Future amounts to be paid


Total Value


Subsequent expenditure on assets


Asset value


Depreciation


Net carrying amount




< 1 year


> 1 year


> 5 years


Total Liability (B)


A + B


(C)


A + B + C


(E)


= A + B + C + E




Land and buildings


843


56


271


1 389


1 716


2 559


61


2 620


(684)



1 936





Other tangible assets


22


9


11


1


21


43


0


43


(24)



19





Total at 31.12.2010


865


65


282


1 390


1 737


2 602


61


2 663


(708)


1 955




Total at 31.12.2009


799


59


270


1 466


1 795


2 594


61


2 655


(612)


2 043




2.3.   LONG-TERM INVESTMENTS









EUR millions




 


Note


31.12.2010


31.12.2009




Participations in Joint Ventures


2.3.1


138


196




Participations in Associates


2.3.2


354


382




Guarantee Fund


2.3.3


1 346


1 240




Available-for-Sale assets


2.3.4


717


561




Total Investments


 


2 555


2 379




This heading covers investments made with a view to supporting the activities of the EU. It also includes the net assets of the Guarantee Fund.
2.3.1.   
Participations in joint ventures













EUR millions




 


GJU


SESAR


ITER


IMI


FCH


Total




Amount at 31.12.2009


0


80


35


81


0


196




Contributions


0


41


53


24


64


182




Share of net result


0


(110)


(76)


(27)


(27)


(240)





Amount at 31.12.2010




0




11




12




78




37




138





Participations in joint ventures are accounted for using the equity method. The following carrying amounts are attributable to the EU based on its percentage of participation in joint ventures:







EUR millions




 


31.12.2010


31.12.2009




Non-current assets


176


48




Current assets


165


192




Non-current liabilities


0


0




Current liabilities


(208)


(44)




Revenue


7


72




Expenses


(247)


(169)





Galileo Joint Undertaking (GJU) in liquidation

The Galileo Joint Undertaking (GJU) was put into liquidation at the end of 2006 and the process is still ongoing. As the entity was inactive and still undergoing liquidation in 2010, there were no revenues or expenditures incurred. The net assets of the GJU and thus the value of the investment at 31 December 2010 (and 31 December 2009) was EUR 0, being the investment of EUR 585 million less the accumulated share of losses, EUR 585 million.

SESAR Joint Undertaking

The aim of this Joint Undertaking is to ensure the modernisation of the European air traffic management system and the rapid implementation of the European air traffic management Master Plan by coordinating and concentrating all relevant research and development efforts in the EU. At 31 December 2010, the Commission held 78,8 % or EUR 11 million of the ownership participation in SESAR. The total (indicative) Commission contribution foreseen for SESAR (from 2007 to 2013) is EUR 700 million.

ITER International Fusion Energy Organisation (ITER)

ITER involves the European Union and China, India, Russia, Korea, Japan and USA. ITER was created to; manage the ITER facilities, 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. The EU (Euratom) contribution to ITER International is given through the Fusion for Energy Agency, including also the contributions from Member States and from Switzerland. The total contribution is legally considered as a Euratom contribution to ITER since the Member States and Switzerland do not have ownership interests in ITER. As the EU legally holds the participation in the joint venture ITER International, the Commission must recognise the participation in its accounts.
At 31 December 2010, Euratom held 47,2 % or EUR 12 million of the ownership participation in ITER. The total (indicative) Euratom contribution foreseen for ITER (from 2007 to 2041) is EUR 7 649 million.

Joint Technology Initiatives

Public private partnerships in the form of Joint Technology Initiatives, which were implemented through Joint Undertakings within the meaning of Article 171 of the Treaty, have been created in order to implement the objectives of the Lisbon Growth and Jobs Agenda. During 2010 two new Joint Technology Initiatives became operational, the ENIAC Joint Undertaking and the FCH Joint Undertaking. Although ENIAC is legally referred to as a joint undertaking, from an accounting perspective it must be considered as an associate (and so is included as such in note 2.3.2) because the Commission has a significant influence, not joint control, over this entity (similar to the ARTEMIS and Clean Sky Joint Undertakings).

IMI Joint Technology Initiative on Innovative Medicines

The IMI Joint Undertaking supports pre-competitive pharmaceutical research and development in the Member States and associated countries, aiming at increasing the research investment in the biopharmaceutical sector and promotes the involvement of small and medium-sized enterprises (SME) in its activities. The ownership interest of the European Union, represented by the Commission, is 97,4 % or EUR 78 million at 31 December 2010. The maximum indicative contribution of the Commission shall amount to EUR 1 billion up to 31.12.2017.

FCH Fuel Cells and Hydrogen Joint Undertaking

The objective of the FCH Joint Undertaking is to combine resources from the public and private sectors to strengthen research activities with a view to increasing the overall efficiency of European research efforts and accelerate the development and deployment of fuel cell and hydrogen technologies. The ownership interest of the European Union, represented by the Commission, is 99,9 % or EUR 37 million at 31 December 2010. The maximum indicative contribution of the EU shall amount to EUR 470 million up to 31.12.2017.
2.3.2.   
Participations in Associates












EUR millions




 


EIF


ARTEMIS


Clean Sky


ENIAC


Total




Amount at 31 December 2009


301


7


74


0


382




Contributions


14


19


101


30


164




Share of net surplus/(deficit)


2


(12)


(161)


(9)


(180)




Other equity movements


(12)


0


0


0


(12)





Amount at 31 December 2010




305




14




14




21




354





Participations in associates are accounted for using the equity method. The following carrying amounts are attributable to the EU based on its percentage of participation in associates:







EUR millions




 


31.12.2010


31.12.2009




Assets


447


420




Liabilities


(93)


(38)




Revenue


25


17




Surplus/(Deficit)


(180)


(6)





European Investment Fund (EIF)

The European Investment Fund (EIF) is the European Union's financial institution specialising in providing risk capital and guarantees to SMEs. At 31 December 2010, the Commission has subscribed for a total amount of EUR 900 million (out of EUR 3 000 million) of the share capital of the EIF. This represents 30 % of the total EIF share capital. EUR 2 million of the above amount concerns the result for 2010 (profit). No dividend was received in 2010. The Commission has paid in 20 %, the balance being uncalled corresponding to an amount of EUR 720 million.







EUR millions




EIF


Total EIF capital


Commission subscription




Total Share Capital


3 000


900




Paid-in


(600)


(180)




Uncalled


2 400


720





ARTEMIS Joint Undertaking

This entity was created to implement a Joint Technology Initiative with the private sector on Embedded Computing Systems. The ownership interest of the EU, represented by the Commission, at 31 December 2010 is 96,7 % or EUR 14 million. The maximum indicative contribution of the Commission shall amount to EUR 420 million.

Clean Sky Joint Undertaking

The aim of this entity is to accelerate the development, validation and demonstration of clean air transport technologies in the EU and in particular to create a radically innovative Air Transport System with the target of reducing the environmental impact of air transport. The ownership interest of the European Union, represented by the Commission, is 64,7 % or EUR 14 million at 31 December 2010. The maximum indicative contribution of the Commission to this venture shall amount to EUR 800 million.

ENIAC Joint Undertaking

The aim of ENIAC is to define a commonly agreed research agenda in the field of nano-electronics in order to set research priorities for the development and adoption of key competences in that area. These objectives will be pursued by pooling resources from the public and private sectors to support R&D activities in the form of projects. The ownership interest of the European Union, represented by the Commission, is 97,8 % or EUR 21 million at 31 December 2010. The total commitment of the EU shall amount to EUR 450 million.
2.3.3.   
Guarantee Fund



Net assets of the Guarantee Fund








EUR millions




 


31.12.2010


31.12.2009




Available-for-sale assets


1 154


1 050




Cash and cash equivalents


193


191




Total assets


1 347


1 241




Total liabilities


(1)


(1)





Net assets




1 346




1 240





The Guarantee Fund for external actions covers loans guaranteed by the EU as a result of a Council Decision, in particular European Investment Bank (EIB) lending operations outside the EU and loans under macro-financial assistance (MFA) and Euratom loans outside the EU. It is a long-term instrument to cover any defaulting loans guaranteed by the EU and can therefore be seen as a long-term investment. This is evidenced by the fact that nearly 85 % of the available-for-sale assets have a maturity of between 1 and 10 years. The Fund is endowed by payments from the general budget of the EU equivalent to 9 % of the capital value of the operations, the proceeds from interest on investments made from the Fund's assets, and sums recovered from defaulting debtors for whom the Fund has had to activate its guarantee. Any yearly surplus arising shall be paid back as a revenue in the general budget of the EU.
The EU is required to include a guarantee reserve to cover loans to third countries. This reserve is intended to cover the requirements of the Guarantee Fund and, where necessary, activated guarantees exceeding the amount available in the Fund, so that these amounts may be charged to the budget. This reserve of EUR 1 746 million corresponds to the target amount of 9 % of the loans outstanding at 31 December 2010. The net assets of the Fund at 31 December 2010 total EUR 1 346 million. The difference between the net assets and the amount of the reserve corresponds to the amount to be paid by the EU budget to the Fund, i.e. EUR 400 million. Fair-value changes of the available-for-sale debt security portfolio have been recognised in equity in 2010 totalling a decrease of EUR 30 million (2009: increase of EUR 16 million).
2.3.4.   
Available-for-sale assets (long-term)


This includes investments and participations purchased to help beneficiaries develop their business activities.

Long-term Available-for-sale assets








EUR millions




 


31.12.2010


31.12.2009




European Bank for Reconstruction and Development


188


157




Risk Capital Operations


137


132




ETF Start up


199


154




European Fund for South East Europe


102


96




Green for Growth Fund


20


20




GEEREF


56


—




Progress Microfinance Facility


14


—




Other investments


1


2




Total


717


561





European Bank for Reconstruction and Development (EBRD)

In May 2010, the Board of Governors approved an immediate increase in the authorised paid-in shares of EUR 1 billion. Payment for the paid-in shares issued was by way of a reallocation of net income previously allocated to surplus for other purposes, namely for the payment of such paid-in shares. As the EBRD is not quoted on any stock exchange and in view of the contractual restrictions included in the EBRD’s articles of incorporation relating, amongst others, to the sale of participating interests, capped at acquisition cost and only authorised to existing shareholders, the Commission's shareholding is valued at cost less any write-down for impairment.
The Commission has subscribed to 3 % of the EBRD's total capital of EUR 21 billion. At balance sheet date, the called up amount was EUR 187 million, which has been fully paid. Payments outstanding on non-called up capital amount to EUR 443 million.







EUR millions




EBRD


Total EBRD capital


Commission subscription




Total Share Capital


20 793


630




Paid-in


(6 197)


(187)




Uncalled


14 596


443




Under Risk Capital Operations amounts are granted to financial intermediaries to finance equity investments. They are managed by European Investment Bank and financed under the European Neighbourhood Policy.

ETF start up covers the Growth & Employment programme, the MAP programme and the CIP programme, under the trusteeship of the EIF, supporting the creation and financing of start-up SMEs by investing in suitable specialised venture capital funds.
The European Fund for South East Europe, an investment company with variable share capital (SICAV) is also included under this heading. The overall objective of EFSE is to foster economic development and prosperity in South East Europe through the sustainable provision of additional development finance via local financial intermediaries.
The overall objective of the Green for Growth Fund (former Southeast Europe Energy Efficient Fund) is to enhance energy efficiency and fostering renewable energies in South East Europe through the provision of dedicated financing to businesses and households via partnering with financial institutions and direct finance.
A new investment of EUR 56 million was made relating to GEEREF. This is a new innovative fund providing global risk capital through private investment for energy efficiency and renewable energy projects in developing countries and economies in transition. There is also a new investment in 2010 of EUR 14 million in the Progress Microfinance Facility for employment and social inclusion.
At year-end, a further EUR 122 million relating to ETF Start up and SME Finance Facility had been committed to, but not yet been drawn down by the other parties.
2.4.   LOANS









EUR millions




 


Note


31.12.2010


31.12.2009




Loans granted from the EU budget & ECSC



2.4.1



162


169




Loans granted from borrowed funds



2.4.2



11 478


10 595




Total


11 640


10 764




2.4.1.   
Loans granted from the European Union budget & the ECSC in liquidation










EUR millions




 


Loans with special conditions


ECSC housing loans


Total




Total at 31.12.2009


143


26


169




New loans


2


—


2




Repayments


(16)


(5)


(21)




Changes in carrying amount


11


1


12




Total at 31.12.2010


140


22


162




Loans with special conditions are granted at preferential rates as part of co-operation with non-member countries. All amounts fall due more than 12 months after year-end. The effective interest rates on these loans vary between 7,73 % and 14,507 %.
2.4.2.   
Loans granted from borrowed funds












EUR millions




 


MFA


Euratom loans


BOP


ECSC in liquidation


Total




Total at 31.12.2009


587


484


9 303


261


10 635




New loans


—


—


2 850


—


2 850




Repayments


(84)


(17)


—


—


(101)




Exchange differences


—


2


—


7


9




Changes in carrying amount


—


—


93


(4)


89




Total at 31.12.2010


503


469


12 246


264


13 482





Amount due < 1 year




—




—




2 004




—




2 004






Amount due > 1 year




503




469




10 242




264




11 478





The effective interest rates (expressed as a range of interest rates) were as follows:







Loans


31.12.2010


31.12.2009




Macro Financial Assistance (MFA)


0,99 %-4,54 %


0,9625 %-4,54 %




Euratom


0,96313 %-5,76 %


1,071 %-5,76 %




BOP


2,375 %-3,625 %


3,125 %-3,625 %




ECSC in liquidation


0,556 %-5,8103 %


0,346 %-5,8103 %





Macro Financial Assistance (MFA) loans

MFA is a policy-based financial instrument of untied and undesignated balance-of-payment and/or budget support to partner third-countries geographically close to the EU territory. 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. At 31 December 2010, EUR 300 million of loan agreements have been entered into by the Commission but not yet drawn down by the other party before the year-end. The Commission has not received third-party guarantees for these loans, but they are guaranteed by the Guarantee Fund (see note 2.3.3).

Euratom loans

Euratom is a legal entity of the EU and is represented by the European Commission. It grants loans to Member States for the purpose of financing investment projects in the Member States relating to the industrial production of electricity in nuclear power stations and to industrial fuel cycle installations. It also grants loans to non-Member States for improving the level of safety and efficiency of nuclear power stations and installations in the nuclear fuel cycle which are in service or under construction. Guarantees from third-parties of EUR 466 million (2009: EUR 481 million) have been received in respect of these loans.

Balance of Payment (BOP) loans

The BOP facility, a policy based financial instrument, has been reactivated during the current economic and financial crisis to provide medium-term financial assistance to Member States of the EU. It enables the granting of loans to Member States which are experiencing, or are seriously threatened with, difficulties in their balance of payments or capital movements. Only Member States which have not adopted the Euro may benefit from this facility. The maximum outstanding amount of loans to be granted is EUR 50 billion. These loans are guaranteed by the EU general budget.
Between November 2008 and end 2010, loans amounting to EUR 14,6 billion were granted to Hungary, Latvia and Romania, of which EUR 12,05 billion have been disbursed by the end of 2010. The following table shows the disbursement and maturity dates for the different BOP loan instalments already disbursed:









EUR millions




 


Hungary


Latvia


Romania


Total






Disbursed in 2008:












—


With maturity Nov. 2011






2 000


—


—


2 000






Disbursed in 2009:












—


With maturity April 2014






—


1 000


—


1 000










—


With maturity Nov. 2014






2 000


—


—


2 000










—


With maturity Jan. 2015






—


1 200


1 500


2 700










—


With maturity April 2016






1 500


—


—


1 500






Disbursed in 2010:












—


With maturity Sept. 2017






—


—


1 150


1 150










—


With maturity May 2019






—


500


1 000


1 500










—


With maturity Oct. 2025






—


200


—


200





Loans disbursed at 31.12.10




5 500




2 900




3 650




12 050





Total loans granted


6 500


3 100


5 000


14 600





Undrawn amounts at 31.12.10




Expired




200




1 350




1 550





It should be noted that the BOP assistance programme for Hungary expired in November 2010.

EFSM

Since disbursements under the European Financial Stability Mechanism (‘EFSM’) only took place after 31 December 2010, the details on these loans are given in Note 9.

ECSC in liquidation loans

This item mainly includes loans granted by the ECSC in liquidation on borrowed funds in accordance with articles 54 and 56 of the ECSC Treaty as well as three unquoted debt securities issued by the European Investment Bank (EIB) as substitute of a defaulted debtor. These debt securities will be held till their final maturity (2017 and 2019) in order to cover the service of related borrowings. The changes in carrying amount correspond to the change in accrued interests plus the amortisation of the year of premiums paid and transaction cost incurred at inception, calculated according to the effective interest rate method.
2.5.   LONG-TERM PRE-FINANCING








EUR millions




 


31.12.2010


31.12.2009
(Restated)




Pre-financing (see note 2.5.1)


40 298


39 750




Prepaid expenditure (see note 2.5.2)


3 820


1 794




Total Long-term Pre-financing


44 118


41 544




2.5.1.   
Pre-financing


The timing of the recoverability or utilisation of the pre-financing governs whether it is disclosed as current or long-term pre-financing asset. The utilisation is defined by the project's underlying agreement. All repayments or utilisation due before twelve months of the reporting date is disclosed as short–term pre-financing and therefore as current assets, the balance is long-term.

Total pre-financing








EUR millions




 


31.12.2010


31.12.2009




Long-term Pre-financing (see below)


40 298


39 750




Short-term Pre-financing (see note 2.9)


9 123


9 077




Total Pre-financing


49 421


48 827





Guarantees received in respect of pre-financing:

These are guarantees that the European Commission in certain cases requests from beneficiaries 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 event is linked to the existence of the guarantee. For the ‘on-going’ value, the guarantee’s generating event is the pre-financing payment and/or subsequent clearings. At 31 December 2010 the ‘nominal’ value of guarantees received in respect of pre-financing amounted to EUR 1 227 million while the ‘on-going’ value of those guarantees was EUR 1 059 million (2009: EUR 936 million and EUR 724 million respectively).
Certain pre-financing amounts paid out under the 7th Research Framework Programme for research and technological development (FP7) are effectively covered by a Participants Guarantee Fund (PGF) – the amount of pre-financing paid out in 2010 totalled EUR 3,2 billion (2009: EUR 2,7 billion). This is a mutual benefit instrument set up to cover the financial risks incurred by the EU and the participants during the implementation of the indirect actions of FP7, its capital and interests constituting a performance security. All participants of indirect actions taking the form of a grant (and thus a pre-financing in the Commission's books) contribute 5 % of the total EU contribution to the PGF's capital for the duration of the action. As such the participants are the owners of the PGF, the EU (represented by the Commission) acting as their executive agent. At the end of an indirect action, participants shall recover their contribution to the capital in full, except where the PGF incurs losses due to defaulting beneficiaries – in this case participants shall recover, at a minimum, 80 % of their contribution. The PGF thus guarantees the financial interest of both the Commission and the participants. At 31 December 2010 EUR 866 million has been contributed to the PGF by the participants (2009: EUR 561 million) – see also note 11.

Long-term pre-financing








EUR millions




Management type


31.12.2010


31.12.2009




Direct centralised management


1 695


1 148




Indirect centralised management


620


486




Decentralised management


441


347




Shared management


37 055


37 199




Joint management


487


568




Implemented by other Institutions & Agencies


0


2




Total


40 298


39 750




The most significant long-term pre-financing amounts relate to Structural Actions for the 2007-2013 programming period: the regional development fund (ERDF), the social fund (ESF), the agricultural fund for rural development (EAFRD), the cohesion fund (CF) and the fisheries fund. As many of these projects are long-term in nature, it is necessary that the related advances are available for more than one year. Thus these pre-financing amounts are shown as long-term assets.
2.5.2.   
Prepaid expenditure









EUR millions




 


31.12.2010


31.12.2009
(Restated)




Financial Engineering Instruments


3 820


1 794




Total


3 820


1 794




Under the framework of the cohesion and rural development programmes 2007-2013, payments can be made from the EU Budget to Member States so as to contribute to Financial Engineering Instruments (be it in the form of loans, guarantees or equity investments) set up and managed under the responsibility of the Member State. However, the basic legal acts do not oblige the Member States to provide periodic reports to the Commission on the use of these funds. It has been noted that while such payments had, up to and including 2010, been originally accounted for as expenses in the Commission's accounting system,not all the monies have been used by the Instrument.It is, therefore more appropriate to classify them as assets on the balance sheet (prepaid expenditure).
It has also been noted that, given the intended purpose of these amounts, their use cannot be determined simply by examining a basic source of information like the account statements of the Instrument since, for example, the amounts used as guarantees remain blocked on the Instruments′ bank accounts and the loans reimbursed to the Instrument become available for new loans. Since the Member States are not required to report specifically on these funds, and since it would not be cost-effective for the Commission to collect such information itself, so as to properly reflect in the financial statements the use of these amounts during the programming period, it has been necessary to make estimations. The most reliable method available, and thus the approach used, is charging the expenses to the economic outturn account on a straight line basis over the programming period up to 31.12.2015, that being the last date when such expenditure is allowable.
To achieve this objective, the Commission requested the necessary information from Member States during early 2011 so as to estimate and then recognise the unused amounts on the balance sheet at 31 December 2010. This total amount is split between amounts that the Member States expect to use during 2011 (shown in note 2.9.2) and amounts that will be used after 2011, shown in the table above.
In accordance with the EU accounting rules, and internationally accepted accounting practice, since the above constitutes a change in accounting policy and the amounts concerned are material, the 2009 balance sheet has been restated in these financial statements so as to present comparable figures showing the situation as it would have looked had the same accounting treatment been followed last year. The impact on 2008 was estimated to be only EUR 18 million, and consequently this amount was adjusted against the accumulated deficit in 2009 and no restatement of the 2009 opening balance was made. The impact of this restatement on the original 2009 balance sheet is shown below:








 


2009 balance sheet originally presented


Change in accounting policy


2009 balance sheet restated




Long-term pre-financing:




Pre-financing


39 750


—


39 750




Pre-paid expenditure


—


1 794


1 794




 


39 750


1 794


41 544




Short-term pre-financing:




Pre-financing


9 077


—


9 077




Pre-paid expenditure


—


359


359




 


9 077


359


9 436




Short-term receivables:




Accrued income & deferred charges


3 912


295


4 207




Total assets


100 859


2 448


103 307




Total liabilities


(145 585)


—


(145 585)





Net Assets




(44 726)




2 448




(42 278)






Accumulated Result & Reserves





Reserves


3 323


—


3 323




Accumulated deficit


(52 506)


18


(52 488)




Result current year


4 457


2 430


6 887




 


(44 726)


2 448


(42 278)




2.6.   LONG-TERM RECEIVABLES








EUR millions




 


31.12.2010


31.12.2009




Member States


14


26




ECSC staff loans


9


10




Guarantees and deposits


14


17




Other


3


2




Total


40


55




Amounts to be received from Member States refer to amounts due to the ECSC in liquidation from former accession countries. From the total tong-term receivables EUR 14 million (2009: EUR 26 million) relates to non-exchange transactions.

CURRENT ASSETS

2.7.   INVENTORIES








EUR millions




Description


31.12.2010


31.12.2009




Scientific materials


71


62




Other


20


15




Total


91


77




2.8.   SHORT-TERM INVESTMENTS


Short-term Available-for-sale assets








EUR millions




 


31.12.2010


31.12.2009




ECSC in liquidation


1 283


1 483




Risk Sharing Finance Facility


419


244




Loan Guarantee Instrument for TEN-T projects


111


61




BUFI investments


515


0




Other


3


3




Total


2 331


1 791




Short-term investments consist of available-for-sale financial assets, which are purchased for their investment return or yield, or held to establish a particular asset structure or a secondary source of liquidity and may therefore be sold in response to needs for liquidity or changes in interest rates.
Regarding the ECSC in liquidation amounts, all AFS investments are debt securities denominated in EUR and quoted in an active market. At 31 December 2010 debt securities (expressed at their fair value) reaching final maturity in the course of 2010 amount to EUR 294 million (2009: EUR 242 million).
While there have been acquisitions in both the Risk Sharing Finance Facility and the Loan Guarantee Instrument for TEN-T Projects (see also note 5.1.2), the large increase from the previous year is due mainly to the investment of provisionally cashed fines amounts in a specifically created fund managed by DG ECFIN (BUFI). In previous years, these amounts would have been held in specific bank accounts – see note 2.11, restricted cash.
2.9.   SHORT-TERM PRE-FINANCING








EUR millions




 


31.12.2010


31.12.2009
(Restated)




Pre-financing (see note 2.9.1)


9 123


9 077




Prepaid expenditure (see note 2.9.2)


955


359




Total short-term pre-financing


10 078


9 436




2.9.1.   
Pre-financing









EUR millions




Management type


31.12.2010


31.12.2009




Direct centralised management


3 038


2 924




Indirect centralised management


2 368


1 990




Decentralised management


536


700




Shared management


2 177


2 550




Joint management


894


832




Implemented by other Institutions & Agencies


110


81




Total


9 123


9 077




The decrease in short-term pre-financing under shared management is due to the winding down of the Solidarity Fund. Although pre-financing instalments were paid in 2010 for new projects (programmes related to the period 2007-2013), they were classified under long-term assets as explained in note 2.5. The increase in short-term pre-financing under the indirect and direct centralised management type is due to the increased activities, mainly in the research and development fields.
2.9.2.   
Prepaid expenditure









EUR millions




 


31.12.2010


31.12.2009
(Restated)




Financial Engineering Instruments


955


359




Total


955


359




As explained under note 2.5.2, these amounts relate to payments made to Member States under the framework of the cohesion and rural develoment programmes 2007-2013, so as to establish or contribute to Financial Engineering Instruments, but which have not yet been used by the instrument at year-end. The above amounts are expected to be used during 2011.
2.10.   SHORT-TERM RECEIVABLES








EUR millions




 


31.12.2010


31.12.2009
(Restated)




Loans and term deposits


2 170


216




Current receivables


6 786


4 519




Sundry receivables


20


16




Accrued income and deferred charges


4 525


4 207




Total


13 501


8 958




The total short-term receivables contain an estimated EUR 11 009 million (2009: 8 415 million) relating to non-exchange transactions.
2.10.1.   
Loans and term deposits


These amounts concern primarily BOP loans of EUR 2 004 million with remaining final maturities less than 12 months after the balance sheet date (see note 2.4 above). Also included under this heading are term deposits of EUR 166 million, primarily relating to the ECSC in liquidation.
2.10.2.   
Current receivables













EUR millions




Account Group


At 31.12.2010


At 31.12.2009




Gross amount


Write down


Net Value


Gross amount


Write down


Net Value




Customers


207


(79)


128


277


(76)


201




Fines


4 584


(406)


4 178


3 370


(133)


3 237




Member States


4 011


(1 625)


2 386


2 198


(1 191)


1 007




Others


96


(2)


94


76


(2)


74




Total


8 898


(2 112)


6 786


5 921


(1 402)


4 519





Customers

These are recovery orders entered in the accounts at 31 December 2010 as established entitlements to be recovered and not already included under other headings on the assets side of the balance sheet.

Fines

This concerns amounts to be recovered relating to fines issued by the Commission. The increase in the write-down from last year is primarily explained by the reduction during 2011 of fines decided before 31 December 2010. Additionally, the write-down takes into account the fact that some new fines issued could not be, in the context of the economic and financial crisis, covered by provisional payments or bank guarantees. Guarantees totalling EUR 2 585 million had been received for the fines outstanding at 31 December 2010 (2009: EUR 2 952 million) in respect of these receivables. It should be noted that EUR 1 771 million of the above amounts were due for payment after 31 December 2010.

Receivables from Member States


EAGF and Rural Development receivables

This item primarily covers the amounts owed by beneficiaries of EAGF at 31 December 2010, as declared and certified by the Member States at 15 October 2010, and less 20 % of the amount, which the Member States are allowed to retain to cover administrative costs. An estimation is made for the receivables arising after this declaration and up to 31 December 2010. 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. Please note also that the write-down method has been adjusted in 2010 with an impact on both income and expenditure which has a neutral effect on the net amount – see note 3.2.3. Following the new method, the receivables are booked for the nominal value and the value reduction is based on statistical analysis (recovery rate).

Own resources receivables

It should be noted that Member States are entitled to withhold 25 % of traditional own resources as collection costs, thus the above figures are shown net of this deduction. Based on the estimations sent by Member States, a write-down of EUR 811 million has been deducted from receivables from Member States. However, this does not mean that the Commission is waiving recovery of the amounts covered by this value adjustment.

Other receivables from Member States

Other receivables from Member States include EUR 30 million of recovery of expenses and EAGF advances of EUR 199 million compared to EUR 72 million and EUR 8 million respectively in 2009.







EUR millions




 


31.12.2010


31.12.2009





EAGF and Rural Development receivables





EAGF


1 130


627




TRDI


19


—




SAPARD


146


—




Write-down


(814)


(350)




Total


481


277





VAT paid and recoverable from Member States




46




38






Own resources





Established in the A account


81


89




Established in the separate account


1 285


1 260




Write-down


(811)


(841)




Other


391


25




Total


946


533





Other receivables from Member States




913




159





Total


2 386


1 007




2.10.3.   
Accrued income and deferred charges









EUR millions




 


31.12.2010


31.12.2009
(Restated)




Accrued income


3 445


3 655




Deferred charges


1 061


525




Other


19


27




Total


4 525


4 207




The main amount under this heading is accrued income:







EUR millions




 


31.12.2010


31.12.2009




Own resources


2 657


2 209




Agricultural assigned revenue Nov & Dec


72


940




EAGF: non-executed conformity correction decisions


520


0




Cohesion, Regional & Rural Development Funds: financial corrections


43


404




Other accrued income


153


102




Total accrued income


3 445


3 655




Other accrued income is primarily late interest income, accrued bank interest and accrued interest on pre-financing amounts.
The most significant amounts included as deferred charges relate to funds transferred by Member States into Financial Engineering Instruments which were yet to be declared to or reimbursed by the Commission at year-end. At 31 December 2010 these amounted to EUR 858 million (2009: EUR 295 million). It should be noted that the amount for 2009 has been restated - see note 2.5.2 for more details. Also included under deferred charges are amounts totalling EUR 182 million of which the main amounts are anticipated payments of EUR 50 million paid under bilateral fisheries agreements with third countries, EUR 41 million for the European school and EUR 44 million for office rental.
2.11.   CASH AND CASH EQUIVALENTS








EUR millions




 


31.12.2010


31.12.2009





Unrestricted cash:





Accounts with Treasuries & Central Banks


10 123


10 958




Current accounts


1 150


1 967




Imprest accounts


39


42




Transfers (cash in transit)


1


9




Short-term deposits and other cash equivalents


1 670


1 486




Total


12 983


14 462





Restricted cash




9 080




8 910





Total


22 063


23 372




2.11.1.   
Unrestricted cash


Unrestricted cash covers all the funds which the EU keeps in its accounts in each Member State and EFTA country (treasury or central bank), as well as in current accounts, imprest accounts, short-term bank deposits and petty cash.
Amounts shown as short-term deposits relate primarily to monies managed by fiduciaries on behalf of the EU for the purpose of implementing particular programmes funded by the EU budget. At year-end, EUR 131 million had been committed to, but not yet been drawn down by the other parties.
2.11.2.   
Restricted cash


Restricted cash refers to amounts received in connection with fines issued by the Commission for which the case is still open. These are kept in specific deposit accounts that are not used for any other activities.

NON CURRENT LIABILITIES

2.12.   EMPLOYEE BENEFITS








EUR millions




 


31.12.2010


31.12.2009




Pensions – Staff


32 801


33 316




Pensions – others


840


663




Joint Sickness Insurance Scheme


3 531


3 263




Total


37 172


37 242




2.12.1.   
Pensions – Staff


In accordance with Article 83 of the Staff Regulations, the payment of the benefits provided for in the staff pension scheme (PSEO: Pension Scheme of European Officials) constitutes a charge to the EU's budget. The scheme is not funded, but the Member States guarantee the payment of these benefits collectively according to the scale fixed for the financing of this expenditure. In addition, officials contribute one third to the long-term financing of this scheme via a compulsory contribution.
The liabilities of the pension scheme were assessed on the basis of the number of staff and retired staff at 31 December 2010 and on the rules of the Staff Regulations applicable at this date. This valuation was carried out in accordance with the methodology of IPSAS 25 (and therefore also EU accounting rule 12). The method used to calculate this liability is the projected unit credit method. The main actuarial assumptions available at the valuation date and used on the valuation were as follows:







Actuarial Assumptions


31.12.2010


31.12.2009




Nominal discount rate


4,6 %


4,5 %




Expected inflation rate


2,1 %


2,5 %




Real discount rate


2,4 %


2,0 %




Probability of marriage: Man/Woman


84 %/38 %


84 %/38 %




General Salary Growth/pension revaluation


0 %


0 %




2008 International Civil Servants Life Table


Yes


Yes




Liabilities cover the rights previously defined for the following persons:






1.


Staff in active employment at 31.12.2010 in all Institutions and Agencies included in the scheme;










2.


Staff in a deferred situation, i.e. who have temporally or definitively left the Institutions but leaving their pension rights in the pension scheme (and having accumulated at least 10 years of service);










3.


Former officials and other servants benefiting from a retirement pension;










4.


Former officials and other servants benefiting from a invalidity pension;










5.


Former officials and other servants benefiting from an invalidity allowance;










6.


The recipients of a survivor pension (widows or widowers, orphans, dependants).




The principal points to note are (see also table below for main movements):






—


The gross actuarial liability was valued at EUR 36 639 million at 31 December 2010 (2009: EUR 37 215 million). Added to this is a co-efficient corrector effect of EUR 1 063 million (2009: EUR 1 079 million). Taxes payable by beneficiaries are deducted from the total gross liability to arrive at the net liability included on the balance sheet (since tax is deducted on the payment of pensions and credited to the EU's revenue in the year of payment.) This net liability (gross liability less taxes) at 31 December 2010 has thus been estimated at EUR 32 801 million.










—


The number of members of the staff pension scheme increased by 1 578 individuals.




2.12.2.   
Pensions – Others


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 Secretaries General of 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.
2.12.3.   
Joint Sickness Insurance Scheme


A valuation is also made for the estimated liability that the EU has regarding its contributions to the Joint Sickness Insurance Scheme in relation to its retired staff. The gross liability has been valued at EUR 3 791 million and plan assets of EUR 260 million are deducted from the gross liability to arrive at the net amount. The discount rate and the general salary growth used in the calculation are the same as those used in the staff pension valuation.

Movement in Gross Employee Benefits liability








EUR millions




 


Staff pension liability


Sickness Insurance




Gross Liability at 31 December 2009


37 215


3 535




Service/normal cost


1 331


188




Interest cost


1 709


169




Benefits paid


(1 131)


(95)




Actuarial gains


(2 566)


(6)




Change due to newcomers


81


—





Gross Liability at 31 December 2010




36 639




3 791





2.13.   LONG-TERM PROVISIONS













EUR millions




 


Amount at 31.12.2009


Additional provisions


Unused amounts reversed


Amounts used


Transfer to short-term


Change in estimation


Amount at 31.12.2010




Legal cases


413


30


(136)


(1)


0


0


306




Nuclear site dismantlement


908


0


0


(3)


(21)


21


905




Financial


76


38


0


0


(30)


2


86




Other


72


18


(9)


(55)


(6)


0


20




Total


1 469


86


(145)


(59)


(57)


23


1 317





Legal cases

This is the estimate of amounts that will probably have to be paid out after 2011 in relation to a number of ongoing legal cases. The largest portion, EUR 300 million, concerns court cases pending at 31 December 2010 in relation to financial corrections for EAGF and other court cases concerning agricultural expenditure.

Nuclear site dismantlement

In 2008 a consortium of independent experts made an update of their 2003 study into the estimated costs of the decommissioning of the JRC nuclear facilities and waste management programme. Their revised estimate of EUR 1 222 million (previously EUR 1 145 million) is taken as the basis for the provision to be included in the financial statements. In accordance with the EU accounting rules, this estimate is indexed for inflation and then discounted to its net present value (using the Euro zero-coupon swap curve). At 31 December 2010, this resulted in a total provision of EUR 926 million split between amounts expected to be paid in 2011 (EUR 21 million) and afterwards (EUR 905 million). In view of the estimated duration of this programme (around 20 years), it should be pointed out that there is some uncertainty about this estimate, and the final cost could be different from the amounts currently entered.

Financial provisions

These concern provisions which represent the estimated losses that will be incurred in relation to the guarantees given under the SME Guarantee Facility 1998, the SME Guarantee Facility 2001 and the SME Guarantee Facility 2007 under CIP, where the European Investment Fund (EIF) is empowered to issue guarantees in its own name but on behalf of and at the risk of the Commission. The financial risk linked to the drawn and undrawn guarantees is, however, capped. Long-term financial provisions are discounted to their net present value (using the Euro Swap annual rate).

Other provisions

The main amount here concerns the estimates of the EU’s contributions to various Member States under the Emergency Veterinary Fund for certain animal disease outbreaks, totalling EUR 12 million (2009: EUR 60 million) split between amounts expected to be settled in 2011 (EUR 10 million) and later (EUR 2 million).
2.14.   LONG-TERM FINANCIAL LIABILITIES











EUR millions




 


MFA


Euratom loans


BOP


ECSC in liquidation


Total




Total at 31.12.2009


587


484


9 303


225


10 599




New borrowings


—


—


2 850


—


2 850




Repayments


(84)


(17)


—


—


(101)




Exchange differences


—


2


—


6


8




Changes in carrying amount


—


—


93


—


93




Total at 31.12.2010


503


469


12 246


231


13 449





Amount due < 1 year



—


—


2 004


—


2 004





Amount due > 1 year




503




469




10 242




231




11 445





This heading includes borrowings due by the European Union maturing in over one year. Borrowings include debts evidenced by certificates amounting to EUR 13 211 million (2009: EUR 10 324 million). The changes in carrying amount correspond to the change in accrued interests.
The effective interest rates (expressed as a range of interest rates) were as follows:







Borrowings


31.12.2010


31.12.2009




Macro Financial Assistance (MFA)


0,99 %-4,54 %


0,9625 %-4,54 %




Euratom


0,987 %-5,6775 %


0,9031 %-5,6775 %




BOP


2,375 %-3,625 %


3,125 %-3,625 %




ECSC in liquidation


0,556 %-9,2714 %


0,346 %-9,2714 %




2.15.   OTHER LONG-TERM LIABILITIES








EUR millions




 


31.12.2010


31.12.2009




Finance Leasing debts


1 672


1 736




Buildings paid for in instalments


382


395




Other


50


47




Total


2 104


2 178




This item covers primarily leasing liabilities due in more than one year (see note 2.2 above). Also included are amounts relating to certain buildings that the Commission bought where the purchase price will be paid off in instalments - these are not leasing contracts since title passed to the Commission immediately.

CURRENT LIABILITIES

2.16.   SHORT-TERM PROVISIONS













EUR millions




 


Amount at 31.12.2009


Additional provisions


Unused amounts reversed


Amounts used


Transfers from long term


Change in estimation


Amount at 31.12.2010




Legal cases


30


7


(7)


(1)


0


0


29




Nuclear site dismantlement


22


0


0


(22)


21


0


21




Financial


128


21


(3)


(38)


30


2


140




Other


33


10


(5)


(20)


6


0


24




Total


213


38


(15)


(81)


57


2


214




This heading includes the portion of provisions which fall due for payment in less than one year's time.
2.17.   SHORT-TERM FINANCIAL LIABILITIES

This heading includes BOP borrowings of EUR 2 004 million (see note 2.14) that mature during the 12 months following the balance sheet date (2009: EUR 40 million relating to MFA).
2.18.   ACCOUNTS PAYABLE








EUR millions




 


31.12.2010


31.12.2009




Current portion of long-term liabilities


78


71




Current payables


17 615


15 260




Sundry payables


97


133




Accrued charges and deferred income


66 739


78 420




Total


84 529


93 884




2.18.1.   
Current portion of long-term liabilities









EUR millions




 


31.12.2010


31.12.2009




Finance leasing liabilities


65


59




Other


13


12




Total


78


71




2.18.2.   
Current payables









EUR millions




Type


31.12.2010


31.12.2009




Member States


17 035


14 903




Suppliers and other


1 292


944




Estimated non-eligible amounts


(712)


(587)




Total


17 615


15 260




Current payables include cost statements received by the EU under the framework of the grant activities. They are credited for the amount being claimed from the moment the demand is received. If the counterpart is a Member State, they are classified as such. It is the same procedure for invoices and credit notes received under procurement activities. The cost claims concerned have been taken into account for the year-end cut off procedures. Following these cut off entries, estimated eligible amounts have therefore been recorded as accrued charges (see note 2.18.3 below), while the non-eligible parts remain open on the ‘Estimated non-eligible amounts’ accounts. In order not to overestimate assets and liabilities, it was decided to present the net amount under current liabilities.

Member States

The primary amounts here relate to EUR 16 924 million (2009: EUR 11 160 million) in unpaid cost claims for Structural Fund actions.

Suppliers and other

Included under this heading are amounts owed following grant and procurement activities, as well as amounts payable to public bodies and non-consolidated entities, (e.g. the EDF).

Estimated non-eligible amounts

Payables are reduced by EUR 712 million, being that part of the requests for reimbursement received, but not yet checked, that was considered to be ineligible. The largest amounts concern the Structural Actions DGs.
2.18.3.   
Accrued charges and deferred income









EUR millions




 


31.12.2010


31.12.2009




Accrued charges


66 326


76 435




Deferred income


407


1 976




Other


6


9




Total


66 739


78 420




The split of accrued charges is as follows:







EUR millions




 


31.12.2010


31.12.2009





EAGF accrued charges:





Expenses 16/10/2010 to 31/12/2010


33 015


32 087




Direct Aid


10 703


12 195




Sugar restructuring


400


735




Others


(303)


(55)




Total EAGF:


43 815


44 962





Structural Actions accrued charges:





EAFRD & EAGGF-G


10 792


9 076




EFF


116


347




ERDF & innovative actions


3 337


11 777




Cohesion fund


1 557


980




ISPA


74


3




ESF


2 182


5 411




Total Structural Actions:


18 058


27 594





Other accrued charges:






R&D



1 267


1 687





Other



3 186


2 192




Total Others:


4 453


3 879




Total accrued charges


66 326


76 435




There is a general trend of decreasing expenditure for the Structural Actions, due to the fact that the 2000-2006 programmes are now in the closing phase.
The large amount of deferred income at 31 December 2009 was due to the advance payment of 2010 own resources contributions by two Member States.

NET ASSETS & RESERVES

2.19.   RESERVES








EUR millions




 


31.12.2010


31.12.2009




Fair value reserve



(61)




69





Other reserves:




Guarantee Fund


1 746


1 472




Revaluation reserve


57


57




Borrowing and lending activities


1 525


1 511




Other


217


214




Total


3 545


3 254




Total


3 484


3 323




2.19.1.   
Fair value reserve


In accordance with the accounting rules, the adjustment to fair value of available-for-sale assets is accounted for through the fair value reserve. In 2010 amounts of EUR 48 million have been taken out of the fair value reserve and recognised in the economic outturn account relating to available-for-sale assets.
2.19.2.   
Other reserves



Guarantee Fund

See also note 2.3.3 concerning the operation of the Guarantee Fund. This reserve reflects the 9 % target amount of the outstanding amounts guaranteed by the Fund that is required to be kept as assets.

Revaluation reserve

The revaluation reserve comprises the revaluations of property, plant and equipment. The balance at the year-end of EUR 57 million relates to a revaluation of Commission land and buildings, which had already occurred before the transition to the new accounting rules.

Borrowing and lending activities reserve

The amount relates to the ECSC in liquidation reserve for the assets of the Research Fund for Coal and Steel. This reserve was created in the context of the winding-up of the ECSC.
2.20.   AMOUNTS TO BE CALLED FROM MEMBER STATES







EUR millions




 


Amount




Amounts to be called from Member States at 31 December 2009 (restated)



45 601





Return of 2009 budget surplus to Member States


2 254




Movement in Guarantee Fund reserve


273




Other reserve movements


21




ECSC in liquidation: transfer 2009 result to reserves


14




Economic outturn (surplus) for the year


(17 232)




Total amounts to be called from Members States at 31 December 2010


30 931





Split between:





Employee Benefits


37 172




Other amounts


(6 241)




This amount, which is not classified as a receivable from the Member States, is equivalent to the sum of the accumulated deficit resulting from previous years (EUR 48 163 million) and the economic surplus for 2010 (EUR 17 232 million). The purpose of ‘amounts to be called from Member States’ is to reflect the actual situation of an annual budget process which funds multi-annual actions. The reserves (EUR 3 484 million), which have to be used in accordance with their own specific regulations and rules, are deliberately not taken into account for this purpose.
In essence, this amount represents that part of the expenses already incurred by the EU up to 31 December 2010 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 and funded by using the budget of year N+1. 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 are the EAGF activities. The amount of payments due to the Member States for the period 16 October to 31 December 2010 was EUR 33 billion. The majority of the amounts to be called are in fact paid by the Member States in less than 12 months after the end of the financial year in question as part of the budget of the following year.
It is essentially only the employee benefits obligations of the Commission towards its staff which are paid out over a longer period, noting that the funding of the pension payments by the annual budgets is guaranteed by the Member States. For information purposes only, an estimate of the split of future employee benefit payments is given below:






EUR millions




 


Amount




Short-term: amounts to be paid in 2011


1 278




Long-term: amounts to be paid after 2011


35 894




Total employee benefits liability at 31.12.2010


37 172




There was a EUR 14,7 billion decrease in the amounts to be called from Members States compared to last year. This decrease is due mainly to: (1) a EUR 9,4 billion decrease in accounts payable (see note 2.18), (2) an increase of EUR 2 billion in short-term financial liabilities (note 2.17), (3) an increase of EUR 2,6 billion in long-term pre-financing, and (4) a EUR 4,6 billion increase in short-term receivables (note 2.10).
It should also be noted that the above has no effect on the budget outturn – budget revenue should always equal or exceed budget expenditure and any excess of revenue is returned to Member States.
3.   NOTES TO THE ECONOMIC OUTTURN ACCOUNT
3.1.   OWN RESOURCE AND CONTRIBUTIONS REVENUE









EUR millions




 


Note


2010


2009




Own resource revenue:



3.1.1



 


 




GNI resources


 


91 178


81 978




VAT resources


 


12 517


12 795




Traditional own resources:




Custom duties


 



16 065




14 002





Sugar levies


 


150


130




Total traditional own resources


 


16 215


14 132




Budgetary adjustments



3.1.2



2 135


1 399




Contributions of third countries (incl. EFTA countries)


 


283


233




Total


 


122 328


110 537




Own resources revenue is the primary element of the European Union’s operating revenue. Thus the bulk of expenditure is financed by own resources as other revenue represents only a minor part of the total financing.
3.1.1.   
Own resource revenue


There are three categories of own resources: traditional own resources, the VAT-based resource and the GNI-based resource. Traditional own resources comprise sugar levies and customs duties. A correction mechanism in respect of budgetary imbalances (UK Rebate) as well as a gross reduction in the annual GNI-based contribution of Netherlands and Sweden are also part of the own resources system. Member States retain, by way of collection costs, 25 % of traditional own resources, and the above amounts are shown net of this deduction.
Compared to 2009, there has been a EUR 9,2 billion increase in the GNI based own resource revenue, which reflects the need to finance higher payments appropriations in 2010. There was a EUR 2 billion increase in custom duties caused primarily by an increase in imports.
3.1.2.   
Budgetary adjustments


The budgetary adjustments include the budget surplus from 2009 (EUR 2 254 million) which is indirectly refunded to Member States by deduction of the amounts of own resources they have to transfer to the EU in the following year – thus it is a revenue for 2010. Additionally, according to the ORD 2007, the United Kingdom is granted a correction in respect of budgetary imbalances. As this amount is financed by the other Member States there should be no net effect on the budgetary or economic outturn. However, an amount of EUR 112 million was registered under this heading being the differences in the Euro rates used for budgetary purposes (see Article 10 (3) of Regulation (EC, Euratom) No 1150/2000) and the rates in force at the time when those Member States not part of the EMU actually made their payments.
3.2.   OTHER OPERATING REVENUE









EUR millions




 


Note


2010


2009




Fines



3.2.1



3 077


2 648




Agricultural levies



3.2.2



25


705




Recovery of expenses:



3.2.3



 


 




Direct centralised management


 


49


63




Indirect centralised management


 


11


6




Decentralised management


 


71


41




Shared management


 


1 776


1 066




Total


 


1 907


1 176




Revenue from administrative operations:



3.2.4



 


 




Staff


 


1 073


1 010




Property, plant and equipment related revenue


 


13


33




Other administrative revenue


 


121


165




Total


 


1 207


1 208




Miscellaneous operating revenue:



3.2.5



 


 




Adjustments/provisions


 


157


150




Exchange gains


 


460


618




Other


 


1 355


1 027




Total


 


1 972


1 795




Total


 


8 188


7 532




3.2.1.   
Fines


These revenues relate to fines imposed by the Commission for infringement of competition rules. Receivables and related revenues are recognised when the Commission decision imposing a fine has been taken and it is officially notified to the addressee.
3.2.2.   
Agricultural levies


These amounts concern milk levies of EUR 25 million (2009: EUR 99 million plus sugar levies of EUR 606 million). Milk levies are a market management tool aimed at penalising milk producers who exceed their reference quantities. As it is not linked to prior payments by the Commission, it is in practice considered as revenue for a specific purpose. Milk quotas are being phased out, which explains the continued decrease in levies revenue. From the 2008/2009 agricultural year onwards quotas will be increased annually by 1 % until their abolition in 2015.
Sugar levies relate to the sugar restructuring fund, whereby the reform of the sugar sector has lowered the internal price of sugar in order to reduce the gap between the EU price and the international price. To encourage the less competitive sugar producers to leave the market, a self-financing restructuring fund was created, financed by revenue stemming from a temporary tax levied on sugar producers, which is treated as assigned revenue. While the scheme's payments will continue until September 2012 all the revenue related to the sugar restructuring fund has already been declared by Member States at 31 December 2009, thus revenues are zero for 2010.
3.2.3.   
Recovery of expenses


This heading represents the recovery orders issued by the Commission and the deduction from subsequent payments recorded in the Commission's accounting system, to recover expenditures previously paid out from the general budget, based on controls, closed audits or eligibility analysis, together with recovery orders issued by Member States to beneficiaries of EAGF expenditure. It also includes the variation of accrued income estimations from the previous year-end to the current. It does not, however, show the full extent of the recovery of EU expenditure, particularly for the significant spending areas of Structural Actions where specific mechanisms are in place to ensure the return of ineligible monies, most of which do not involve the issuance of a recovery order. Recoveries of pre-financing amounts are also not included as revenue, in accordance with the EU accounting rules.
The main amount, EUR 1 775 million, relates to shared management and is made up of EUR 1 331 million concerning the European Agricultural Guarantee Fund (EAGF), EUR 19 million for TRDI, EUR 146 million for SAPARD and EUR 279 million for Structural Actions.
(a)   Agriculture: EAGF

In the framework of EAGF, amounts accounted for as revenue of the year under this heading are EUR 1 331 million, made up as follows:






—


conformity corrections decided during the year, EUR 1 032 million;










—


fraud and irregularities EUR 299 million: reimbursements declared by Member States and recovered during the year, EUR 178 million, plus the increase in the outstanding amounts declared by Member States to be recovered at year-end concerning fraud and irregularities, EUR 121 million (EUR 1 130 million minus the write-down adjustment of EUR 382 million at year-end 2010 compared to EUR 627 million at year-end 2009) – see also note 2.10.2.




(b)   Structural Actions

The recovery of expenditure under the Structural actions included under this heading amounted to EUR 279 million (2009: EUR 613 million). The main amounts in this sub-heading are the recovery orders issued by the Commission to recover undue expenditure made in previous years for an amount of EUR 610 million and the decrease of the accrued income at year-end of EUR 377 million.
Recovery orders are issued only in the following cases:






—


formal financial correction decisions by the Commission following the detection of irregular expenditure in the amounts claimed by Member States










—


adjustments at closure of a programme leading to a reduction in the EU contribution where a Member State has not declared sufficient eligible expenditure to justify the total pre-financing and interim payments already made; such operations may be without a formal Commission decision if accepted by the Member State;










—


repayment of amounts recovered after closure following the conclusion of legal proceedings which were pending at the time of closure.




Other recovery orders issued under Structural Actions concern the recovery of pre-financing. These amounts are not shown as revenue, but credited to the pre-financing heading on the balance sheet.
3.2.4.   
Revenue from administrative operations


This revenue arises from deductions from staff salaries and is made up primarily of two amounts – pension contributions and taxes on income.
3.2.5.   
Miscellaneous operating revenue


An amount of EUR 430 million (2009: EUR 376 million) relates to amounts received from accession countries. Exchange gains, except on financial activities dealt with in note 3.5 below, are also included under this heading. These arise from the everyday activities and related transactions made in currencies other than the Euro, as well as the year-end revaluation required to prepare the accounts. They contain both realised and unrealised gains. There was a net exchange gain for the year of EUR 21 million (2009: EUR 185 million).
3.3.   ADMINISTRATIVE EXPENSES








EUR millions




 


2010


2009




Staff expenses


5 171


4 898




Depreciation and impairment


384


436




Other administrative expenses


3 059


2 799




Total


8 614


8 133




These are administrative expenses incurred as part of the activities of the EU and include staff costs, depreciation and other costs associated with the running of the institutions and agencies (such as rental costs, maintenance costs, supplies, training costs, etc).
3.4.   OPERATING EXPENSES









EUR millions




 


Note


2010


2009
Restated





Primary operating expenses:




3.4.1



 


 




Direct centralised management


 


10 123


8 744




Indirect centralised management


 


4 045


3 605




Decentralised management


 


933


137




Shared management


 


85 432


87 251




Joint management


 


1 868


1 655




Total


 


102 401


101 392





Other operating expenses:




3.4.2



 


 




Adjustments/provisions


 


68


199




Exchange losses


 


439


432




Other


 


856


481




Total


 


1 363


1 112




Total


 


103 764


102 504




3.4.1.   
Primary operating expenses


The European Union's operating expenditure covers the various headings of the financial framework and takes different forms, depending on how the money is paid out and managed. The majority of the expenditure falls under the heading “Shared Management” involving the delegation of tasks to Member States, covering such areas as EAGF spending and actions financed through the different Structural Actions (the regional development fund, the social fund, the agricultural fund for rural development, the cohesion fund and the fisheries fund).
For shared management, the decrease in 2010 is due mainly to the closing of the programmes for the period 2000-2006 (ESF) and to the fact that for FEAGA the execution has diminished in 2010 compared to the previous year. This decrease is partly compensated by the Structural Actions for the programming period 2007-2013, which already reached a normal level in 2009, after a slow start-up. The increase of expenditure under centralised management is due to research and development actions.
As explained in note 2.5.2, in 2010 the Commission changed its accounting policy for certain expenditure under cohesion and rural development. Since the amounts concerned are material, the Commission is required by its accounting rules to restate the relevant 2009 figures so as to present comparable figures showing the situation as it would have looked had the same accounting treatment been followed last year. The impact of this restatement on the original 2009 economic outturn is shown below:








EUR millions




 


2009 accounts originally presented


Change in accounting policy


2009 accounts
Restated





Operating revenue



118 069


—


118 069





Operating expenses:





Primary operating expenses:




Shared management


(89 681)


2 430


(87 251)




Total operating expenses


(113 067)


2 430


(110 637)





Surplus from operating activities



5 002


2 430


7 432





Economic Outturn



4 457


2 430


6 887




3.4.2.   
Other operating expenses


Exchange losses, except on financial activities dealt with in note 3.6 below, occur on the everyday activities and related transactions made in currencies other than the Euro, as well as the year-end revaluation required to prepare the accounts – they are both realised and unrealised.
Under the ‘other’ sub-heading there was a significant increase in amounts written down on Commission debtors – EUR 365 million compared to EUR 26 million in 2009. This is due mainly to specific reductions made relating to fines decisions (EUR 273 million) and EAGF & Rural development write downs totalling EUR 82 million.

Research and Development costs:

Included as expenses in 2010 were the following costs:






EUR millions




 


2010




Research costs


295




Non-capitalised development costs


157





Recognised as an expense




452





3.5.   FINANCIAL REVENUE








EUR millions




 


2010


2009





Dividend income




1




14






Interest income:





On pre-financing


42


59




On late payments


382


132




On swaps


0


2




On available for sale assets


100


100




On loans


394


265




On cash & cash equivalents


110


158




Other


2


3




Total


1 030


719





Other financial income:





Realised gain on sale of financial assets


11


10




Other


83


76




Total


94


86





Present value adjustments




1




10






Exchange gains




52




6





Total


1 178


835




3.6.   FINANCIAL EXPENSES








EUR millions




 


2010


2009





Interest expenses:





Leasing


93


95




On swaps


0


2




On borrowings


380


248




Other


23


20




Total


496


365





Other financial expenses:





Adjustments to financial provisions


60


39




Financial charges on budgetary instruments


55


73




Impairment losses on AFS financial assets


5


15




Realised loss on sale of financial assets


1


0




Other


42


57




Total


163


184





Exchange losses




2




45





Total


661


594




3.7.   SHARE OF NET DEFICIT OF JOINT VENTURES & ASSOCIATES

In accordance with the equity method of accounting, the EU includes in its economic outturn account its share of the net deficit of its joint ventures and associates (see also notes 2.3.1 & 2.3.2).
3.8.   REVENUE FROM NON-EXCHANGE TRANSACTIONS

In 2010 EUR 129 597 million revenue from non-exchange transactions have been recognised in the economic outturn account.
3.9.   SEGMENT REPORTING

The segment report gives the split of the operating revenues and expenses by policy area, based on the Activity Based Budget structure, within the Commission. These policy areas can be grouped under three larger headings – Activities within the European Union, Activities outside the European Union and Services & other.
‘Activities within the European Union’ is the largest of these headings as it covers the many policy areas within the European Union. ‘Activities outside the European Union’ concerns the policies operated outside the EU, such as trade and aid. “Services & other” are the internal and horizontal activities necessary for the functioning of the EU Institutions and bodies.
Note that own resources and contributions are not split amongst the various activities as these are calculated, collected and managed by central Commission services. They are shown here so as to allow for comparison with the net result in the economic outturn account.

SEGMENT REPORTING – SUMMARY













EUR millions




 


Activities within the EU


Activities outside the EU


Services & Other


ECSC in Liquidation


Other Institutions


Consolidation eliminations


TOTAL




Other operating revenue:




Fines


3 077


0


0


0


0


0


3 077




Agricultural levies


25


0


0


0


0


0


25




Recovery of expenses


1 849


89


1


0


0


(32)


1 907




Revenue from admin operations


60


36


912


0


347


(148)


1 207




Other operating revenue


2 445


10


575


3


1


(1 062)


1 972




OTHER OPERATING REVENUE



7 456




135




1 488




3




348




(1 242)




8 188






Administrative expenses:





Staff expenses


(1 945)


(824)


(1 073)


0


(1 353)


24


(5 171)




Intangible assets and PPE related expenses


(88)


(13)


(119)


0


(164)


0


(384)




Other administrative expenses


(904)


(318)


(902)


0


(1 234)


299


(3 059)




 



(2 937)




(1 155)




(2 094)




0




(2 751)




323




(8 614)






Operating expenses:





Direct centralised management


(7 115)


(3 597)


(180)


0


0


769


(10 123)




Indirect centralised management


(3 821)


(213)


(45)


0


0


34


(4 045)




Decentralised management


(113)


(820)


0


0


0


0


(933)




Shared management


(85 173)


(29)


(230)


0


0


0


(85 432)




Joint management


(382)


(1 486)


0


0


0


0


(1 868)




Other operating expenses


(947)


(23)


(448)


(59)


(2)


116


(1 363)




 



(97 551)




(6 168)




(903)




(59)




(2)




919




(103 764)





TOTAL OPERATING EXPENSES


(100 488)


(7 323)


(2 997)


(59)


(2 753)


1 242


(112 378)





Net operating expenses




(93 032)




(7 188)




(1 509)




(56)




(2 405)




0




(104 190)





Own resource and contributions revenue


 



122 328






Surplus from operating activities



 



18 138





Net financial income


 


517




Movement in employee benefits liability


 


(1 003)




Share of associates/joint venture results


 


(420)





Economic outturn for the year



 



17 232









SEGMENT REPORTING – ACTIVITIES WITHIN THE EU















EUR millions




 


Economic & Financial affairs


Enterprise & Industry


Competition


Employment


Agriculture


Transport & Energy


Environment


Research


Information Society




Other operating revenue:




Fines


0


12


3 065


0


0


0


0


0


0




Agricultural levies


0


0


0


0


25


0


0


0


0




Recovery of expenses


0


1


0


15


1 603


12


1


32


14




Revenue from administrative operations


0


0


0


0


0


1


1


1


1




Other operating revenue


4


402


0


39


135


184


39


624


7




OTHER OPERATING REVENUE



4




415




3 065




54




1 763




197




41




657




22






Administrative expenses:




(57)




(178)




(82)




(108)




(115)



(268)




(110)




(391)




(125)





Staff expenses


(51)


(128)


(75)


(82)


(95)


(190)


(80)


(218)


(102)




Intangible assets and PPE related expenses


0


(8)


0


(0)


0


(11)


(1)


(2)


0




Other administrative expenses


(6)


(42)


(7)


(26)


(20)


(67)


(29)


(171)


(23)





Operating expenses:




(105)




(650)




(305)




(6 077)




(56 176)




(3 328)




(224)




(3 238)




(1 107)





Centralised direct management


(105)


(347)


1


(176)


(31)


(1 312)


(207)


(2 436)


(1 179)




Centralised indirect management


0


(90)


0


(7)


0


(1 750)


0


(714)


78




Decentralised management


0


0


0


(24)


0


(5)


0


0


0




Shared management


0


0


0


(5 850)


(56 037)


0


0


0


0




Joint management


0


(166)


0


(3)


0


(197)


0


0


0




Other operating expenses


0


(47)


(306)


(17)


(108)


(64)


(17)


(88)


(6)




TOTAL OPERATING EXPENSES


(162)


(829)


(387)


(6 185)


(56 291)


(3 596)


(333)


(3 630)


(1 231)





Net operating expenses




(158)




(414)




2 678




(6 131)




(54 528)




(3 399)




(292)




(2 973)




(1 209)





 


Joint Research Centre


Fisheries


Internal Market


Regional Policy


Taxation & Customs


Education & Culture


Health & Consumer protection


Justice, Freedom & Security


Total Activities within the EU




Other operating revenue:




Fines


0


0


0


0


0


0


0


0


3 077




Agricultural levies


0


0


0


0


0


0


0


0


25




Recovery of expenses


0


9


0


150


0


9


1


2


1 849




Revenue from administrative operations


38


0


0


0


0


0


9


9


60




Other operating revenue


77


7


174


1


0


166


337


249


2 445




OTHER OPERATING REVENUE



115




16




174




151




0




175




347




260




7 456






Administrative expenses:




(341)




(44)




(162)




(71)




(94)




(195)




(323)




(273)




(2 937)





Staff expenses


(242)


(35)


(113)


(59)


(38)


(100)


(197)


(140)


(1 945)




Intangible assets and PPE related expenses


(27)


0


(4)


0


(2)


(1)


(24)


(8)


(88)




Other administrative expenses


(72)


(9)


(45)


(12)


(54)


(94)


(102)


(125)


(904)





Operating expenses:




(85)




(523)




(51)




(22 677)




(16)




(1 445)




(615)




(929)




(97 551)





Centralised direct management


(63)


(254)


(10)


(46)


(16)


(175)


(411)


(348)


(7 115)




Centralised indirect management


0


0


0


(8)


0


(1 254)


(76)


0


(3 821)




Decentralised management


0


0


0


(84)


0


0


0


0


(113)




Shared management


0


(267)


0


(22 524)


0


0


0


(495)


(85 173)




Joint management


0


0


0


(15)


0


(1)


0


0


(382)




Other operating expenses


(22)


(2)


(41)


0


0


(15)


(128)


(86)


(947)




TOTAL OPERATING EXPENSES


(426)


(567)


(213)


(22 748)


(110)


(1 640)


(938)


(1 202)


(100 488)





Net operating expenses




(311)




(551)




(39)




(22 597)




(110)




(1 465)




(591)




(942)




(93 032)









SEGMENT REPORTING – ACTIVITIES OUTSIDE THE EU












EUR millions




 


External Relations


Trade


Development


Enlargement


Humanitarian Aid


Total Activities outside the EU




Other operating revenue:




Recovery of expenses


15


0


10


61


3


89




Revenue from administrative operations


36


0


0


0


0


36




Other operating revenue


5


0


1


5


(1)


10




OTHER OPERATING REVENUE



56




0




11




66




2




135






Administrative expenses:




(862)




(57)




(165)




(44)




(27)




(1 155)





Staff expenses


(577)


(49)


(144)


(37)


(17)


(824)




Intangible assets and PPE related expenses


(13)


0


0


0


0


(13)




Other administrative expenses


(272)


(8)


(21)


(7)


(10)


(318)





Operating expenses:




(2 766)




(7)




(1 387)




(1 063)




(945)




(6 168)





Direct centralised management


(1 722)


(5)


(866)


(531)


(473)


(3 597)




Indirect centralised management


(171)


0


(16)


(26)


0


(213)




Decentralised management


(259)


0


(95)


(466)


0


(820)




Shared management


(29)


0


0


0


0


(29)




Joint management


(574)


(2)


(405)


(38)


(467)


(1 486)




Other operating expenses


(11)


0


(5)


(2)


(5)


(23)




TOTAL OPERATING EXPENSES


(3 628)


(64)


(1 552)


(1 107)


(972)


(7 323)





Net operating expenses




(3 572)




(64)




(1 541)




(1 041)




(970)




(7 188)









SEGMENT REPORTING – SERVICES & OTHER
















EUR millions




 


Press & Communication


Anti-Fraud Office


Co-ordination


Personnel & Administration


Eurostat


Budget


Audit


Languages


Other


Total Services & Other




Other operating revenue:




Recovery of expenses


1


0


0


0


0


0


0


0


0


1




Revenue from administrative operations


2


5


0


764


0


51


0


90


0


912




Other operating revenue


(2)


(1)


8


25


0


37


0


53


455


575




OTHER OPERATING REVENUE



1




4




8




789




0




88




0




143




455




1 488






Administrative expenses:




(108)




(54)




(168)




(1 260)




(85)




(52)




(10)




(403)




46




(2 094)





Staff expenses


(67)


(38)


(140)


(448)


(62)


(39)


(9)


(316)


46


(1.073)




Intangible assets and PPE related expenses


(2)


(1)


0


(114)


0


0


0


(2)


0


(119)




Other administrative expenses


(39)


(15)


(28)


(698)


(23)


(13)


(1)


(85)


0


(902)





Operating expenses:




(136)




(17)




(2)




(32)




(37)




(234)




0




(15)




(430)




(903)





Direct centralised management


(91)


(17)


(1)


(30)


(37)


(4)


0


0


0


(180)




Indirect centralised management


(45)


0


0


0


0


0


0


0


0


(45)




Shared management


0


0


0


0


0


(230)


0


0


0


(230)




Other operating expenses


0


0


(1)


(2)


0


0


0


(15)


(430)


(448)




TOTAL OPERATING EXPENSES


(244)


(71)


(170)


(1 292)


(122)


(286)


(10)


(418)


(384)


(2 997)





Net operating expenses




(243)




(67)




(162)




(503)




(122)




(198)




(10)




(275)




71




(1 509)





4.   NOTES TO THE CASHFLOW TABLE
4.1.   PURPOSE AND PREPARATION OF THE CASHFLOW TABLE

Cash flow 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 cash flows.
The cashflow table is prepared using the indirect method. This means that the net surplus or deficit 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 cash flows.
Cash flows arising from transactions in a foreign currency are recorded in the European Union’s reporting currency (Euro), by applying to the foreign currency amount the exchange rate between the euro and the foreign currency at the date of the cash flow.
The cashflow table presented reports cash flows during the period classified by operating and investing activities (the EU does not have financing activities).
4.2.   OPERATING 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. Operating activities also include investments such as EIF, EBRD and venture capital funds. Indeed, the objective of these activities is to participate in the achievement of policy targeted outcomes.
4.3.   INVESTING ACTIVITIES

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.
It should be noted that EUR 9 080 million of cash and cash equivalent balances held by the Commission are not available for use by the EU. This is the cash received as payment of fines levied, where the other party is appealing the imposition of the fine. These amounts are clearly disclosed as “restricted cash” under note 2.11 above.
5.   CONTINGENT ASSETS & LIABILITIES AND OTHER DISCLOSURES

CONTINGENT ASSETS








EUR millions




 


31.12.2010


31.12.2009




Guarantees received:




Performance guarantees


301


252




Other guarantees


30


27




Other contingent assets


8


18




Total Contingent Assets


339


297




Performance guarantees are sometimes requested to ensure that beneficiaries of EU funding meet the obligations of their contracts with the EU. Other contingent assets relate primarily to possible reimbursement of taxes related to Commission buildings.

CONTINGENT LIABILITIES









EUR millions




 


Note


31.12.2010


31.12.2009




Guarantees given


5.1


22 171


19 330




Fines – appeals to the Court of Justice


5.2


9 627


11 969




EAGF – court judgements pending


5.3


1 772


1 945




Amounts relating to legal cases and other disputes


5.4


458


416




Other contingent liabilities


5.5


4


12




Total Contingent Liabilities


 


34 032


33 672




All contingent liabilities would be financed, should they fall due, by the EU budget in the years to come.




5.1.   GUARANTEES GIVEN

5.1.1.   
On loans granted by the European Investment Bank (EIB) from its own resources












EUR millions




 


Risk Sharing
31.12.2010


Non-risk Sharing
31.12.2010


Outstanding
31.12.2010
Total


Outstanding
31.12.2009




Public authority


Private company




65 % guarantee


3 625


12 443


2 149



18 217



14 945




70 % guarantee


87


2 132


62



2 281



2 596




75 % guarantee


0


635


60



695



850




100 % guarantee


0


683


106



789



821




Total


3 712


15 893


2 377


21 982


19 212




The EU budget guarantees loans signed and granted by the EIB from its own resources to third countries at 31 December 2010 (including loans granted to Member States before accession). However, the EU’s guarantee is limited to a percentage of the ceiling of the credit lines authorised: 65 %, 70 %, 75 % or 100 %. Where the ceiling is not reached, the EU guarantee covers the full amount. At 31 December 2010 the amount outstanding totalled EUR 21 982 million and this, therefore, is the maximum exposure faced by the EU.
For loans covered by the EU budget guarantee, the EIB also obtains guarantees from third parties (States, public or private financial institutions); in these cases the Commission is a secondary guarantor. The EU budget guarantee covers only the political risk of guarantees provided under the title of "risk-sharing". The other risks are covered by the EIB should the primary guarantor not honour the undertakings given. For guarantees provided under the title of "non-risk sharing", all the risks are covered by the EU budget should the primary guarantor not honour its undertakings given. If the primary guarantor is a public authority these risks are confined as a rule to the political risk, but when the guarantees are provided by an institution or a private company, the EU budget might also have to cover the commercial risk.
5.1.2.   
Other guarantees given









EUR millions




 


31.12.2010


31.12.2009




Risk Sharing Finance Facility (RSFF)


161


94




Loan Guarantee Instrument for Ten-T Projects (LGTT)


11


6




MEDA: Moroccan guarantees


17


17




Other


0


1




Total


189


118





Risk Sharing Finance Facility (RSFF)

Under Risk Sharing Finance Facility (RSFF), the Commission's contribution is used to provision financial risk for loans and guarantees given by the EIB to eligible research projects. In total, a Commission budget of up to EUR 1 billion is foreseen for the period 2007 to 2013, of which up to EUR 800 million are from the ‘Cooperation’ and up to EUR 200 million from the ‘Capacities’ specific programmes. The EIB has committed itself to provide the same amount.
At 31 December 2010 the Commission had contributed EUR 515 million to the RSFF. This has been invested by the EIB in bonds (EUR 419 million at 31 December 2010), term deposits (EUR 55 million) and cash equivalents (EUR 33 million). At end 2010, EUR 2 212 million of loans have been signed and are thus covered by the Facility. A default of EUR 5 million occurred during 2009 and thus was charged to the Facility. The amount included as a contingent liability above, EUR 161 million, represents the estimated maximum loss at 31 December 2010 that the Commission would suffer in case of defaults on loans or guarantees given by the EIB within the framework of the RSFF. This represents 7,3 % of the total amounts guaranteed. It should be noted that the Commission's overall risk is limited to the amount it contributes to the Facility.

Loan Guarantee Instrument for Ten-T Projects (LGTT)

The Loan Guarantee Instrument for Ten-T Projects (LGTT) issues guarantees so as to mitigate revenue risk in the early years of TEN-Transport projects. Specifically the guarantee would fully cover stand-by credit lines, which would only be drawn upon in cases where project cash flows are insufficient to service senior debt. The instrument is a joint financial product of the Commission and the EIB and the TEN-T regulation has earmarked EUR 500 million from the EU budget to be allocated during the period 2007-2013. The EIB will allocate another EUR 500 million, so in total the amount available will be EUR 1 billion to the instrument.
At 31 December 2010 the Commission had contributed EUR 155 million to the LGTT. This has been invested by the EIB in bonds (EUR 111 million at 31 December 2010), term deposits (EUR 36 million) and cash (EUR 5 million). At end 2010, EUR 140 million of loans have been signed and are thus covered by the guarantee. The amount included as a contingent liability, EUR 11 million, represents the estimated maximum loss at 31 December 2010 that the Commission would suffer in case of defaults on loans given by the EIB within the framework of the LGTT operations. This represents 7,9 % of the total amounts guaranteed. It should be noted that the Commission's overall risk is limited to the amount it contributes to the Instrument.
The assets of the RSFF and LGTT instruments are included on the Commission's balance sheet as short-term Available-for-sale assets (see note 2.8) and cash (note 2.11).

Meda

As part of the MEDA programme, the Commission created a guarantee mechanism through a specific fund, which will benefit two Moroccan organisations, namely the Caisse Centrale de Garantie and the Fonds Dar Ad-Damane. As at 31 December 2010, the fund amounts to EUR 27 million that are shown as cash and cash equivalents – see note 2.11. The Commission guarantee shown as contingent liability covers EUR 17 million of the loans given by the organisations mentioned above.
5.2.   FINES

These amounts concern fines imposed by the Commission for infringement of competition rules that have been provisionally paid and where either an appeal has been lodged or where it is unknown if an appeal will be made. The contingent liability will be maintained until a decision by the Court of Justice on the case is final. Interest earned on provisional payments (EUR 561 million) is included in the economic result for the year and also as a contingent liability to reflect the uncertainty of the Commission’s title to these amounts.
5.3.   EAGF – COURT JUDGEMENTS PENDING

These are contingent liabilities towards the Member States connected with the EAGF 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. An estimate of the probable amounts to be paid has been included as a long-term provision on the balance sheet – see note 2.13.
5.4.   AMOUNTS RELATED TO LEGAL CASES AND OTHER DISPUTES

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 288 EC 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.
5.5.   OTHER CONTINGENT LIABILITIES

This heading includes other smaller contingent liability amounts not classifiable under the above headings.

Other significant disclosures

5.6.   COMMITMENTS AGAINST APPROPRIATIONS NOT YET CONSUMED








EUR millions




 


31.12.2010


31.12.2009




Commitments against appropriations not yet consumed


155 642


134 689




The budgetary RAL (‘Reste à Liquider’) is an amount representing the open commitments for which payments and/or de-commitments have not yet been made. This is the normal consequence of the existence of multi-annual programmes. At 31 December 2010 the budgetary RAL totalled EUR 194 395 million. The amount disclosed above is this budgetary RAL less related amounts that have been included as expenses in the 2010 economic outturn account.
5.7.   SIGNIFICANT LEGAL COMMITMENTS








EUR millions




 


31.12.2010


31.12.2009




Structural Operations


210 638


275 761




Protocol with Mediterranean countries


263


263




Fisheries agreements


130


249




Galileo programme


513


1 517




GMES programme


390


556




TEN-T


3 530


4 289




Other contractual commitments


3 920


1 325




Total


219 384


283 960




These commitments originated because the Commission decided to enter into long-term legal commitments in respect of amounts that were not yet covered by commitment appropriations in the budget. This can relate to multi-annual programmes such as Structural Actions or amounts that the European Union is committed to pay in the future under administrative contracts existing at the balance sheet date (e.g. relating to the provision of services such as security, cleaning, etc, but also contractual commitments concerning specific projects such as building works). Not all multi-annual programmes contain commitments requiring inclusion under this heading since expenditure in future years is conditional on the annual decisions by the budgetary authority or changes in the rules concerned.
5.7.1.   
Structural Actions


The table below shows a comparison between the legal commitments for which budget commitments have not yet been made and the maximum commitments in relation to the amounts foreseen in the financial framework 2007-2013.










EUR millions




 


Financial perspective amounts 2007-2013
(A)


Legal commitments concluded
(B)


Budget commitments 2007-2010
(C)


Legal commitments less budget commitments
(= B – C)


Maximum commitment
(= A – C)




Cohesion policy funds


347 550


346 475


189 574


156 901


157 976




Natural Resources


100 549


100 549


54 759


45 790


45 790




Instrument for Pre-Accession Assistance


10 958


7 357


4 086


3 271


6 872




Total


459 057


454 381


248 419


205 962


210 638




5.7.2.   
Protocols with Mediterranean countries


These commitments total EUR 263 million and relate to financial protocols with Mediterranean non-member countries. The amount included here is the difference between the total amount of the protocols signed and the amount of the budget commitments entered in the accounts. These protocols are international treaties that cannot be wound up without the agreement of both parties, although the winding-up process is on-going.
5.7.3.   
Fisheries agreements


These are commitments totalling EUR 130 million entered into with third countries for operations under international fisheries agreements.
5.7.4.   
Galileo programme


Galileo is a global navigation satellite system (GNSS) currently being built by the European Union and European Space Agency (ESA). The Galileo programme is now financed entirely from the EU budget and it is the Commission who manages the programme on behalf of the EU. It is expected that the first phase of the programme, the In-Orbit Validation (‘IOV’) phase, will be completed during 2012 and the transfer of the created assets to the Commission will take place then.
It should be noted that the Commission has, up to end 2010 and including the previous investment in the GJU, paid EUR 1 178 million towards the IOV phase of the Galileo programme. As this programme is currently still in the research phase, under the EU accounting rules, the money spent has been expensed and no intangible assets have been recognised. The total (indicative) Commission contribution foreseen for the next phase (‘FOC’) of the Galileo programme (from 2008 to 2013) is EUR 2 408 million.
5.7.5.   
GMES programme


The Commission has entered into a contract with the ESA for the period from 2008 to 2013 for the implementation of the space component of Global Monitoring for Environment and Security (GMES). The total indicative amount for that period is EUR 624 million. In 2010, EUR 166 million of expenses have been incurred by ESA.
5.7.6.   
TEN-T commitments


This amount relates to grants in the field of the trans-European transport network (TEN-T) for the period 2007-2013. The programme applies to projects identified for the development of a trans-European transport network to support both infrastructure projects and research and innovation projects to foster the integration of new technologies and innovative processes on the deployment of new transport infrastructure. The total indicative amount for this programme is EUR 8 013 million.
5.7.7.   
Other contractual commitments


The amounts included correspond to amounts committed to be paid during the term of the contracts. Included here is the outstanding contractual obligation of EUR 83 million concerning the renovation costs of buildings of the Court of Justice, EUR 76 million concerning building related contracts of the Council, as well as EUR 434 million relating to building contracts of the Parliament and EUR 446 million from the Commission (concerning primarily two major building projects in Luxembourg). The other significant amount included here is EUR 2 654 million relating to procurement arrangements of the Fusion for Energy Agency (European Joint Undertaking for ITER and the Development of Fusion Energy) in the context of the ITER project.
5.8.   OPERATING LEASE COMMITMENTS










EUR millions




Description


Future amounts to be paid




< 1 year


1- 5 years


> 5 years


Total




Buildings


350


1 235


749


2 334




IT materials and other equipment


12


38


0


50




Total


362


1 273


749


2 384




This heading covers buildings and other equipment rented under operating leasing contracts that do not meet the conditions for entry on the assets side of the balance sheet. The amounts indicated correspond to commitments still to be paid during the term of the contracts.
In 2010, EUR 363 million was recognised as an expense in the economic outturn account in respect of operating leases.
6.   FINANCIAL CORRECTIONS AND RECOVERIES
6.1.   INTRODUCTION

This note provides an overview of the correction of errors and irregularities detected, in particular in that part of the EU budget that is implemented under the shared management mode (i.e. some 80 % of the total budget). Under shared management, the Commission relies on Member States for the implementation of EU programmes i.e. the EU contribution is paid to the Member States, generally to a specific paying agency, which is then responsible for the payments made to beneficiaries. As a result, Member States are the primary responsible for the prevention, detection and correction of errors and irregularities committed by the beneficiaries, while the European Commission ensures an overall supervisory role (i.e. verifying the effective functioning of Member States′ management and control systems).
6.1.1.   
Financial corrections


Financial corrections are the main tool used for the correction of errors and irregularities in the context of shared management. Financial corrections are made by the European Commission so as to exclude from EU funding expenditure that is not in accordance with applicable rules and regulations. Financial corrections may also be applied following the detection of serious deficiencies in the management and control systems of Member States. The final objective of this correction mechanism is to ensure that all expenditure declared by the Member State (i.e. on the basis of which the EU contribution is paid) is regular. The issuance of a recovery order by the Commission to recover amounts unduly paid is just one of the means of implementation of financing corrections.
The processing of financial corrections follows these three main steps:






(1)


The amount of the financial correction is being established through legal and contradictory procedure (‘in progress’);










(2)


The amount of the financial correction is established with certainty and is definitive, either ‘decided’ through a Commission decision, or ‘confirmed’ (i.e. accepted) by the Member State;










(3)


the amount is ‘implemented’, by any of the following means: (a) following the issuance of a recovery order by the Commission, the amount is either paid by the Member State to the Commission, or offset by the Commission from future Commission payments to the concerned Member State; or (b) once the correction is accepted, the Member State deducts (withdraws) this amount from a subsequent payment claim to the Commission, before recovery proceedings are completed at national level (withdrawal), or once the recovery proceedings are completed at national levels and amounts are effectively recovered from the beneficiary (recovery at national level); in both cases (withdrawal or recovery at national level deducted by the Member State from a subsequent payment claim), the replacement of irregular expenditure by other eligible expenditure is allowed by the applicable regulations. According to accrual accounting principles, the validation of the recovery order or of the payment request, depending on the case, by the authorising officer in the accounting system is a necessary step to establish the implementation of financial corrections. However at programme closure when no re-use of the funds is possible by the Member State, the Commission implements the financial correction by decommitment.




(1)   Financial corrections in progress

The amount disclosed under financial corrections in progress is based on audit findings of the Commission and those of the Court of Auditors or OLAF, all of which are followed up by the relevant Directorate General through on-going contradictory procedures with the concerned Member States. This is a best and prudent estimate, taking into account the state of play of the follow up of the audits and the issuance of final position letters (or pre-suspension letters) at 31 December 2010. This amount will certainly be subject to change following the contradictory procedures, under which Member States are given the opportunity to present further evidence to support their claims.
(2)   Financial correction decided/confirmed

In the area of Agriculture and Rural Development for the 2007-2013 period, the EAGF (i.e. European Agricultural Guarantee Fund) and the EAFRD (i.e. European Agricultural Fund for Rural Development) have replaced the EAGGF (i.e. European Agricultural Guidance and Guarantee Fund) (2000-2006). Financial corrections’ decisions are mainly launched as a result of the verification of the expenditure declared by the Member States that is subject to following clearance of accounts procedures:






—


An annual financial clearance decision is adopted by the Commission to formally accept the paying agencies′ annual accounts on the basis of management verifications and certifications;










—


A multi-annual conformity clearance decision is adopted by the Commission on the conformity of the expenditure declared by Member States with applicable EU rules and regulations;










—


A financial clearance decision on payment execution is adopted by the Commission as a result of which financial corrections may be established for payments that do not respect legal or regulatory deadlines.




In the area of Cohesion Policy, financial corrections decided/confirmed are the result of EU controls and audits by the Commission, the European Court of Auditors or OLAF.
(3)   Implementation of Financial corrections

In the case of the EAGF, financial corrections are always implemented by deduction in the monthly declarations. For the EAFRD, the amounts recovered by the Member States themselves, as well as the financial corrections decided, may be re-used.
Financial corrections under Cohesion Policy are implemented as follows:






—


The Member State accepts the correction required or proposed by the Commission: the Member State applies itself the financial correction, through deduction from a subsequent payment claim (see withdrawals and recoveries in section 6.1.1 (3) above). All amounts corrected by the Member States may then be re-used for other eligible operations, which have incurred regular expenditure. In these cases there is no impact in the Commission's accounts, as the level of EU funding to a specific programme is not reduced. The EU's financial interests are thus protected against irregularities and fraud.










—


The Member State disagrees with the correction required or proposed by the Commission, following a formal contradictory procedure with the Member State that includes the suspension of payments to the programme; in this case, the Commission has three months from the date of a formal hearing with the Member State (six months for 2007-2013 programmes) to adopt a formal financial correction decision and issues a recovery order to obtain repayment from the Member State. These cases lead to a net reduction of the EU contribution to the specific operational programme affected by the financial correction (no possibility for the Member State to re-use the corrected amount for other eligible operations).










—


At programme closure when no re-use of the funds is possible by the Member State, the amount of the financial correction is either deducted from the final cost claim submitted by the Member State or decommitted by the Commission.




6.1.2.   
Recoveries


Recovery of amounts is just a mean of implementing financial corrections that merit a separate disclosure given the importance attached to it by the Budget Authority.
In accordance with the Financial Regulation recovery orders should be established by the authorising officer for amounts unduly paid. Recoveries are then implemented by direct bank transfer from the debtor (e.g. Member State) or by offsetting from other amounts that the Commission owes to the Member State. The Financial Regulation foresees additional procedures to ensure the collection of recovery orders overdue, which are the object of a specific follow up by the Accounting Officer of the Commission.
In the area of Agriculture, Member States are obliged to identify errors and irregularities and to recover amounts unduly paid in accordance with national rules and procedures. For the EAGF, amounts recovered from the beneficiaries are credited to the Commission, after deduction applied by Member States of 20 % (on average), who book them as revenue in the economic outturn account. For EAFRD, recoveries are deducted from the next payment claim before it is sent to the Commission's services, and therefore the relevant amount can be reused for the programme. If a Member State does not pursue the recovery or is not diligent in its actions, the Commission may decide to intervene and to impose a financial correction on the Member State concerned.
In the area of Cohesion Policy, Member States (and not the Commission) are primarily responsible for recovering, from beneficiaries, amounts unduly paid increased, where applicable, by late payment interest. The amounts recovered by the Member States are disclosed in this note as additional information, in addition to financial corrections imposed by the Commission. For the 2007-2013 period, Member States are legally required to provide the Commission with clear and structured data on amounts withdrawn from co-financing before the national recovery process is finalised and the amounts effectively recovered from beneficiaries at national level.
6.1.3.   
Suspensions and interruptions of payments


In accordance with sector legislation the Commission may also:






—



interrupt the payment deadline for a maximum period of 6 months for 2007-2013 programmes if:






(a)


There is evidence of a significant deficiency in the functioning of the management and control systems of the Member State concerned;










(b)


The Commission services have to carry out additional verifications following information that expenditure in a certified statement of expenditure is linked to a serious irregularity which has not been corrected.














—



suspend all or part of an interim payment to a Member State for both 2000-2006 and 2007-2013 programmes in the following three cases:






(a)


Serious deficiency in the management and control system of the programme; or










(b)


Expenditure in a certified statement of expenditure is linked to a serious irregularity which has not been corrected; or










(c)


Serious breach by a Member State of its management and control obligations.








Where the required measures are not taken by the Member State, the Commission may impose a financial correction.
6.1.4.   
Other management types


Concerning the part of the EU budget that is managed under the direct management mode, expenditure that is not in accordance with applicable rules and regulations is either the subject of a recovery order established by the Commission or deducted from the subsequent cost statement. If the deduction is directly made by the beneficiary in the cost statement, the information cannot be registered in the Commission's accounting system. The recovery of amounts unduly paid under the decentralised and indirect centralised management modes is responsibility of Member States, third countries or agencies. The joint management mode applies also corrective tools that are defined in the agreements concluded with international organisations.

Note: All figures are rounded into millions of Euros. It should be noted that due to the rounding of figures, some financial figures in the tables may not add up. Amounts shown as 0 represent figures of less than EUR 500 000. Amounts that equal to zero are shown as a dash (–).
6.2.   FINANCIAL CORRECTIONS AND RECOVERIES UNDER AGRICULTURE AND RURAL DEVELOPMENT

6.2.1.   
Financial corrections and recoveries decided in 2010



EAGF financial corrections decided in 2010








EUR millions




 


2010


2009





EAGF Clearance of accounts procedure:





Financial clearance and non-respected payment deadlines


33


103




Conformity clearance


1 022


359




Subtotal


1 055


462








Rural Development financial corrections decided in 2010








EUR millions




 


2010


2009





Rural development financial corrections:





TRDI 2000-2006


49


11




SAPARD 2000-2006


3


14




EAFRD 2007-2013


20


—




Subtotal


73


25








Recoveries confirmed in 2010








EUR millions




 


2010


2009




EAGF - irregularities


178


163




TRDI - recoveries


10


—




SAPARD - recoveries


5


—




EAFRD - irregularities


98


47




Subtotal


292


210








Total financial corrections and recoveries decided/confirmed in 2010








EUR millions




 


2010


2009





EAGF:





Financial corrections


1 055


462




Recoveries


178


163




Subtotal EAGF


1 233


625





Rural Development:





Financial corrections


73


25




Recoveries


114


47




Subtotal Rural Development


187


72




Total


1 420


697




A breakdown of the EAGF amounts per Member State is disclosed in Annex 1.
All the above amounts are included in the economic outturn account of the Commission. The increase in conformity clearance procedures in 2010 follows a previous decrease between 2008 and 2009. This is primarily due to the absence of non-executed clearance decisions at end 2009. In fact 2008 included a non-executed clearance decision for an amount of EUR 178 million, which explained the decrease observed between 2008 and 2009. Similarly, 2010 figures include a non-executed clearance decision totalling EUR 471 million which was adopted before the year-end and for which financial execution will be in 2011. This explains the increase between 2009 and 2010.
Recoveries confirmed include for the first time in 2010 amounts from EAFRD, for a total of EUR 98 million, which explains the increase compared to 2009.
6.2.2.   
Financial corrections and recoveries implemented in 2010



EAGF financial corrections implemented in 2010








EUR millions




 


2010


2009





EAGF Clearance of accounts procedure:





Financial clearance and non-respected payment deadlines


33


103




Conformity clearance


728


600




Total


761


703








Rural development financial corrections implemented in 2010








EUR millions




 


2010


2009





Rural development financial corrections:





TRDI 2000-2006


49


11




SAPARD 2000-2006


3


14




EAFRD 2007-2013


0


0




Subtotal


53


25








Recoveries implemented in 2010








EUR millions




 


2010


2009




EAGF - irregularities


172


148




TRDI - recoveries


10


—




SAPARD - recoveries


5


—




EAFRD - irregularities


98


47




Subtotal


286


195








Total financial corrections and recoveries implemented in 2010








EUR millions




 


2010


2009





EAGF:





Financial corrections


761


703




Recoveries


172


148




Subtotal EAGF


934


851





Rural Development:





Financial corrections


53


25




Recoveries


114


47




Subtotal Rural Development


167


72




Total


1 101


923




A breakdown of the EAGF amounts per Member State is disclosed in Annex 2.
Concerning the financial execution of clearance decisions, the amounts are generally stable and show little variation from one year to the next. Concerning the EAFRD, which became operational in the programming period 2007-2013, the first wave of EU controls and audits has started. Financial correction amounts are expected to be reported in the coming years (see note 6.2.4 on financial corrections in progress).
As already mentioned above under recoveries confirmed, recoveries implemented include for the first time in 2010 amounts from EAFRD totalling EUR 98 million, which primarily explains the increase compared to 2009. This figure is expected to increase in the coming years for the reason mentioned above.
6.2.3.   
Financial corrections – cumulative figures



EAGF financial corrections implemented in 2010 – cumulative figure 1999-2010








EUR millions




 


2010


2009





EAGF Clearance of accounts procedures



6 258


5 719




Total


6 258


5 719




This amount represents the total financial impact of clearance of accounts procedures since this corrective mechanism has been implemented, i.e. from 1999 onwards.

Other financial corrections implemented in 2010 – cumulative figure 2000-2010








EUR millions




 


As at end 2010


As at end 2009





Other financial corrections:





TRDI 2000-2006


61


11




SAPARD 2000-2006


17


14




EAFRD 2007-2013


21


0




Subtotal


98


25




The cumulative figure for EAGF clearance of accounts corrections represents the amounts formally decided by means of Commission's decisions. Clearance decisions No. 1 to No. 34 have been taken into account in the 2010 figure. It should be noted that all conformity clearance decisions have been formally taken while financial clearance decisions usually take a longer time to proceed and will impact the coming years.
6.2.4.   
Financial corrections in progress



EAGF financial corrections in progress as at 31.12.2010











EUR millions




 


Financial corrections in progress as at 31.12.2009


New financial corrections in progress in 2010


Financial corrections decided in 2010


Adjustments on financial corrections decided or in progress as at 31.12.2009


Financial corrections in progress as at 31.12.2010




EAGF - future conformity and financial decisions


2 763


670


(1 029)


(115)


2 288




Total EAGF financial corrections in progress


2 763


670


(1 029)


(115)


2 288




The amount of EAGF financial corrections in progress end of 2010 shows the consolidation of the estimation method for future conformity decisions.

Other financial corrections in progress as at 31.12.2010











EUR millions




 


Financial corrections in progress as at 31.12.2009


New financial corrections in progress in 2010


Financial corrections decided in 2010


Adjustments on financial corrections decided or in progress as at 31.12.2009


Financial corrections in progress as at 31.12.2010




TRDI 2000-2006


12


45


(49)


0


7




SAPARD 2000-2006


4


54


(3)


13


68




EAFRD 2007-2013


114


55


(57)


11


123




Total other financial corrections in progress


130


154


(109)


24


198




SAPARD and TRDI programmes are entering in a closure phase which explains the amount of financial corrections in progress. In addition audits and controls at EU level have been launched for EAFRD, which explains most of the amount.

EAGF recoveries in progress as at 31.12.2010











EUR millions




 


Financial corrections in progress as at 31.12.2009


New financial corrections in progress in 2010


Financial corrections decided in 2010


Adjustments on financial corrections decided or in progress as at 31.12.2009


Financial corrections in progress as at 31.12.2010




EAGF - irregularities


276


170


(178)


55


323




Total recoveries in progress


276


170


(178)


55


323




As irregularities confirmed and implemented are disclosed in note 6.2.1 and 6.2.2, it is important to show in this section how the future amounts of irregularities progress.

Other recoveries in progress as at 31.12.2010











EUR millions




 


Financial corrections in progress as at 31.12.2009


New financial corrections in progress in 2010


Financial corrections decided in 2010


Adjustments on financial corrections decided or in progress as at 31.12.2009


Financial corrections in progress as at 31.12.2010




TRDI 2000-2006


5


6


(10)


7


7




SAPARD 2000-2006


88


52


(5)


(41)


94




EAFRD 2007-2013


8


60


(98)


52


22




Total recoveries in progress


101


118


(114)


18


123




6.3.   FINANCIAL CORRECTIONS UNDER COHESION POLICY

In the Agriculture and Rural development policy, recoveries (not related to financial corrections) are common. However, under the Cohesion policy, recovery orders are almost exclusively used to implement those financial corrections decided by the Commission and that result in a net reduction of the EU funding.
The results of the Member States′ own checks of the Cohesion policy expenditure are reported in note 6.5. Note also that the amount of financial corrections 2009 for the programming period 2000-2006 linked to TRDI and SAPARD are now disclosed in the section Agriculture and Rural development (see note 6.2), together with EAFRD.
6.3.1.   
Financial corrections confirmed in 2010



Financial corrections decided/confirmed in 2010








EUR millions




 


2010


2009





Cohesion policy (EU work)





1994-1999 programmes


136


521




2000-2006 programmes


788


1 865




2007-2013 programmes


2


0




Subtotal


925


2 386




A breakdown of these amounts per Member State is disclosed in Annex 3.








Financial corrections confirmed/decided in 2010 and their implementation in 2010












EUR millions




 


ERDF


CF


ESF


FIFG


EAGGF Guidance


TOTAL




Financial Corrections 1994-99:




Implemented by decommitment/deduction at closure


2


0


—


0


—


2




Implemented by recovery order


118


—


4


3


3


128




Not yet implemented


5


0


—


—


0


6




Subtotal 1994-99 period


125


0


4


3


3


136




Financial Corrections 2000-2006:




Implemented by decommitment/deduction at closure


—


11


—


—


—


11




Implemented by Member States


—


—


35


87


—


122




Implemented by recovery order


0


0


—


—


30


30




Not yet implemented


368


246


8


2


—


624




Subtotal 2000-2006 period


368


258


43


89


30


788




Financial Corrections 2007-2013:




Implemented by decommitment/deduction at closure


—


—


—


—


—


—




Implemented by Member States


1


—


1


—


—


2




Implemented by recovery order


—


—


—


—


—


—




Not yet implemented


0


—


0


—


—


0




Subtotal 2007-2013 period


1


—


1


—


—


2




Total financial corrections confirmed in 2010


494


258


49


91


33


925




Total financial corrections decided in 2009


2 061


86


180


46


13


2 386




Out of the total amount of EUR 925 million confirmed in 2010, EUR 2 million were confirmed in previous years but have not been reported before and EUR 44 million represent adjustments on previously-reported amounts.




The amount of financial corrections confirmed/decided in the year and implemented by issuance of a recovery order by the Commission (i.e. cash reimbursed to the Commission) is EUR 158 million, EUR 128 million for the 1994-99 period, and EUR 30 million for the 2000-06 period (2009: EUR 146 million). It should be noted that implementation by means of a recovery order represent only a limited amount of financial corrections (i.e. 20 % of the amount implemented in 2010) since the applicable sectoral legislation foresees the possibility for the Member State to accept the financial correction proposed by the Commission and then to replace the irregular expenditure by a regular one- thus meaning that no recovery order needs to be issued by the Commission. Recovery orders are only issued by the Commission in the cases where the Member State refuses the financial correction, or at the stage of programme closure when it is no longer possible for the Member State to submit other expenditure to replace the irregular one.
For ERDF, the large difference between confirmed/decided corrections in 2009 and 2010 is due to a large correction in Spain (approximately EUR 1,5 billion), which was confirmed by the Member State at the end of 2009. This correction concluded an important action plan initiated in 2004 concerning management and second level verifications on public procurement issues across twenty Spanish programmes. It increased significantly the amounts of corrections reported in 2009. From 2010 onwards, the amounts linked to the 2000-2006 period will decrease as the closure period is winding down. Corrections reported will be linked to finalisation of procedures started in previous years, as well as to the results of closure proceedings and audits.
Concerning the ESF, the lower amount of financial corrections for the programming period 1994-1999 is due to the fact that Commission's services are reaching the end of the closure process. For the programming period 2000-2006, 2010 was the year in which the vast majority of the programmes have submitted their closure documents. Therefore amounts of financial corrections will only be identified and confirmed after the ongoing analysis made by the Commission's services of the Member States documents is completed.
Regarding FIFG, the audit performed on central authorities in Spain at the end of 2009 led to the confirmation in 2010 of an amount of EUR 87 million which was deducted by the Member State from the final cost statement received at end 2010.
6.3.2.   
Financial corrections implemented in 2010



Financial corrections implemented in 2010








EUR millions




 


2010


2009





Cohesion policy (EU work)





1994-1999 programmes


476


300




2000-2006 programmes


259


384




2007-2013 programmes


2


0




Subtotal


737


684




A breakdown of these amounts per Member State is disclosed in Annex 4.




It should be noted that the above amounts, in particular for the programming period 2000-06, do not include financial corrections reported by the Member States in final payment claims received by the Commission in 2010, which are in the process of being validated. At this stage, the financial correction is indeed implemented by the Member State who certifies the deduction of the financial correction amount from the final payment claim amount. However, in the context of programme closure, the validation of the claim by the authorising officer in the accounting system is subject to longer regulatory deadlines before it can be fully processed and payments be made by the Commission. Payments claims received before the year-end 2010 and not yet authorised include financial corrections deducted for a total amount of EUR 2,3 billion (ERDF: EUR 2 155 millions; Cohesion Fund: EUR 105 millions; and ESF: EUR 24 millions). Payment claims will be processed end of 2011 and beginning of 2012.

Financial corrections implemented in 2010 (confirmed/decided in 2010 and in previous years)












EUR millions




 


ERDF


CF


ESF


FIFG


EAGGF Guidance


Total 2010




Financial Corrections 1994-99 period:




Confirmed in 2010


120


0


4


3


2


129




Confirmed previous years


342


4


1


—


1


347




Subtotal 1994-99 period


462


4


5


3


3


476




Financial Corrections 2000-2006:




Confirmed in 2010


0


11


35


87


30


164




Confirmed previous years


79


6


1


—


8


95




Subtotal 2000-2006 period


80


18


36


87


38


259




Financial Corrections 2007-2013:




Confirmed in 2010


1


—


1


—


—


1




Confirmed previous years


—


—


—


—


—


—




Subtotal 2007-2013 period


1


—


1


—


—


1




Total financial corrections implemented in 2010


542


21


42


90


41


737




Total financial corrections implemented in 2009


334


89


206


50


5


684




Out of the amount of EUR 737 million reported as financial correction implemented in 2010, EUR 1 million was implemented in previous years but has not been reported before.




Concerning ERDF, it should be noted that the large correction in Spain totalling EUR 1,5 billon referred to in note 6.3.1 was certified by the Member State in February 2010 as accounted for in the local accounting systems of the relevant programmes. This amount was then deducted from the 20 final payment claims introduced in September 2010. However these payment claims being still under authorising process, they have not been taken into account in the above implementation figures. So are the majority of the claims received for the 2000-06 closure.
Concerning the ESF, all financial corrections confirmed in 2010 for the programming period 1994-1999 have been implemented in the same year. Moreover there are no outstanding amounts of financial corrections to be implemented concerning that programming period. The amounts of financial corrections for the programming period 2000-2006 confirmed in previous years will be identified and cleared within the closure process that is ongoing.
6.3.3.   
Financial corrections – cumulative figures and implementation rate



Financial corrections confirmed/decided – cumulative figures











EUR millions




 


1994-1999 Period


2000-2006 Period


2007-2013 Period


Total as at end 2010


Total as at end 2009




ERDF


1 758


4 165


1


5 924


5 430




Cohesion Fund


273


490


—


763


506




ESF


397


1 174


1


1 572


1 522




FIFG


100


96


—


195


104




EAGGF Guidance


124


41


—


165


132




Total


2 652


5 965


2


8 619


7 694




A breakdown of the total amount per Member State is disclosed in Annex 3.

Financial corrections implemented – cumulative figures











EUR millions




 


1994-1999 Period


2000-2006 Period


2007-2013 Period


Total as at end 2010


Total as at end 2009




ERDF


1 736


1 972


1


3 709


3 167




Cohesion Fund


266


227


—


493


472




ESF


395


1 146


1


1 542


1 500




FIFG


100


94


—


194


104




EAGGF Guidance


124


41


—


165


124




Total


2 621


3 480


2


6 102


5 366




A breakdown of the total amount per Member State is disclosed in Annex 4.
Most of the programmes and irregularities for the programming period 1994-99 are closed cases, and amounts are therefore expected to decrease in the future. Many deductions were withdrawn by the Member States from their final payment requests for 2000-06 programmes however the payment claims are still under validation, which explains why they are not included in the above amounts. They will be reported as implemented when the payments will be validated, in 2011 and in 2012 for the most complex files. The corrections for the current programming period 2007-13 should increase as a result of the current controls on the spot.
Included in the above table are financial corrections that are being challenged by certain Member States (noting that past experience has shown that the Commission has very rarely had to repay amounts following such cases).

Financial corrections confirmed/decided as at 31 December 2010 but not yet implemented and implementation rates as at 31 December 2010 (cumulative figures)













EUR millions




 


ERDF


CF


ESF


FIFG


EAGGF Guidance


Total 2010


Total 2009





Financial corrections 1994-1999 programmes





Financial corrections confirmed/decided


1 758


273


397


100


124



2 652




2 516





Financial corrections implemented


1 736


266


395


100


124



2 621




2 145





Financial corrections confirmed/decided but not yet implemented


22


8


2


—


0



31




371





Rate of implementation


99 %


97 %


100 %


100 %


100 %



99 %




85 %






Financial corrections 2000-2006 programmes





Financial corrections confirmed/decided


4 165


490


1 174


96


41



5 965




5 177





Financial corrections implemented


1 972


227


1 146


94


41



3 480




3 221





Financial corrections confirmed/decided but not yet implemented


2 192


263


28


2


—



2 485




1 956





Rate of implementation


47 %


46 %


98 %


98 %


100 %



58%




62%






Financial corrections 2007-2013 programmes





Financial corrections confirmed/decided


1


—


1


—


—



2




—





Financial corrections implemented


1


—


1


—


—



2




—





Financial corrections confirmed/decided but not yet implemented


0


—


0


—


—



0




—





Rate of implementation


69 %


N/A


98 %


N/A


N/A



84 %



N/A






Total financial corrections





Financial corrections confirmed/decided


5 924


764


1 571


195


165



8 619




7 694





Financial corrections implemented


3 709


493


1 542


194


165



6 102




5 366





Financial corrections confirmed/decided but not yet implemented


2 214


271


30


2


0



2 516




2 327






Rate of implementation




63 %




65 %




98 %




99 %




100 %




71 %




70 %





The level of implementation during the programming period 1994-1999 is explained by the issuance during 2010 of most of the recovery orders needed to implement the financial corrections decisions adopted at the end of 2009 (pending at closure of the accounts 2009), or the new corrections confirmed/ decided during the year.
Concerning the programming period 2000-2006, the low implementation rate is explained by the ongoing closure process whereby payment claims received end of 2010 are not yet authorised, and the related financial corrections for a total amount of EUR 2,3 billion cannot be taken into account in the 2010 implementation figures.
6.3.4.   
Financial corrections in progress












EUR millions




 


Financial corrections in progress as at 31.12.2009


New financial corrections in progress in 2010


Financial corrections decided in 2010


Adjustments on financial corrections decided or in progress as at 31.12.2009


Financial corrections in progress as at 31.12.2010





Structural and Cohesion funds (1994-1999, 2000-2006 and 2007-2013 programmes)





ERDF


430


135


(212)


(156)


197




Cohesion Fund


149


206


(21)


(72)


262




ESF


326


9


(42)


(10)


284




FIFG


2


—


(1)


0


0




EAGGF Guidance


63


4


(33)


(31)


4




Total


971


354


(309)


(269)


747




Concerning the ERDF, many of the procedures in progress in the previous years were finalised in 2010 with the application of financial corrections or the adjustments of the amounts. Furthermore, 2010 was characterised as a transition year for the two programming periods; the conclusion of procedures for 2000-2006 leading to a decrease of amounts in progress and the initiation of new procedures (somewhat less at this stage) for 2007-2013. Thus, the amounts of financial corrections in progress this year are lower compared to last year.
Concerning the ESF, most of the EUR 9 million of new cases refers to the 2000-2006 programming period as all the operational programmes concerned are reaching their closure phase. The processing of financial corrections will be dealt with in the closure process. Nevertheless, half of the on-going procedures concern the 2007-2013 programming period. These were estimated to be at EUR 1 (provisional amount) as the amount to be corrected still needs to be identified.
In addition to the above-mentioned figure, an amount of EUR 1 437 million has been reported by Member States and represents potential recoveries following the detection of irregular claims on structural funds. It is based on the formal reports submitted by the member States in accordance with Commission Regulation No 1681/94. However the prospects of recovery in individual cases cannot be assessed with sufficient accuracy based on the information forwarded by Member States. In addition there is a risk of overlap with the figures above-disclosed which is difficult to quantify as Member States are not obliged to distinguish in their reporting between potential recoveries resulting from EU's work and those resulting from their own controls.
6.3.5.   
Interruptions and suspension of payments


Concerning the ERDF, 49 interruption decisions for payment deadlines were taken in 2010 for a total amount of EUR 2 156 million. Payments were released for 41 cases representing EUR 2 057 million. 8 cases were still ongoing at year-end, covering an amount of EUR 99 million.
Concerning the ESF, 12 interruption decisions for payment deadlines were taken in 2010 for a total amount of EUR 255 million, all relating to the programming period 2007-2013. Payments were released for 6 cases, representing EUR 94 million. 6 cases are still ongoing for an amount of EUR 161 million.
The breakdown of interruption cases per Member State in 2010 is as follows:








EUR millions




 


ERDF


ESF


Total





Interruptions - closed cased as at 31.12.2010





Germany


175


—


175




Spain


1 477


74


1 552




Italy


84


—


84




Luxembourg


—


1


1




Hungary


33


—


33




Portugal


103


—


103




Romania


—


18


18




United Kingdom


184


—


184




Subtotal closed cases


2 057


94


2 151





Interruptions - open cases as at 31.12.2010





Belgium


—


3


3




Bulgaria


15


—


15




Germany


43


69


112




Italy


—


72


72




Austria


—


17


17




United Kingdom


41


—


41




Subtotal open cases


99


161


260




Total interruptions


2 156


255


2 411




Data disclosed in this table represent the situation as at 15 February 2011




In addition 6 suspension decisions were taken during 2010 for the ESF (Belgium, Spain, and France), and payments were resumed before the year-end for Spain only.
6.4.   OTHER RECOVERIES

This heading concerns the recovery of amounts unduly paid because of errors or irregularities detected either by the Commission, Member States, the European Court of Auditors, or OLAF for the part of the budget which is not executed under shared management.

OTHER RECOVERIES CONFIRMED IN 2010








EUR millions




 


2010


2009





Other management types:











—


external actions






137


81










—


internal policies






188


202




Total other recoveries confirmed


325


283








OTHER RECOVERIES IMPLEMENTED IN 2010








EUR millions




 


2010


2009





Other management types:











—


external actions






136


81










—


internal policies






163


202




Total other recoveries implemented


299


283




6.5.   RECOVERY AND FINANCIAL CORRECTION ACITIVITIES BY MEMBER STATES FOR STRUCTURAL ACTIONS OR COHESION POLICY

In the area of cohesion policy, the corrections effected by Member States following their own or EU audits are not recorded in the Commission's accounting system because Member States can reuse these amounts for other eligible expenditure. Nonetheless, Member States are requested to provide the Commission with updated information on withdrawals, recoveries and pending recoveries of Structural Funds both for individual years and cumulatively for the period 2000-2006, and covering all four funds (ERDF, ESF, EAGGF Guidance and FIFG). However, they are not obliged to separately identify corrections resulting from EU work. For this reason the financial corrections made by Member States are not added to the Commission's.
As the period 2000-2006 is now in its closure phase, a phase during which proof of deduction is requested in relation to all irregularities, Member States are not required to separately submit to the Commission information on withdrawals, recoveries and pending recoveries for the year 2010. Nevertheless, this additional information was received in March 2011 from Greece, Belgium, Hungary, Portugal and for Inter-regional programmes. This information is taken into account in this section.
Based on data received so far, in terms of EU contribution, Member States have reported a total of some EUR 5,1 billion of cumulative financial corrections resulting from their national audit work for the 2000-2006 programmes (of which withdrawals total some EUR 4 billion and recoveries approximately EUR 1.1 billion).
The on-the-spot audit work undertaken by DG Regional Policy under the 2008 Action Plan to audit the national systems of Member States for recoveries related to the 2000-2006 programming period was completed in 2010 for the six remaining Member States, having covered thus all 25 concerned Member States (there was no reporting obligation for Bulgaria and Romania for the 2000-2006 period). The results of this exercise, as well as the audits carried out by the Court of Auditors, in the last two annual reports, showed that Member States′ authorities generally follow the requirements, although significant weaknesses still existed in respect of the completeness of data and the system for recording and reporting irregularities for some 2000-2006 programmes in Italy, Spain, France and the Netherlands. To a lesser extent, weaknesses also existed in programmes in the UK, Slovenia, Finland, Sweden and Latvia. Even if improvements have been identified in all Member States during the years 2007-2010 by the Commission audits, the Commission remains prudent at closure and requested all programmes authorities to report on the follow-up (including financial corrections) that was made at national level for all irregularities registered for each programme. The Commission will not close programmes until it assesses this information as being consistent and complete.
There is a risk of overlap for the 2000-2006 period between the figures reported for financial corrections resulting from the work of EU bodies (audits by the Commission and the Court of Auditors and OLAF investigations) and those reported by Member States resulting from their own work. This is because a large proportion of the financial corrections resulting from the work of EU bodies is accepted by the Member States and implemented by them without a formal Commission decision, by withdrawing the expenditure concerned from their expenditure declarations. As Member States are not obliged to distinguish between corrections resulting from EU bodies′ work from those due to their own controls and audits in the 2000-2006 reporting, the extent of this overlap cannot be precisely quantified. Furthermore, the actual implementation by the Member State may not be in the same year as the Member State's acceptance of the financial correction. Therefore, the possible overlap remains only an estimation. A comparison, Member State by Member State, between the Member States′ figures for 2010 and the amounts of corrections resulting from EU bodies′ work which Member States have accepted for the same year, suggests that the amount of the overlap cannot exceed EUR 65 million (2009: EUR 465 million).
In the 2007-2013 programming period, there is a regulatory requirement for Member States to report annually on recoveries and withdrawals through IT systems SFC 2007. This means that the Commission receives data electronically directly from the Member States at 31 March each year. In its guidance to Member States, the Commission also proposed to separately identify corrections resulting from EU bodies′ work, in order to avoid any overlap in reporting. As reported by Member States to the Commission at 31 March 2011, the total amounts (EU share) recovered by Member States from beneficiaries and withdrawn from certified expenditure presented to the Commission in 2010 (recoveries, for EUR 35 million), or withdrawn from 2010 payment claims before the recovery process is completed at national level (withdrawals, for EUR 189 million), as well as the pending recoveries (EUR 41 million) at the end of 2010, are EUR 265 million:













EUR million




EU 27 2007-2013 (2)



Withdrawals resulting from MS work


Withdrawals resulting from EU bodies


Total withdrawals


Recoveries resulting from MS work


Recoveries resulting from EU bodies


Total Recoveries


Total pending recoveries declared in 2010


Total declared by MS





ERDF/CF
 (3)



151


5



156



29


2



31




25




212






ESF



31


2



33



4


0



4




15




52






EFF



0


0



0



1


0



1




0




1





Total


183


7


189


34


2


35


41


265




The Commission has planned an audit on recoveries as from the second semester of 2011 so as to review, for all Funds, the corrective mechanism systems put in place by certifying authorities and to assess the assurance the Commission can place on the reported figures, using a sample of programmes and Member States selected on the basis of a risk analysis.

Note 6 –   Annex 1: Total financial corrections and recoveries decided in 2010 for EAGF - Breakdown per Member State











EUR millions




Member State


Financial clearance


Conformity clearance


Irregularities declared


Total 2010


Total 2009




Belgium


0


—


4


4


15




Bulgaria


0


17


3


20


5




Czech Republic


0


1


0


1


1




Denmark


0


10


3


12


104




Germany


–1


16


12


28


17




Estonia


—


—


0


0


0




Ireland


–1


0


7


7


4




Greece


4


460


14


477


21




Spain


8


52


23


83


106




France


–1


39


28


67


111




Italy


4


39


35


78


15




Cyprus


—


1


0


1


0




Latvia


0


—


0


0


0




Lithuania


0


0


2


2


4




Luxembourg


0


1


0


1


0




Hungary


0


8


1


8


22




Malta


0


—


0


0


0




Netherlands


–1


47


5


51


36




Austria


0


1


1


2


3




Poland


0


50


2


52


13




Portugal


2


40


16


58


18




Romania


11


38


6


55


14




Slovenia


0


4


1


5


2




Slovakia


0


0


0


0


1




Finland


0


2


1


2


2




Sweden


0


3


2


5


2




United Kingdom


8


194


11


213


109




Total decided


33


1 022


178


1 233


625








Note 6 –   Annex 2: Total financial corrections and recoveries implemented in 2010 for EAGF - Breakdown per Member State











EUR millions




Member State


Financial clearance and non-respected payment deadlines


Conformity clearance


Irregularities declared by Member States (repaid to EU)


Total 2010


Total 2009




Belgium


0


0


3


3


14




Bulgaria


0


—


5


6


1




Czech Republic


0


0


1


1


0




Denmark


0


10


3


12


105




Germany


–1


16


10


26


18




Estonia


—


—


0


0


0




Ireland


–1


1


5


5


5




Greece


4


136


10


150


196




Spain


8


92


30


130


59




France


–1


90


30


120


82




Italy


4


5


23


33


177




Cyprus


—


1


0


1


1




Latvia


0


—


0


0


0




Lithuania


0


2


1


4


2




Luxembourg


0


1


0


1


0




Hungary


0


24


2


26


9




Malta


0


—


0


0


0




Netherlands


–1


46


5


51


9




Austria


0


3


1


3


1




Poland


0


95


1


97


2




Portugal


2


4


18


24


7




Romania


11


—


6


16


12




Slovenia


0


—


1


1


2




Slovakia


0


0


1


1


0




Finland


0


2


1


2


2




Sweden


0


3


2


5


14




United Kingdom


8


195


12


215


133




Total implemented


33


728


172


934


851








Note 6 –   Annex 3: Total financial corrections confirmed in 2010 for Structural Actions - Breakdown per Member State














EUR millions




Member State


Cumulative end 2009


Financial corrections confirmed in 2010


Cumulative end 2010




ERDF


CF


ESF


FIFG


EAGGF Guidance


Total Year 2010





1994-1999




2 516




125




0




4




3




3




136




2 652





Belgium


5


—


—


—


—


—


0


5




Denmark


3


—


—


—


—


—


0


3




Germany


339


0


—


—


0


1


1


340




Ireland


42


—


—


—


—


—


0


42




Greece


526


1


0


—


—


0


2


528




Spain


548


116


0


0


—


1


117


664




France


84


—


—


4


—


0


4


88




Italy


505


0


—


—


—


0


0


505




Luxembourg


5


—


—


—


—


—


0


5




Netherlands


177


—


—


—


—


—


0


177




Austria


2


—


—


—


—


—


0


2




Portugal


137


2


—


—


1


1


4


141




Finland


1


—


—


—


—


—


0


1




Sweden


1


—


—


—


—


—


0


1




United Kingdom


131


6


—


—


1


0


7


138




INTERREG


10


0


—


—


—


—


0


10





2000-2006




5 178




368




258




43




89




30




788




5 965





Belgium


10


0


—


—


—


—


0


10




Bulgaria


2


—


18


—


—


—


18


21




Czech Republic


0


4


7


—


—


—


11


11




Denmark


0


—


—


—


—


—


0


0




Germany


12


0


—


0


0


—


1


13




Estonia


0


0


—


0


—


—


0


0




Ireland


42


2


1


—


—


—


2


44




Greece


920


40


0


0


—


—


40


961




Spain


2 503


170


104


2


87


—


363


2 865




France


261


16


—


0


—


9


26


287




Italy


825


97


—


4


1


2


105


930




Cyprus


—


—


—


—


—


—


0


0




Latvia


4


—


1


—


0


—


1


4




Lithuania


2


—


0


—


—


—


0


2




Luxembourg


2


—


—


—


—


—


0


2




Hungary


52


0


—


—


—


—


0


52




Malta


—


—


—


—


—


—


0


0




Netherlands


2


—


—


—


—


—


0


2




Austria


—


—


—


—


—


—


0


0




Poland


134


0


111


1


0


—


112


246




Portugal


126


0


13


0


—


18


31


157




Romania


10


—


2


—


—


—


2


12




Slovenia


2


—


—


—


—


—


0


2




Slovakia


39


0


2


—


—


—


2


41




Finland


0


—


—


—


0


—


0


1




Sweden


11


0


—


—


—


—


0


11




United Kingdom


217


29


—


36


—


1


65


283




INTERREG


1


9


—


—


—


—


9


10





2007-2013




0




1




0




1




0




—




2




2





Belgium


—


—


—


—


—


—


—


—




Bulgaria


—


—


—


—


—


—


—


—




Czech Republic


—


—


—


—


—


—


—


—




Denmark


—


—


—


0


—


—


0


0




Germany


—


—


—


—


—


—


—


—




Estonia


—


0


—


—


—


—


0


0




Ireland


—


—


—


0


—


—


0


0




Greece


—


—


—


—


—


—


—


—




Spain


—


—


—


—


—


—


—


—




France


—


—


—


0


—


—


0


0




Italy


—


—


—


—


—


—


—


—




Cyprus


—


—


—


—


—


—


—


—




Latvia


—


—


—


—


—


—


—


—




Lithuania


—


—


—


—


—


—


—


—




Luxembourg


—


—


—


0


—


—


0


0




Hungary


—


0


—


1


—


—


1


1




Malta


—


—


—


—


—


—


—


—




Netherlands


—


—


—


—


—


—


—


—




Austria


—


—


—


—


—


—


—


—




Poland


—


0


—


0


—


—


0


0




Portugal


—


0


—


0


—


—


1


1




Romania


—


—


—


—


—


—


—


—




Slovenia


—


—


—


—


—


—


—


—




Slovakia


—


—


—


—


—


—


—


—




Finland


—


—


—


—


—


—


—


—




Sweden


—


—


—


—


—


—


—


—




United Kingdom


—


—


—


—


—


—


—


—




INTERREG


—


—


—


—


—


—


—


—




Total confirmed


7 694


494


258


49


91


33


925


8 619








Note 6 –   Annex 4: Total financial corrections implemented in 2010: Structural Actions – Breakdown per Member State














EUR millions




Member State


Cumulative end 2009


Financial corrections implemented in 2010


Cumulative end 2010




ERDF


CF


ESF


FIFG


EAGGF Guidance


Total Year 2010





1994-1999




2 144




462




4




5




3




3




476




2 621





Belgium


6


—


—


—


—


—


—


6




Denmark


4


—


—


—


—


—


—


4




Germany


300


37


—


—


0


1


38


338




Ireland


40


—


—


—


—


—


—


40




Greece


521


1


3


—


—


0


4


525




Spain


293


363


1


0


—


1


365


658




France


85


—


—


4


—


0


4


89




Italy


483


21


—


—


—


—


21


504




Luxembourg


4


—


—


1


—


—


1


5




Netherlands


177


—


—


—


—


—


—


177




Austria


2


—


—


—


—


—


—


2




Portugal


118


20


—


—


1


1


23


141




Finland


1


0


—


—


—


—


0


1




Sweden


1


—


—


—


—


—


—


1




United Kingdom


108


11


—


—


1


0


13


120




INTERREG


2


7


—


—


—


—


7


9





2000-2006




3 222




80




18




36




87




38




259




3 480





Belgium


8


—


—


0


—


—


0


8




Bulgaria


2


—


—


—


—


—


—


2




Czech Republic


0


—


—


—


—


—


—


0




Denmark


0


—


—


—


—


—


—


0




Germany


10


0


—


—


—


—


0


10




Estonia


0


—


—


0


—


—


0


0




Ireland


26


—


—


—


—


—


—


26




Greece


904


—


—


—


—


—


—


904




Spain


940


—


16


0


87


8


111


1 051




France


239


—


—


—


—


9


9


248




Italy


686


79


—


0


—


2


82


768




Cyprus


0


—


—


—


—


—


—


0




Latvia


3


—


1


—


—


—


1


4




Lithuania


1


—


0


—


—


—


0


1




Luxembourg


2


—


—


—


—


—


—


2




Hungary


41


—


—


—


—


—


—


41




Malta


0


—


—


—


—


—


—


0




Netherlands


0


—


—


—


—


1


1


1




Austria


0


—


—


—


—


—


—


0




Poland


90


—


—


—


—


—


—


90




Portugal


95


—


1


—


—


18


18


113




Romania


8


—


0


—


—


—


0


8




Slovenia


2


—


—


—


—


—


—


2




Slovakia


1


—


—


—


—


—


—


1




Finland


0


—


—


—


—


—


—


0




Sweden


11


—


—


—


—


—


—


11




United Kingdom


151


—


—


36


—


1


37


188




INTERREG


0


0


—


—


—


—


0


0





2007-2013




0




1




0




1




0



—



2




2





Belgium


—


—


—


—


—


—


—


—




Bulgaria


—


—


—


—


—


—


—


—




Czech Republic


—


—


—


—


—


—


—


—




Denmark


—


—


—


0


—


—


0


0




Germany


—


—


—


—


—


—


—


—




Estonia


—


0


—


—


—


—


0


0




Ireland


—


—


—


0


—


—


0


0




Greece


—


—


—


—


—


—


—


—




Spain


—


—


—


—


—


—


—


—




France


—


—


—


0


—


—


0


0




Italy


—


—


—


—


—


—


—


—




Cyprus


—


—


—


—


—


—


—


—




Latvia


—


—


—


—


—


—


—


—




Lithuania


—


—


—


—


—


—


—


—




Luxembourg


—


—


—


—


—


—


—


—




Hungary


—


—


—


1


—


—


1


1




Malta


—


—


—


—


—


—


—


—




Netherlands


—


—


—


—


—


—


—


—




Austria


—


—


—


—


—


—


—


—




Poland


—


0


—


—


—


—


0


0




Portugal


—


0


—


0


—


—


1


1




Romania


—


—


—


—


—


—


—


—




Slovenia


—


—


—


—


—


—


—


—




Slovakia


—


—


—


—


—


—


—


—




Finland


—


—


—


—


—


—


—


—




Sweden


—


—


—


—


—


—


—


—




United Kingdom


—


—


—


—


—


—


—


—




INTERREG


—


—


—


—


—


—


—


—




Total implemented


5 366


542


21


42


90


41


737


6 102




7.   FINANCIAL RISK MANAGEMENT
The following disclosures with regard to the financial risk management of the European Union (EU) relate to:






—


the treasury operations carried out by the European Commission in order to implement the EU budget;










—


lending and borrowing activities carried out by the European Commission through Macro Financial Assistance (MFA), Balance of Payments (BOP) and Euratom actions;










—


the Guarantee Fund for external actions; and










—


lending and borrowing, as well as treasury activities carried out by the European Union through the European Coal & Steel Community (in Liquidation).




7.1.   RISK MANAGEMENT POLICIES

7.1.1.   
Treasury operations


The rules and principles for the management of the Commission's treasury operations are laid down in the Council Regulation 1150/2000 (amended by Council Regulations 2028/2004 and 105/2009) and in the Financial Regulation (Council Regulation 1605/2002, amended by Council Regulations 1995/2006, 1525/2007 and 1081/2010) and its Implementing Rules (Commission Regulation 2342/2002, amended by Commission Regulations 1261/2005, 1248/2006 and 478/2007).
As a result of the above regulations the following main principles apply:






—


Own resources are paid by the Member States in accounts opened for this purpose in the name of the Commission with the Treasury or the body appointed by each Member State. 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.










—


Funds held in bank accounts denominated in other currencies 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 regulates 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 the 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. Additionally, meetings are held between DG BUDGET and DG ECFIN to discuss information sharing on risk management and best practices.

BUFI – provisionally cashed fines

From 2010 onwards provisionally cashed fines amounts are invested in a specifically created fund managed by DG ECFIN, BUFI. Fines amounts received before 2010 remain in specific bank accounts. The asset management for provisionally cashed fines is carried out by the Commission in accordance with internal guidelines and the asset management guidelines which are included in the SLA signed in December 2009 between DG BUDG and DG ECFIN. Procedural manuals covering specific areas such as treasury management have been developed and are used by the relevant operating 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 paid to the Commission in such a way as to:






(a)


ensure that the funds are easily available when needed, while










(b)


aiming at delivering under normal circumstances a return which on average is equal to the return of the BUFI Benchmark minus costs incurred.




Investments are restricted basically to the following categories: term deposits with euro-zone Central Banks, euro-zone sovereign debt agencies, fully state-owned or state-guaranteed banks or supranational institutions; bonds, bills and Certificates of Deposit issued by sovereign entities creating a direct euro-zone sovereign exposure or which are issued by supranational institutions.
7.1.2.   
Borrowing and lending activities (MFA, BOP and Euratom)


The lending and borrowing transactions, as well as related treasury management, are carried out by the EU according to the respective Council Decisions, if applicable, and internal guidelines. Written procedure manuals covering specific areas such as borrowings, loans and treasury management have been developed and are used by the relevant operating units. Financial and operational risks are identified and evaluated and compliance to internal guidelines and procedures is checked regularly. As a general rule, there are no activities to compensate interest rate variations or foreign currency variations ("hedging" activities) carried-out as lending operations are financed by "back-to-back" borrowings, which thus do not generate open interest rate or currency positions.
7.1.3.   
Guarantee Fund


The rules and principles for the asset management of the Guarantee Fund (see note 2.3.3) are laid out in the Convention between the European Commission and the European Investment Bank (EIB) dated 25 November 1994 and the subsequent amendments dated 17/23 September 1996, 8 May 2002, 25 February 2008 and 9 November 2010. The Guarantee Fund operates only in EUR. 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.
7.1.4.   
ECSC in liquidation


The European Commission manages the liquidation of the liabilities and no new loans or corresponding funding is foreseen for the ECSC in liquidation. New ECSC borrowings are restricted to refinancing with the aim of reducing the cost of funds. As far as treasury operations are concerned, the principles of prudent management with a view to limiting financial risks are applied.
7.2.   MARKET RISK

Market risk is the risk that the fair value or future cashflows of a financial instrument will fluctuate, because of changes 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.
7.2.1.   
Currency 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.
7.2.1.1.   Treasury operations

Own resources paid by Member States in currencies other than EUR are kept on the own resources accounts, in accordance with the Own Resources Regulation. They are converted into EUR when they are needed to cover for the execution of payments. The procedures applied for the management of these funds are dictated by the above 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 (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 for 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 payments needs in the same currencies. Balances on these accounts are kept within their respective ceilings.

BUFI – provisionally cashed fines

Since all fines are imposed and paid in EUR, there is no foreign currency risk.
7.2.1.2.   Borrowing and lending activities (MFA, BOP and Euratom)

Most financial assets and liabilities are in EUR, so in these cases the EU has no foreign currency risk. However, the EU does give loans in USD through the financial instrument Euratom, which are financed by borrowings with an equivalent amount in USD (back-to-back operation). At the balance sheet date the EU has no foreign currency risk with regard to Euratom.
7.2.1.3.   Guarantee Fund

The financial assets are in EUR so there is no currency risk.
7.2.1.4.   ECSC in liquidation

The ECSC in liquidation has a small foreign currency net exposure of EUR equivalent 1,43 million arising from EUR equivalent 1,39 million housing loans and EUR equivalent 0,04 million current account balances.
7.2.2.   
Interest rate risk


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.
7.2.2.1.   Treasury operations

The Commission's treasury does not borrow any money; as a consequence it is not exposed to interest rate risk. It does, however, earn interest on balances it holds on its different banks 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.
Accounts opened with Member States Treasuries or National Central Banks for own resources receipts are non-interest bearing and free of charges. For all other accounts held with National Central Banks the remuneration depends on the specific conditions offered by each bank; interest rates applied are variable and adjusted to market fluctuations.
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. For most of the accounts the interest calculation is linked to the EONIA (Euro over night index average), and is adjusted to reflect any fluctuations of this rate. For some other accounts the interest calculation is linked to the ECB marginal rate for its main refinancing operations. As a result no risk exists that the Commission earns interest at rates lower than market rates.

BUFI – provisionally cashed fines

There are no bonds with variable interest rates in the BUFI portfolio. Zero coupon bonds represented 69 % of the bond portfolio at the balance sheet date.
7.2.2.2.   Borrowing and lending activities (MFA, BOP and Euratom)


Borrowings and loans with variable interest rates

Due to the nature of its borrowing and lending activities, the EU has significant interest-bearing assets and liabilities. MFA and Euratom borrowings issued at variable rates expose the EU to interest rate risk. However, the interest rate risks that arise from borrowings are offset by equivalent loans in terms and conditions (back-to-back). At the balance sheet date, the EU has loans (expressed in nominal amounts) with variable rates of EUR 0,86 billion (2009: EUR 0,96 billion), with a re-pricing taking place every 6 months.

Borrowings and loans with fixed interest rates

The EU also has MFA and Euratom loans with fixed rates totalling EUR 110 million in 2010 (2009: EUR 110 million) and which have a final maturity date between one and five years (EUR 25 million) and more than five years (EUR 85 million). More significantly, the EU has ten loans under the financial instrument BOP with fixed interest rates totalling EUR 12,05 billion in 2010 (2009: EUR 9,2 billion) and with a final maturity up to one year (EUR 2 billion), between one and five years (EUR 5,7 billion) and more than five years (EUR 4,35 billion).
7.2.2.3.   Guarantee Fund

Debt securities within the Guarantee Fund issued at variable interest rates are subject to the volatility effects of these rates, whereas debt securities at fixed rates have a risk with regard to their fair value. Fixed rate bonds represent approximately 93 % of the investment portfolio at the balance sheet date (2009: 97 %).
7.2.2.4.   ECSC in liquidation

Due to the nature of its activities, the ECSC in liquidation is exposed to interest rate risk. The interest rate risks that arise from borrowings are generally offset by equivalent loans in terms and conditions. As regards asset management operations, fixed rate bonds represent approximately 92 % of the securities portfolio at the balance sheet date (2009: 97 %).
7.3.   CREDIT RISK

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.
7.3.1.   
Treasury operations


Most of the Commission's treasury resources are kept, in accordance with Council Regulation 1150/2000 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 instructed on a just-in-time basis and is automatically managed by the treasury cash management system. Minimum cash levels, proportional to the average amount of daily payments executed from it, are kept on each account. As a consequence the amounts kept overnight on these accounts remain constantly at low levels (overall between EUR 20 million and EUR 100 million on average, spread over more than 20 accounts) and so ensure the Commission′s risk exposure is limited. These amounts should be viewed with regard to the overall treasury balances which fluctuate between EUR 1 billion and EUR 35 billion, and with an overall amount of payments executed in 2010 that totalled EUR 120 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 (S&P A-1 or Fitch F1). A lower level may be accepted in specific and duly justified circumstances.










—


For commercial banks that have been specifically selected for the deposit of provisionally cashed fines (restricted cash), a minimum long-term rating of S&P AA or equivalent is also required as a general rule and specific measures are applied in case banks in this group are subject to downgrade.










—


In the course of 2009 the Commission's treasury services have put in place an alternative system for the management of provisionally cashed fines, with the specific objective of reducing risk in this area. Further to Commission's Decision C(2009) 4264 fines imposed from the 1st January 2010, are now managed under the new system and no longer deposited with commercial banks.










—


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.










—


The credit ratings of the commercial banks where the Commission has accounts are reviewed at least on a monthly basis, or with higher frequency if and when needed. Intensified monitoring measures were adopted in the context of the financial crisis, and kept in place during 2010.





BUFI – provisionally cashed fines

For investments from provisionally cashed fines we take on exposure to credit risk which is the risk that a counterparty will be unable to pay amounts in full when due. The highest concentration of exposure is towards France and Germany as each of these countries represents respectively 69 % and 25 % of the total volume of the portfolio.
The main investment limits are for benchmark countries (currently France and Germany, rated AAA/Aaa): up to 100 % of the portfolio. For other authorised issuers (a minimum rating of Aa2 (Moody's or equivalent) is required): up to 25 % of the portfolio.
7.3.2.   
Borrowing and lending activities (MFA, BOP and Euratom)


Exposure to credit risk is managed firstly by obtaining country guarantees in the case of Euratom, then through the Guarantee Fund (MFA & Euratom) and ultimately through the Budget of the EU (BOP, and should the other measures not be sufficient, MFA & Euratom). The Own Resource legislation in force during 2010 fixed the ceiling for the GNI resource at 1,23 % of Member States′ GNI and during 2010 1,12 % was actually used to cover payment appropriations. This means that at 31 December 2010 there existed an available margin of 0,11 % to cover this guarantee. The Guarantee Fund for external actions was set up in 1994 to cover default risks related to borrowings which finance loans to countries outside the European Union. In any case, the exposure to credit risk is mitigated by the possibility to call on the EU budget in case a debtor would be unable to reimburse the amounts due in full. To this end the EU is entitled to call upon all the Member States to ensure compliance with the EU's legal obligation towards its lenders.
The main beneficiaries of these loans are Hungary, Romania and Latvia. These countries represent approximately 42 %, 30 % and 22 % respectively of the total volume of loans. As far as treasury operations are concerned, guidelines on the choice of counterparties must be applied. Accordingly, the operating unit will be able to enter into deals only with eligible banks having sufficient counterparty limits.
7.3.3.   
Guarantee Fund


In accordance with the agreement between the EU and the EIB on the management of the Guarantee Fund, all interbank investments should have a minimum rating from Moody's or equivalent of P-1. As at 31 December 2010 all investments (EUR 124 million) were made with such counterparties (2009: EUR 153 million). As at 31 December 2010, the fund invested in five short-term financial instruments and all such investments (EUR 69 million) were made with counterparties having a minimum rating of P-1 Moody's or equivalent. All the securities held in the available for sale portfolio are in line with the management guidelines.
7.3.4.   
ECSC in liquidation


Exposure to credit risk is managed through regular analysis of the ability of borrowers to meet interest and capital repayment obligations. Exposure to credit risk is also managed by obtaining collateral as well as country, corporate and personal guarantees. 68 % of the total amount of outstanding loans is covered by guarantees from a Member State or equivalent bodies (e.g. public institutions). 11 % of loans outstanding have been granted to banks or have been guaranteed by banks. As far as treasury operations are concerned, guidelines on the choice of counterparties must be applied. The operating unit is only allowed to enter into deals with eligible banks having sufficient counterparty limits.
7.4.   LIQUIDITY RISK

Liquidity risk is the risk that arises from the difficulty of 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.
7.4.1.   
Treasury operations


EU budget principles ensure that overall cash resources for the year are always sufficient for the execution of all payments. In fact, the total Member States contributions equal the amount of payment appropriations for the budgetary year. Member States contributions, however, are received in twelve monthly instalments throughout the year, while payments are subject to certain seasonality. In order to ensure that 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 can be called up in advance from Member States if needed, and under certain conditions. 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.
7.4.2.   
Borrowing and lending activities (MFA, BOP and Euratom)


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 serves as a liquidity reserve (or safety net) in case of payment default and payment delays of borrowers. For BOP, the Council Regulation 431/2009 provides for a procedure allowing sufficient time to mobilise funds through the EU budget.
7.4.3.   
Guarantee Fund


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 must maintain a minimum of EUR 100 million in a portfolio with a maturity of < 12 months which is to be invested in monetary instruments. As at 31 December 2010 these investments amounted to EUR 192 million. Furthermore a minimum of 20 % of the fund's nominal value shall comprise monetary instruments, fixed-rate bonds with a remaining maturity of no more than one year and floating-rate bonds. As at 31 December 2010 this ratio stood at 32 %.
7.4.4.   
ECSC in liquidation


The liquidity risk that arises from borrowings is generally offset by equivalent loans in terms and conditions (back-to-back operations). For the asset and liability management of ECSC in liquidation, the Commission manages liquidity requirements based on disbursement forecasts obtained through consultations with the responsible Commission services.
8.   RELATED PARTY DISCLOSURES
8.1.   RELATED PARTIES

The related parties of the EU are its consolidated entities and the key management personnel of these entities (see below). 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. A list of these consolidated entities is given in note 10.
8.2.   KEY MANAGEMENT ENTITLEMENTS

For the purposes of presenting information on related party transactions concerning the key management of the European Commission, such persons are shown here under five categories:
Category 1: the Presidents of the European Council, the Commission and the Court of Justice
Category 2: the Vice-president of the Commission and High Representative of the European Union 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, the President and Members of the General Court, the President and Members of the European Civil Service Tribunal, the Ombudsman and the European Data Protection Supervisor
Category 4: the President and Members of the Court of Auditors
Category 5: the highest ranking civil servants of the Institutions and Agencies
A summary of their entitlements are given below – further information can be found in the 
Official Journal of the European Union (L 187, 8.8.1967 last modified by Regulation (EC, Euratom) No 202/2005 of 18.1.2005 (L 33, 5.2.2005) and L 268, 20.10.1977 last modified by Regulation (EC, Euratom) No 1293/2004 of 30.4.2004 (L 243, 15.7.2004)). Other information is also available 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.

Key management financial entitlements











EUR




Entitlement (per employee)


Category 1


Category 2


Category 3


Category 4


Category 5





Basic salary (per month)


25 351,76


22 963,55 – 23 882,09


18 370,84 – 20 667,20


19 840,51 – 21 126,47


11 681,17 – 18 370,84





Residential/Expatriation allowance



15 %


15 %


15 %


15 %


16 %





Family allowances:





Household (% salary)


2 % + 170,52


2 % + 170,52


2 % + 170,52


2 % + 170,52


2 % + 170,52




Dependent child


372,61


372,61


372,61


372,61


372,61




Pre-school


91,02


91,02


91,02


91,02


91,02




Education, or


252,81


252,81


252,81


252,81


252,81




Education outside place of work


505,39


505,39


505,39


505,39


505,39





Presiding judges allowance



N/A


N/A


500 - 810,74


N/A


N/A





Representation allowance



1 418,07


0 - 911,38


500 - 607,71


N/A


N/A





Annual travel costs



N/A


N/A


N/A


N/A


Yes





Transfers to Member State:





Education allowance (4)



Yes


Yes


Yes


Yes


Yes




% of salary (4)



5 %


5 %


5 %


5 %


5 %




% of salary with no cc


max 25 %


max 25 %


max 25 %


max 25 %


max 25 %





Representation expenses



reimbursed


reimbursed


reimbursed


N/A


N/A





Taking up duty:





Installation expenses


50 703,52


45 927,10 – 47 764,18


36 741,68 – 41 334,40


39 681,02 – 42 252,94


reimbursed




Family travel expenses


reimbursed


reimbursed


reimbursed


reimbursed


reimbursed




Moving expenses


reimbursed


reimbursed


reimbursed


reimbursed


reimbursed





Leaving office:





Resettlement expenses


25 351,76


22 963,55 – 23 882,09


18 370,84 – 20 667,20


19 840,51 – 21 126,47


reimbursed




Family travel expenses


reimbursed


reimbursed


reimbursed


reimbursed


reimbursed




Moving expenses


reimbursed


reimbursed


reimbursed


reimbursed


reimbursed




Transition (% salary) (5)



40 % - 65 %


40 % - 65 %


40 % - 65 %


40 % - 65 %


N/A




Sickness insurance


covered


covered


covered


covered


optional





Pension (% salary, before tax)


Max 70 %


Max 70 %


Max 70 %


Max 70 %


Max 70 %





Deductions:





Community tax


8 % - 45 %


8 % - 45 %


8 % - 45 %


8 % - 45 %


8 % - 45 %




Sickness insurance (% salary)


1,8 %


1,8 %


1,8 %


1,8 %


1,8 %




Special levy on salary


5,07 %


5,07 %


5,07 %


5,07 %


5,07 %




Pension deduction


N/A


N/A


N/A


N/A


11,3 %





Number of persons at 31/12/2010




3




7




91




27




89





9.   EVENTS AFTER THE BALANCE SHEET DATE
At the date of transmission of these accounts, aside from the information provided below, no other material issues had come to the attention of the Accounting Officer of the Commission or were reported to him that would require separate disclosure under this section. The annual accounts and related notes were prepared using the most recently available information and this is reflected in the information presented.

Balance of Payments (BOP) lending operations

In March 2011 a further EUR 1,2 billion was disbursed to Romania under the BOP facility, with a maturity date of April 2018 and in June 2011 the last amount of EUR 150 million was paid out. Furthermore, in February 2011, Romania requested a follow-up precautionary financial assistance programme under the Balance of Payments Facility to support the re-launch of economic growth. On 12 May 2011 the Council decided to make available precautionary EU BOP assistance for Romania of up to EUR 1,4 billion (Council Decision 2011/288/EU). Currently, Romania does not intend to request the disbursement of any instalment under the precautionary financial assistance programme since the amounts would only be requested in case of unforeseen market deterioration in the economic and/or financial situation due to factors outside the control of the Romanian authorities, leading to the opening of an acute financing gap. Should the financial assistance be activated, it would be provided in form of a loan with a maximum maturity of seven years. The table below shows the reimbursement schedule of the EUR 13,4 billion disbursed at the date of authorisation for issue of the annual accounts.

European Financial Stabilisation Mechanism (EFSM)

On 11 May 2010 the Council adopted a European Financial Stabilisation Mechanism (EFSM) to preserve financial stability in Europe (Council Regulation (EU) no 407/2010). The mechanism is based on Art. 122.2 of the Treaty and enables the granting of financial assistance to a Member State in difficulties or seriously threatened with severe difficulties caused by exceptional occurrences beyond its control. The assistance may take the form of a loan or credit line guaranteed by the EU budget. When activated, the Commission would borrow funds on the capital markets or with financial institutions on behalf of the EU and lend these funds to the beneficiary Member State. The ECOFIN Council conclusions of 9 May 2010 restrict the facility to EUR 60 billion but the legal limit is provided in Article 2.2 of the Council Regulation, which restricts the outstanding amount of loans or credit lines to the margin available under the own resources ceiling.
On 21 November 2010, Ireland requested financial assistance under the above referenced Regulation. The Council Implementing Decision (2011/77/EU) of 7 December 2010 agreed to grant Ireland a loan amounting to a maximum of EUR 22,5 billion with a maximum average maturity of 7½ years. The loan will be made available in a maximum of 13 instalments. The first tranche of EUR 5 billion under the first instalment was paid to Ireland on 12 January 2011 with a final maturity in December 2015. The second tranche of the first instalment of EUR 3,4 billion was paid to Ireland on 24 March 2011 with a final maturity in April 2018. A second instalment of EUR 3 billion, with a maturity date of June 2021, was paid out on the 31 May 2011.
On 7 April 2011, Portugal also requested financial assistance under the EFSM and so on 17 May 2011 the Council agreed to grant a loan amounting to a maximum of EUR 26 billion (see Council Implementing Decision (2011/344/EU)), with a maximum average maturity of 7½ years. The loan shall be made available during three years, in a maximum of 14 installments. The first tranche of the first installment, amounting to EUR 1,75 billion, was disbursed on 31 May 2011, with a maturity date of June 2021. On 1 June 2011, the second tranche of the first installment, EUR 4,75 billion was disbursed, with a maturity of June 2016. The table below shows the reimbursement schedule of the EUR 17,9 billion disbursed at the date of authorisation for issue of the annual accounts.

Other Financial Stabilisation Mechanisms without impact on the EU accounts

It is worth noting that although it has no impact on either the EU accounts or the EU budget, another financial assistance package, the European Financial Stability Facility (EFSF), was established by the euro area Member States and other participating Member States. This Facility expires in June 2013.
The above mentioned EFSM loans to Ireland and Portugal were granted in conjunction with a loan facility from the EFSF with an aggregate net disbursement amount of EUR 17,7 billion for Ireland and EUR 26 billion for Portugal, and with assistance from the International Monetary Fund of respectively SDR 19,5 billion (approximately EUR 22.5 billion based on the rate in force at the time of the agreement) and SDR 23,7 billion (approximately EUR 26 billion) under an Extended Fund Facility. In addition, Ireland was also granted bilateral loans from the United Kingdom of GBP 3,3 billion (approximately EUR 3,8 billion), Sweden EUR 600 million and Denmark EUR 400 million.
Additionally, the European Council decided on the 24 June 2011 to establish a new permanent crisis mechanism, the European Stability Mechanism (ESM). It will become operational as of mid-2013 and will replace the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM). This mechanism will allow for the provision of financial assistance to euro area Member States in financial distress. Assistance will be conditional on the implementation of a strict economic and fiscal adjustment programme, in line with existing arrangements. As this mechanism will have its own legal personality and will be funded directly by the euro area Member States, there is no impact on either the EU accounts or the EU budget.

Outstanding loan amounts to be reimbursed per year as at date of authorisation for issue of the annual accounts

















EUR Billions




Loan and Beneficiary


Instalment


2011


2014


2015


2016


2017


2018


2019


2021


2025


Total





BOP





Hungary


1st


2,0


 


 


 


 


 


 


 


 


 




2nd


 


2,0


 


 


 


 


 


 


 


 




3rd


 


 


 


1,5


 


 


 


 


 


 




Latvia


1st


 


1,0


 


 


 


 


 


 


 


 




2nd


 


 


1,2


 


 


 


 


 


 


 




3rd


 


 


 


 


 


 


0,5


 


 


 




4th


 


 


 


 


 


 


 


 


0,2


 




5th


 


 


 


 


 


 


 


 


 


 




6th


 


 


 


 


 


 


 


 


 


 




Romania


1st


 


 


1,5


 


 


 


 


 


 


 




2nd


 


 


 


 


 


 


1,0


 


 


 




3rd


 


 


 


 


1,15


 


 


 


 


 




4th


 


 


 


 


 


1,2


 


 


 


 




5th


 


 


 


 


 


0,15


 


 


 


 




Precautionary assistance


 


 


 


 


 


 


 


 


 


 




Total BOP


 


2,0


3,0


2,7


1,5


1,15


1,35


1,5


0,0


0,2


13,4





EFSM





Ireland


1st (T1)


 


 


5,0


 


 


 


 


 


 


 




1st (T2)


 


 


 


 


 


3,4


 


 


 


 




2nd


 


 


 


 


 


 


 


3,0


 


 




Portugal


1st (T1)


 


 


 


 


 


 


 


1,75


 


 




1st (T2)


 


 


 


4,75


 


 


 


 


 


 




Total EFSM


 


0,0


0,0


5,0


4,75


0,0


3,4


0,0


4,75


0,0


17,9




Overall total


 


2,0


3,0


7,7


6,25


1,15


4,75


1,5


4,75


0,2


31,3




10.   CONSOLIDATED ENTITIES
A.   CONTROLLED ENTITIES

1.   
Institutions and consultative bodies








 


Committee of the Regions










 


Council of the European Union










 


Court of Justice of the European Union










 


European Commission










 


European Court of Auditors










 


European Data Protection Supervisor










 


European Economic and Social Committee










 


European Ombudsman










 


European Parliament










 


European Council (6)





2.   
EU Agencies








 


European Agency for Safety and Health at Work










 


European Aviation Safety Agency










 


European Centre for Disease Prevention and Control










 


European Centre for the Development of Vocational Training










 


European Environment Agency










 


European Food Safety Authority










 


European Foundation for the Improvement of Living and Working Conditions










 


European Maritime Safety Agency










 


European Medicines Agency










 


European Chemicals Agency










 


Fusion for Energy (European Joint Undertaking for ITER and the Development of Fusion Energy)










 


Eurojust










 


European Institute for Gender Equality (6)











 


European Union Agency for Fundamental Rights










 


European Network and Information Security Agency










 


European Training Foundation










 


European Agency for the Management of Operational Co-operation at External Borders of the Member States of the EU










 


Translation Centre for the Bodies of the European Union










 


European GNSS Supervisory Authority










 


Office for Harmonisation in the Internal Market (Trade Marks and Designs)










 


European Railway Agency










 


Community Plant Variety Office










 


Community Fisheries Control Agency










 


European Monitoring Centre for Drugs and Drug Addiction










 


European Police College (CEPOL)










 


European Police Office (EUROPOL) (6)











 


Executive Agency for Competitiveness and Innovation










 


Education, Audiovisual & Culture Executive Agency










 


European Research Council Executive Agency










 


Executive Agency for Health and Consumers










 


Trans-European Transport Network Executive Agency










 


Research Executive Agency




3.   
Other controlled entities


European Coal and Steel Community (in liquidation)
B.   JOINT VENTURES







 


ITER International Fusion Energy Organisation










 


SESAR Joint Undertaking










 


FCH Joint Undertaking (6)











 


Galileo Joint Undertaking in liquidation










 


IMI Joint Undertaking




C.   ASSOCIATES







 


European Investment Fund










 


Clean Sky Joint Undertaking










 


ARTEMIS Joint Undertaking










 


ENIAC Joint Undertaking (6)





11.   NON-CONSOLIDATED ENTITIES
Although the EU manages the assets of the below mentioned entities, they do not meet the requirements to be consolidated and so are not included in the European Union accounts.
11.1.   THE EUROPEAN DEVELOPMENT FUND (EDF)

The European Development Fund (EDF) is the main instrument for providing European Union aid for development cooperation to the African, Caribbean and Pacific (ACP) States and Overseas Countries and Territories (OCTs). The 1957 Treaty of Rome made provision for its creation with a view to granting technical and financial assistance, initially limited to African countries with which some Member States had historical links.
The EDF is not funded from the European Union's budget but from direct contributions from the Member States, which are agreed in negotiations at intergovernmental level. The Commission and the EIB manage the resources of the EDF. Each EDF is usually concluded for a period of around five years. Since the conclusion of the first partnership convention in 1964, the EDF programming cycles have generally followed the partnership agreement/convention cycles.
The EDF is governed by its own Financial Regulation (OJ L 78, 19.3.2008) which foresees the presentation of its own financial statements, separately from those of the EU. The EDF annual accounts and resource management are subject to the external control of the Court of Auditors and the Parliament. For information purposes, the balance sheet and the economic outturn account of the 8th, 9th and 10th EDFs are shown below:

Balance sheet – 8th, 9th and 10th EDFs








EUR millions




 


31.12.2010


31.12.2009




NON-CURRENT ASSETS


353


196




CURRENT ASSETS


2 151


1 389




Total assets


2 504


1 585




CURRENT LIABILITIES


(1 046)


(860)




Total liabilities


(1 046)


(860)





Net assets




1 458




725





FUNDS & RESERVES




Called fund capital


23 879


20 381




Other reserves


2 252


2 252




Economic outturn carried forward from previous years


(21 908)


(18 814)




Economic outturn of the year


(2 765)


(3 094)





Net assets




1 458




725









Economic outturn account – 8th, 9th and 10th EDF








EUR millions




 


2010


2009




OPERATING REVENUE


140


49




OPERATING EXPENSES


(3 000)


(3 192)




DEFICIT FROM OPERATING ACTIVITIES


(2 860)


(3 143)




FINANCIAL ACTIVITIES


95


49





ECONOMIC OUTTURN OF THE YEAR




(2 765)




(3 094)





11.2.   THE SICKNESS INSURANCE SCHEME

The Sickness Insurance Scheme is the scheme that provides medical assurance to the staff of the various European Union bodies. The funds of the Scheme are its own property and are not controlled by the European Union, although its financial assets are managed by the Commission. The Scheme is funded by contributions from its members (staff) and from the employers (the Institutions/Agencies/bodies.) Any surplus remains within the Scheme.
The scheme has four separate entities – the main scheme covering staff of the Institutions, Agencies of the European Union, and three smaller schemes covering staff in the European University of Florence, the European schools and staff working outside the EU such as staff in the EU delegations. The total assets of the Scheme at 31 December 2010 totalled EUR 286 million (2009: EUR 297 million).
11.3.   THE PARTICIPANTS GUARANTEE FUND (PGF)

Certain pre-financing amounts paid out under the 7th Research Framework Programme for research and technological development (FP7) are effectively covered by a Participants Guarantee Fund (PGF). This is a mutual benefit instrument set up to cover the financial risks incurred by the EU and the participants during the implementation of the indirect actions of FP7, its capital and interests constituting a performance security. All participants of indirect actions taking the form of a grant contribute 5 % of the total EU contribution to the PGF's capital for the duration of the action. As such the participants are the owners of the PGF, and the EU (represented by the Commission) acts only as their executive agent. As at 31 December 2010 the PGF had total assets of EUR 879 million (2009: EUR 580 million). The funds of the PGF are its own property and are not controlled by the European Union, even if its financial assets are managed by the Commission.
PART II

Consolidated reports on implementation of the budget of the European Union and explanatory notes

CONTENTS

Reports on implementation of the budget:







1.

Budget outturn









2.

Statement of Comparison of Budget and Actual Amounts




Revenue:







3.

Consolidated summary of the implementation of budget revenue




Expenditure:







4.

Breakdown and changes in commitment and payment appropriations by financial framework heading









5.

Implementation of commitment appropriations by financial framework heading









6.

Implementation of payment appropriations by financial framework heading









7.

Movement in commitments outstanding by financial framework heading









8.

Breakdown of commitments outstanding by year by financial framework heading









9.

Breakdown and changes in commitment and payment appropriations by policy area









10.

Implementation of commitment appropriations by policy area









11.

Implementation of payment appropriations by policy area









12.

Movement in commitments outstanding by policy area









13.

Breakdown of commitments outstanding by year of origin by policy area




Institutions:







14.

Consolidated summary of implementation of budget revenue by Institution









15.

Implementation of commitment appropriations by financial framework heading




Agencies:







16.

Agency income: budget forecasts, entitlements and amounts received









17.

Commitment and payment appropriations by Agency









18.

Budget outturn including Agencies




Explanatory notes to the reports on implementation of the budget:







1.

Budgetary principles, structure and appropriations









2.

Explanation of the reports on the implementation of the budget




CONSOLIDATED REPORTS ON IMPLEMENTATION OF THE BUDGET
 (7)


RESULT OF IMPLEMENTATION OF THE EU BUDGET

1.   EU budget outturn 2010








EUR millions




EUROPEAN UNION


2010


2009




Revenue for the financial year



127 795




117 626





Payments against current year appropriations



(121 213)




(116 579)





Payment appropriations carried over to year N+1



(2 797)




(1 759)





Cancellation of unused payment appropriations carried over from year N-1



741




2 791





Exchange differences for the year



23




185






Budget Outturn
 (8)




4 549




2 264





The budget surplus for the European Union is returned to the Member States during the following year through deduction of their amounts due for that year.
2.   Statement of comparison of budget and actual amounts


Revenue













EUR millions




Title


Original Budget


Final Budget


Entitlements established


Revenue


Difference Final-Actual


Receipts as % of budget


Outstanding




1


2


3


4


5=2 – 4


6=4/2


7=3 – 4










1.


Own resources






121 507


119 270


119 950


119 869


– 599


100,50 %


81










3.


Surpluses, balances and adjustments






0


2 254


1 624


1 460


794


64,79 %


164










4.


Revenue accruing from persons working with the institutions and with other Community bodies






1 178


1 180


1 129


1 123


58


95,12 %


7










5.


Revenue accruing from the administrative operation of the institutions






69


69


407


388


– 319


563,54 %


19










6.


Contributions and refunds in connection with community agreements and programmes






30


30


3 781


3 512


–3 482


11 707,30 %


269










7.


Interest on late payments and fines






123


123


15 301


1 408


–1 285


1 144,36 %


13 893










8.


Borrowing and lending operations






0


0


122


0


0


0


122










9.


Miscellaneous revenue






30


30


47


36


–6


119,95 %


10




Total


122 937


122 956


142 362


127 795


–4 839


103,94 %


14 566








Expenditure – by financial framework heading













EUR millions




Financial Framework Heading


Original Budget


Final Budget (9)



Payments made


Difference Final-Actual


%


Appropriations carried over


Appropriations lapsing




1


2


3


4=2 – 3


5=3/2


6


7=2 – 3 – 6










1.


Sustainable growth






47 727


52 103


48 828


3 275


93,71 %


1 905


1 370










2.


Preservation & management of natural resources






58 136


59 630


56 647


2 983


95,00 %


2 382


601










3.


Citizenship, freedom, security and justice






1 398


1 617


1 373


244


84,93 %


199


44










4.


The EU as a global partner






7 788


8 101


7 487


615


92,41 %


114


501










5.


Administration






7 889


9 076


7 896


1 180


87,00 %


957


223










6.


Compensations






0


0


0


0


0,00 %


0


0




Total


122 937


130 527


122 231


8 296


93,64 %


5 557


2 739








Expenditure – by policy area













EUR millions




Policy Area


Original Budget


Final Budget (10)



Payments made


Difference Final-Actual


%


Appropriations carried over to 2011


Appropriations lapsing




1


2


3


4=2 – 3


5=3/2


6


7=2 – 3 – 6










01


Economic and financial affairs






406


401


289


112


72,11 %


67


44










02


Enterprise






638


771


658


113


85,35 %


99


14










03


Competition






91


104


92


12


88,79 %


10


2










04


Employment and social affairs






8 572


8 543


7 481


1 062


87,57 %


43


1 019










05


Agriculture and rural development






57 077


58 421


55 611


2 810


95,19 %


2 325


485










06


Energy and transport






3 262


3 369


2 859


510


84,85 %


187


323










07


Environment






371


438


358


80


81,79 %


24


56










08


Research






4 138


5 369


4 507


863


83,93 %


848


14










09


Information society and media






1 597


1 986


1 786


200


89,94 %


197


3










10


Direct research






392


789


438


351


55,51 %


344


7










11


Maritime affairs and Fisheries






819


827


656


172


79,23 %


39


133










12


Internal market






73


80


71


9


88,66 %


7


2










13


Regional policy






28 768


30 709


30 623


87


99,72 %


79


8










14


Taxation and customs union






107


136


126


10


92,53 %


9


1










15


Education and culture






1 443


1 783


1 572


211


88,16 %


205


6










16


Communication






210


231


206


25


89,24 %


14


11










17


Health and consumer protection






542


664


590


74


88,84 %


45


30










18


Area of freedom, security and justice






798


840


745


95


88,70 %


71


24










19


External relations






3 658


3 867


3 683


185


95,23 %


84


101










20


Trade






82


90


77


13


85,06 %


6


7










21


Development and relations with ACP States






1 608


1 819


1 708


111


93,90 %


55


56










22


Enlargement






1 204


1 152


1 130


22


98,06 %


16


6










23


Humanitarian aid






820


978


971


7


99,30 %


6


1










24


Fight against fraud






73


82


73


10


88,34 %


7


3










25


Commission’s policy coordination and legal advice






188


215


189


26


87,95 %


22


4










26


Commission’s administration






1 013


1 239


1 044


195


84,24 %


177


19










27


Budget






68


77


65


12


83,82 %


11


1










28


Audit






11


12


11


2


86,62 %


1


0










29


Statistics






120


148


126


22


84,99 %


17


6










30


Pensions and related expenditure






1 214


1 210


1 205


4


99,63 %


0


4










31


Language Services






389


486


427


60


87,75 %


57


3










40


Reserves






249


193


0


193


0,00 %


0


193










90


Other Institutions






2 937


3 496


2 857


639


81,72 %


484


155




Total


122 937


130 527


122 231


8 296


93,64 %


5 557


2 739




3.   Summary of the implementation of budget revenue 2010
















EUR millions




Title


Income appropriations


Entitlements established


Revenue


Receipts as % of budget


Outstanding




Initial


Final


Current year


Carried over


Total


On entitlements of Current year


On entitlements Carried


Total










1.


Own resources






121 507


119 270


119 861


89


119 950


119 846


22


119 869


100,50 %


81










3.


Surpluses, balances and adjustments






0


2 254


1 624


0


1 624


1 460


0


1 460


64,79 %


164










4.


Revenue accruing from persons working with the institutions and with other Community bodies






1 178


1 180


1 122


7


1 129


1 116


7


1 123


95,12 %


7










5.


Revenue from administrative operations of institutions






69


69


305


102


407


290


98


388


563,54 %


19










6.


Contributions and refunds in connection with community agreements and programmes






30


30


3 507


275


3 781


3 360


153


3 512


11 707,30 %


269










7.


Interest on late payments and fines






123


123


3 460


11 841


15 301


621


786


1 408


1 144,36 %


13 893










8.


Borrowing and lending operations






0


0


47


76


122


0


0


0


 


122










9.


Miscellaneous revenue






30


30


28


19


47


24


13


36


119,95 %


10




Total


122 937


122 956


129 955


12 407


142 362


126 717


1 078


127 795


103,94 %


14 566








Detail Title 1:   Own resources
















Chapter


Income appropriations


Entitlements established


Revenue


Receipts as % of budget


Outstanding




Initial


Final


Current year


Carried over


Total


On entitlements of Current year


On entitlements Carried


Total










11.


Sugar levies






123


123


146


0


146


146


0


146


118,00 %


0










12.


Customs duties






14 080


15 596


15 507


89


15 595


15 491


22


15 514


99,47 %


81










13.


VAT






13 951


13 277


13 393


0


13 393


13 393


0


13 393


100,87 %


0










14.


GNI






93 353


90 273


90 948


0


90 948


90 948


0


90 948


100,75 %


0










15.


Correction of budgetary imbalances






0


0


– 128


0


– 128


– 128


0


– 128


—


0










16.


Reduction of GNI based contributions of NL & S






0


0


–3


0


–3


–3


0


–3


—


0




Total


121 507


119 270


119 861


89


119 950


119 846


22


119 869


100,50%


81








Detail Title 3:   Surpluses, balances and adjustments
















Chapter


Income appropriations


Entitlements established


Revenue


Receipts as % of budget


Outstanding




Initial


Final


Current year


Carried over


Total


On entitlements of Current year


On entitlements Carried


Total










30.


Surplus from previous year






0


2 254


2 254


0


2 254


2 254


0


2 254


100,00 %


0










31.


VAT balances






0


0


– 880


0


– 880


– 917


0


– 917


—


37










32.


GNI balances






0


0


241


0


241


113


0


113


—


128










34.


Adjustment for non-participation in JHAP






0


0


–4


0


–4


–4


0


–4


—


0










35.


United Kingdom correction-adjustments






0


0


9


0


9


9


0


9


—


0










37.


United Kingdom correction-intermediate calculation






0


0


4


0


4


4


0


4


—


0




Total


0


2 254


1 624


0


1 624


1 460


0


1 460


64,79 %


164




4.   Breakdown & changes in commitment & payment appropriations by financial framework heading


















EUR millions




 


Commitment appropriations


Payment appropriations




Financial Framework Heading


Appropriations adopted


Modifications
(Transfers and AB)


Carried over


Assigned revenue


Total additional


Total authorised


Appropriations adopted


Modifications
(Transfers and AB)


Carried over


Assigned revenue


Total additional


Total authorised




1


2


3


4


5=3 + 4


6=1 + 2 + 5


7


8


9


10


11=9 + 10


12=7 + 8 + 11










1


Sustainable growth






64 249


0


65


1 929


1 994


66 243


47 727


1 074


932


2 370


3 302


52 103










2


Preservation and management of natural resources






59 499


0


253


2 560


2 813


62 312


58 136


–1 116


62


2 549


2 611


59 630










3


Citizenship, freedom, security and justice






1 674


80


0


151


151


1 906


1 398


42


8


169


177


1 617










4


The EU as a global partner






8 141


0


0


277


277


8 418


7 788


1


90


222


313


8 101










5


Administration






7 889


19


11


473


484


8 392


7 889


19


682


486


1 168


9 076










6


Compensations






0


0


0


0


0


0


0


0


0


0


0


0




Total


141 453


99


329


5 390


5 719


147 270


122 937


19


1 774


5 797


7 571


130 527




5.   Implementation of commitment appropriations by financial framework heading





















EUR millions




Financial Framework Heading


Commitment appropriations authorised


Commitments made


Appropriations carried over to 2011


Appropriations lapsing




From the year’s appropriations


From carry-overs


From assigned revenue


Total


%


Assigned revenue


Carry-overs by decision


Total


%


From the year’s budget appropriations


From carry overs


Assigned revenue
(EFTA)


Total


%




1


2


3


4


5=2 + 3 + 4


6=5/1


7


8


9=7 + 8


10=9/1


11


12


13


14=11 + 12 + 13


15=14/1










1


Sustainable growth






66 243


63 590


65


799


64 453


97,30 %


1 130


182


1 312


1,98 %


477


0


1


478


0,72 %










2


Preservation and management of natural resources






62 312


59 406


253


592


60 251


96,69 %


1 968


2


1 970


3,16 %


91


0


0


91


0,15 %










3


Citizenship, freedom, security and justice






1 906


1 717


0


78


1 795


94,20 %


73


24


97


5,11 %


13


0


0


13


0,69 %










4


The EU as a global player






8 418


8 083


0


164


8 247


97,97 %


113


42


154


1,83 %


16


0


0


17


0,20 %










5


Administration






8 392


7 758


10


229


7 997


95,30 %


244


9


254


3,02 %


140


1


0


141


1,68 %










6


Compensations






0


0


0


0


0


0,00 %


0


0


0


0,00 %


0


0


0


0


0,00 %




Total


147 270


140 554


328


1 861


142 744


96,93 %


3 528


259


3 787


2,57 %


738


1


1


740


0,50 %




6.   Implementation of payment appropriations by financial framework heading






















EUR millions




Financial Framework Heading


Payment
Appropriations authorised


Payments made


Appropriations carried over to 2010


Appropriations lapsing




From the year’s appropriations


From carry-overs


From assigned revenue


Total


%


Automatic carry-overs


Carry-overs by decision


Assigned revenue


Total


%


From the year’s appropria-tions


From carry-overs


Assigned revenue
(EFTA)


Total


%




1


2


3


4


5=2 + 3 + 4


6=5/1


7


8


9


10=7 + 8 + 9


11=10/1


12


13


14


15=12 + 13 + 14


16=15/1










1


Sustainable growth






52 103


47 811


282


735


48 828


93,71 %


125


156


1 624


1 905


3,66 %


709


651


10


1 370


2,63 %










2


Preservation and management of natural resources






59 630


56 014


47


587


56 647


95,00 %


46


373


1 963


2 382


3,99 %


586


15


0


601


1,01 %










3


Citizenship, freedom, security and justice






1 617


1 299


6


67


1 373


84,93 %


8


90


101


199


12,33 %


42


2


0


44


2,74 %










4


The EU as a global player






8 101


7 259


81


147


7 487


92,41 %


36


2


76


114


1,41 %


491


9


0


501


6,18 %










5


Administration






9 076


7 088


602


205


7 896


87,00 %


666


10


281


957


10,54 %


144


80


0


223


2,46 %










6


Compensations






0


0


0


0


0


0,00 %


0


0


0


0


0,00 %


0


0


0


0


0,00%




Total


130 527


119 472


1 018


1 741


122 231


93,64 %


881


631


4 045


5 557


4,26 %


1 972


756


11


2 739


2,10 %




7.   Movements in commitments outstanding - by financial framework heading















EUR millions




 


Commitments outstanding at the end of the previous year


Commitments of the year


 




Financial Framework Heading


Commitments carried forward from previous year


Decommitments /Revaluations/ Cancellations


Payments


Commitments outstanding at year-end


Commitments made during the year


Payments


Cancellation of commitments which cannot be carried over


Commitments outstanding at year-end


Total Commitments outstanding at year-end










1


Sustainable growth






136 903


–2 058


–43 678


91 167


64 453


–5 150


–3


59 300


150 467










2


Preservation and management of natural resources






19 541


– 181


–10 280


9 079


60 251


–46 367


0


13 883


22 963










3


Citizenship, freedom, security and justice






1 662


– 173


– 452


1 037


1 795


– 921


0


874


1 911










4


The EU as a global player






18 462


– 890


–5 231


12 340


8 247


–2 255


0


5 992


18 332










5


Administration






704


–83


– 607


15


7 997


–7 289


–1


708


723










6


Compensations






0


0


0


0


0


0


0


0


0




Total


177 272


–3 385


–60 249


113 638


142 744


–61 982


–5


80 757


194 395




8.   Breakdown of commitments outstanding by the commitment's year of origin - by financial framework heading















EUR millions




Financial Framework Heading


< 2004


2004


2005


2006


2007


2008


2009


2010


Total










1


Sustainable growth






781


617


1 461


13 421


2 879


23 288


48 719


59 300


150 467










2


Preservation & management of natural resources






44


13


47


1 517


138


688


6 633


13 883


22 963










3


Citizenship, freedom, security and justice






13


12


23


42


151


218


577


874


1 911










4


The EU as a global player






786


412


584


1 474


1 727


3 164


4 193


5 992


18 332










5


Administration






0


0


0


0


0


0


14


708


723




Total


1 623


1 055


2 116


16 455


4 895


27 359


60 136


80 757


194 395




9.   Breakdown and changes in commitment and payment appropriations by policy area


















EUR millions




Policy Area


Commitment appropriations


Payment appropriations




Approps adopted


Modifications
(Transfer/AB)


Carried over


Assigned revenue


Total additional


Total authorised


Approps adopted


Modifications
(Transfer/AB)


Carried over


Assigned revenue


Total additional


Total authorised




1


2


3


4


5=3 + 4


6=1 + 2 + 5


7


8


9


10


11=9 + 10


12=7 + 8 + 11










01


Economic and financial affairs






449


–6


0


13


13


455


406


–29


6


18


24


401










02


Enterprise






795


0


0


112


112


907


638


–7


13


126


140


771










03


Competition






91


0


0


4


4


95


91


0


8


4


12


104










04


Employment and social affairs






11 274


85


40


16


56


11 414


8 572


– 790


748


14


762


8 543










05


Agriculture and rural development






58 081


–2


252


2 548


2 800


60 879


57 077


–1 229


26


2 548


2 573


58 421










06


Energy and transport






4 950


3


0


136


136


5 089


3 262


– 152


92


167


259


3 369










07


Environment






471


–1


0


24


24


494


371


26


24


18


42


438










08


Research






5 142


0


0


770


770


5 912


4 138


28


38


1 165


1 203


5 369










09


Information society and media






1 628


0


0


189


189


1 817


1 597


96


14


279


293


1 986










10


Direct research






383


0


4


460


464


847


392


–11


35


374


409


789










11


Maritime affairs and Fisheries






1 001


1


1


3


3


1 005


819


–9


15


3


17


827










12


Internal market






74


1


0


3


3


78


73


–2


6


3


9


80










13


Regional policy






38 897


99


21


4


25


39 020


28 768


1 925


13


4


17


30 709










14


Taxation and customs union






135


0


0


4


4


139


107


18


7


4


11


136










15


Education and culture






1 500


0


0


317


317


1 817


1 443


–3


14


329


343


1 783










16


Communication






218


2


0


4


4


223


210


3


15


4


18


231










17


Health and consumer protection






677


1


0


26


26


703


542


73


28


21


50


664










18


Area of freedom, security and justice






1 066


1


0


61


61


1 128


798


–23


7


58


65


840










19


External relations






4 264


65


0


121


121


4 450


3 658


67


50


92


142


3 867










20


Trade






79


–1


0


3


3


81


82


–1


6


3


9


90










21


Development and relations with ACP States






1 647


–49


0


139


139


1 737


1 608


57


41


114


154


1 819










22


Enlargement






1 022


–6


1


18


19


1 035


1 204


–79


9


19


28


1 152










23


Humanitarian aid






820


245


0


5


5


1 070


820


107


46


4


50


978










24


Fight against fraud






78


0


0


0


0


78


73


2


7


0


7


82










25


Commission’s policy coordination and legal advice






188


2


0


9


9


199


188


2


16


9


25


215










26


Commission’s administration






1 014


2


0


96


96


1 111


1 013


4


123


99


222


1 239










27


Budget






68


–7


0


6


6


67


68


–7


10


6


16


77










28


Audit






11


0


0


1


1


12


11


0


1


1


1


12










29


Statistics






141


–5


0


17


17


153


120


4


7


17


24


148










30


Pensions and related expenditure






1 214


–4


0


0


0


1 210


1 214


–4


0


0


0


1 210










31


Language Services






389


0


0


72


72


462


389


0


24


72


97


486










40


Reserves






749


– 334


0


0


0


415


249


–56


0


0


0


193










90


Other Institutions






2 937


9


10


213


223


3 170


2 937


9


325


224


549


3 496




Total


141 453


99


329


5 390


5 719


147 270


122 937


19


1 774


5 797


7 571


130 527




10.   Implementation of commitment appropriations by policy area





















EUR millions




Policy Area


Commitment appropriations authorised


Commitments made


Appropriations carried over to 2011


Appropriations lapsing




From the year’s approps


From carry-overs


Assigned revenue


Total


%


Assigned revenue


Carry-overs: decision


Total


%


From the year’s budget approps


From carry-overs


Assigned revenue
(EFTA)


Total


%




1


2


3


4


5=2 + 3 + 4


6=5/1


7


8


9=7 + 8


10=9/1


11


12


13


14=11 + 12 + 13


15=14/1










01


Economic and financial affairs






455


440


0


11


451


99,07 %


1


0


1


0,32 %


3


0


0


3


0,60 %










02


Enterprise






907


785


0


60


845


93,14 %


52


0


52


5,68 %


10


0


0


11


1,18 %










03


Competition






95


90


0


2


92


96,87 %


2


0


2


2,15 %


1


0


0


1


0,98 %










04


Employment and social affairs






11 414


11 329


40


9


11 378


99,69 %


7


19


26


0,23 %


10


0


0


10


0,09 %










05


Agriculture and rural development






60 879


58 048


252


580


58 880


96,72 %


1 967


0


1 967


3,23 %


31


0


0


31


0,05 %










06


Energy and transport






5 089


4 797


0


67


4 864


95,57 %


69


146


215


4,23 %


10


0


0


10


0,20 %










07


Environment






494


447


0


11


459


92,78 %


13


0


13


2,60 %


23


0


0


23


4,62 %










08


Research






5 912


5 141


0


404


5 545


93,79 %


366


0


366


6,19 %


1


0


0


1


0,02 %










09


Information society and media






1 817


1 624


0


68


1 692


93,12 %


121


0


121


6,66 %


4


0


0


4


0,22 %










10


Direct research






847


383


4


75


462


54,49 %


385


0


385


45,46 %


0


0


0


0


0,04 %










11


Maritime affairs and Fisheries






1 005


975


1


2


977


97,20 %


1


2


3


0,31 %


25


0


0


25


2,48 %










12


Internal market






78


75


0


2


76


98,23 %


1


0


1


1,64 %


0


0


0


0


0,13 %










13


Regional policy






39 020


38 958


21


2


38 981


99,90 %


2


21


23


0,06 %


16


0


0


16


0,04 %










14


Taxation and customs union






139


131


0


2


133


95,51 %


2


0


2


1,15 %


5


0


0


5


3,34 %










15


Education and culture






1 817


1 497


0


144


1 641


90,33 %


173


0


173


9,52 %


3


0


0


3


0,15 %










16


Communication






223


216


0


2


217


97,52 %


2


0


2


0,83 %


4


0


0


4


1,65 %










17


Health and consumer protection






703


659


0


17


676


96,10 %


9


0


9


1,24 %


19


0


0


19


2,66 %










18


Area of freedom, security and justice






1 128


1 038


0


32


1 070


94,84 %


29


24


53


4,71 %


5


0


0


5


0,45 %










19


External relations






4 450


4 293


0


66


4 359


97,96 %


55


31


86


1,93 %


5


0


0


5


0,11 %










20


Trade






81


77


0


1


78


97,05 %


1


0


1


1,57 %


1


0


0


1


1,37 %










21


Development & relations ACP States






1 737


1 591


0


96


1 686


97,07 %


44


6


49


2,83 %


2


0


0


2


0,10 %










22


Enlargement






1 035


1 014


1


8


1 023


98,87 %


10


0


10


0,98 %


2


0


0


2


0,16 %










23


Humanitarian aid






1 070


1 055


0


3


1 058


98,90 %


2


0


2


0,20 %


10


0


0


10


0,90 %










24


Fight against fraud






78


77


0


0


77


98,77 %


0


0


0


0,02 %


1


0


0


1


1,21 %










25


Policy coordination and legal advice






199


189


0


4


193


97,10 %


4


0


4


2,21 %


1


0


0


1


0,69 %










26


Commission’s administration






1 111


1 013


0


58


1 070


96,32 %


38


0


38


3,44 %


3


0


0


3


0,24 %










27


Budget






67


61


0


3


63


94,71 %


3


0


3


4,02 %


1


0


0


1


1,27 %










28


Audit






12


11


0


0


11


96,29 %


0


0


0


2,55 %


0


0


0


0


1,16 %










29


Statistics






153


130


0


9


139


90,74 %


8


0


8


5,10 %


6


0


0


6


4,16 %










30


Pensions and related expenditure






1 210


1 205


0


0


1 205


99,63 %


0


0


0


0,00 %


4


0


0


4


0,37 %










31


Language Services






462


388


0


44


431


93,39 %


29


0


29


6,24 %


2


0


0


2


0,37 %










40


Reserves






415


0


0


0


0


0,00 %


0


0


0


0,00 %


415


0


0


415


100,00 %










90


Other Institutions






3 170


2 821


9


81


2 911


91,83 %


133


9


142


4,47 %


117


1


0


117


3,70 %




Total


147 270


140 554


328


1 861


142 744


96,93 %


3 528


259


3 787


2,57 %


738


1


1


740


0,50 %




11.   Implementation of payment appropriations by budget policy area






















EUR millions




Policy Area


Payment Appropriations authorised


Payments made


Appropriations carried over to 2011


Appropriations lapsing




From the year's approps


From carry-overs


Assigned revenue


Total


%


Automatic carry-overs


Carry-overs by decision


Assigned revenue


Total


%


From the year's approps


From carry-overs


Assigned revenue
(EFTA)


Total


%




1


2


3


4


5=2 + 3 + 4


6=5/1


7


8


9


10=7 + 8 + 9


11=10/1


12


13


14


15=12 + 13 + 14


16=15/1










01


Economic and financial affairs






401


282


5


2


289


72,11 %


5


48


14


67


16,82 %


41


0


3


44


11,07 %










02


Enterprise






771


594


11


53


658


85,35 %


14


12


73


99


12,81 %


11


3


1


14


1,84 %










03


Competition






104


83


7


2


92


88,79 %


7


0


2


10


9,46 %


1


1


0


2


1,74 %










04


Employment and social affairs






8 543


7 353


121


7


7 481


87,57 %


18


19


6


43


0,51 %


392


627


0


1 019


11,93 %










05


Agriculture and rural development






58 421


55 009


22


580


55 611


95,19 %


25


332


1 968


2 325


3,98 %


482


3


0


485


0,83 %










06


Energy and transport






3 369


2 710


88


62


2 859


84,85 %


17


70


100


187


5,56 %


313


4


6


323


9,59 %










07


Environment






438


329


19


10


358


81,79 %


16


0


7


24


5,44 %


51


4


0


56


12,78 %










08


Research






5 369


4 136


25


345


4 507


83,93 %


29


0


819


848


15,80 %


1


13


0


14


0,27 %










09


Information society and media






1 986


1 675


13


98


1 786


89,94 %


16


0


181


197


9,91 %


2


1


0


3


0,15 %










10


Direct research






789


338


31


69


438


55,51 %


39


0


305


344


43,58 %


3


4


0


7


0,91 %










11


Maritime affairs and Fisheries






827


652


2


1


656


79,23 %


3


35


1


39


4,74 %


121


12


0


133


16,03 %










12


Internal market






80


64


5


1


71


88,66 %


6


0


1


7


8,81 %


1


1


0


2


2,53 %










13


Regional policy






30 709


30 611


11


2


30 623


99,72 %


10


67


2


79


0,26 %


5


2


0


8


0,03 %










14


Taxation and customs union






136


117


6


2


126


92,53 %


7


1


2


9


6,98 %


0


1


0


1


0,49 %










15


Education and culture






1 783


1 416


13


143


1 572


88,16 %


15


5


186


205


11,51 %


4


2


0


6


0,33 %










16


Communication






231


192


12


2


206


89,24 %


12


0


2


14


6,09 %


8


3


0


11


4,67 %










17


Health and consumer protection






664


552


27


11


590


88,84 %


29


6


10


45


6,70 %


28


1


0


30


4,45 %










18


Area of freedom, security and justice






840


721


6


18


745


88,70 %


8


23


41


71


8,48 %


23


1


0


24


2,82 %










19


External relations






3 867


3 589


42


52


3 683


95,23 %


42


2


40


84


2,16 %


93


8


0


101


2,61 %










20


Trade






90


70


5


1


77


85,06 %


5


0


1


6


7,01 %


6


1


0


7


7,92 %










21


Development and relations with ACP States






1 819


1 585


35


88


1 708


93,90 %


29


0


26


55


3,03 %


50


5


0


56


3,07 %










22


Enlargement






1 152


1 113


8


10


1 130


98,06 %


7


0


9


16


1,39 %


5


2


0


6


0,55 %










23


Humanitarian aid






978


922


45


4


971


99,30 %


5


0


1


6


0,61 %


1


0


0


1


0,09 %










24


Fight against fraud






82


67


5


0


73


88,34 %


7


0


0


7


8,55 %


1


1


0


3


3,11 %










25


Commission’s policy coordination and legal advice






215


171


14


4


189


87,95 %


16


1


5


22


10,39 %


2


2


0


4


1,66 %










26


Commission’s administration






1 239


889


110


44


1 044


84,24 %


122


1


54


177


14,27 %


6


13


0


19


1,50 %










27


Budget






77


52


10


3


65


83,82 %


8


0


3


11


14,49 %


1


0


0


1


1,69 %










28


Audit






12


10


1


0


11


86,62 %


1


0


0


1


11,77 %


0


0


0


0


1,61 %










29


Statistics






148


113


6


7


126


84,99 %


6


0


10


17


11,21 %


5


1


0


6


3,79 %










30


Pensions and related expenditure






1 210


1 205


0


0


1 205


99,63 %


0


0


0


0


0,00 %


4


0


0


4


0,37 %










31


Language Services






486


362


23


41


427


87,75 %


25


0


31


57


11,65 %


2


1


0


3


0,60%










40


Reserves






193


0


0


0


0


0,00%


0


0


0


0


0,00%


193


0


0


193


100,00%










90


Other Institutions






3 496


2 490


286


80


2 857


81,72%


331


9


144


484


13,85%


117


38


0


155


4,43%




Total


130 527


119 472


1 018


1 741


122 231


93,64%


881


631


4 045


5 557


4,26%


1 972


756


11


2 739


2,10%




12.   Movements in commitments outstanding by policy area















EUR millions




Policy Area


Commitments outstanding at the end of the previous year


Commitments of the year


Total Commitments outstanding at year-end




Commitments carried forward from previous year


Decommitments /Revaluations/ Cancellations


Payments


Commitments outstanding at year-end


Commitments made during the year


Payments


Cancellation of commitments which cannot be carried over


Commitments outstanding at year-end










01


Economic and financial affairs






424


–5


–74


344


451


– 215


0


236


581










02


Enterprise






768


–20


– 301


447


845


– 357


0


488


935










03


Competition






9


–2


–7


0


92


–85


0


8


8










04


Employment and social affairs






26 278


–1 501


–7 071


17 706


11 378


– 410


–1


10 967


28 673










05


Agriculture and rural development






17 155


– 227


–9 400


7 528


58 880


–46 211


0


12 669


20 197










06


Energy and transport






6 713


–99


–2 180


4 435


4 864


– 679


0


4 184


8 619










07


Environment






750


–29


– 225


496


459


– 133


0


325


821










08


Research






8 407


– 200


–3 019


5 188


5 545


–1 488


0


4 057


9 245










09


Information society and media






2 411


–65


–1 031


1 315


1 692


– 755


0


937


2 252










10


Direct research






158


–17


–90


51


462


– 348


–1


112


163










11


Maritime affairs and Fisheries






1 620


–64


– 428


1 128


977


– 227


0


750


1 877










12


Internal market






15


–1


–12


2


76


–59


0


17


20










13


Regional policy






93 232


– 114


–30 104


63 013


38 981


– 518


0


38 462


101 475










14


Taxation and customs union






83


–14


–53


15


133


–72


0


60


76










15


Education and culture






591


–50


– 283


258


1 641


–1 288


0


353


610










16


Communication






91


–9


–65


18


217


– 141


0


76


94










17


Health and consumer protection






706


–68


– 337


300


676


– 253


0


423


723










18


Area of freedom, security and justice






1 049


–92


– 220


737


1 070


– 525


0


545


1 282










19


External relations






9 034


– 327


–2 398


6 309


4 359


–1 285


0


3 074


9 383










20


Trade






19


–1


–12


6


78


–65


0


13


19










21


Development/relations ACP States






3 391


–95


–1 131


2 166


1 686


– 577


0


1 109


3 275










22


Enlargement






3 173


– 300


– 939


1 934


1 023


– 191


0


832


2 766










23


Humanitarian aid






513


–19


– 334


160


1 058


– 637


0


421


581










24


Fight against fraud






32


–4


–18


10


77


–55


0


22


32










25


Commission's policy coordination & legal advice






18


–2


–16


1


193


– 173


0


20


20










26


Commission’s administration






168


–15


– 143


11


1 070


– 901


0


169


179










27


Budget






10


0


–10


0


63


–55


0


8


8










28


Audit






1


0


–1


0


11


–10


0


1


1










29


Statistics






101


–6


–46


49


139


–79


0


59


108










30


Pensions and related expenditure






0


0


0


0


1 205


–1 205


0


0


0










31


Language Services






24


–1


–23


0


431


– 403


0


28


28










90


Other Institutions






328


–38


– 278


11


2 911


–2 579


0


332


344




Total


177 272


–3 385


–60 249


113 638


142 744


–61 982


–5


80 757


194 395




13.   Breakdown of commitments outstanding by the commitment's year of origin by policy area















EUR millions




Policy Area


<2004


2004


2005


2006


2007


2008


2009


2010


Total










01


Economic and financial affairs






0


0


13


63


32


40


196


236


581










02


Enterprise






16


3


13


17


57


112


229


488


935










03


Competition






0


0


0


0


0


0


0


8


8










04


Employment and social affairs






137


26


350


2 616


701


4 288


9 590


10 967


28 673










05


Agriculture and rural development






4


2


4


1 199


0


494


5 825


12 669


20 197










06


Energy and transport






62


61


105


175


381


797


2 854


4 184


8 619










07


Environment






4


7


24


40


101


138


183


325


821










08


Research






183


117


213


423


792


1 369


2 091


4 057


9 245










09


Information society and media






12


8


42


73


179


337


664


937


2 252










10


Direct research






0


0


1


7


4


14


26


112


163










11


Maritime affairs and Fisheries






36


4


19


282


23


130


634


750


1 877










12


Internal market






0


0


0


0


0


0


2


17


20










13


Regional policy






522


553


884


10 452


729


16 566


33 307


38 462


101 475










14


Taxation and customs union






0


0


0


0


0


2


13


60


76










15


Education and culture






12


3


10


28


27


57


121


353


610










16


Communication






0


0


0


0


0


1


17


76


94










17


Health and consumer protection






4


7


4


17


29


74


164


423


723










18


Area of freedom, security and justice






0


1


12


13


98


167


446


545


1 282










19


External relations






450


187


215


636


1 074


1 588


2 158


3 074


9 383










20


Trade






0


0


0


0


1


1


4


13


19










21


Development and relations with ACP States






126


46


133


203


262


523


873


1 109


3 275










22


Enlargement






52


28


72


208


392


623


559


832


2 766










23


Humanitarian aid






2


0


0


0


7


27


124


421


581










24


Fight against fraud






0


0


0


0


2


3


5


22


32










25


Commission's policy coordination & legal advice






0


0


0


0


0


0


0


20


20










26


Commission’s administration






0


0


0


0


0


2


7


169


179










27


Budget






0


0


0


0


0


0


0


8


8










28


Audit






0


0


0


0


0


0


0


1


1










29


Statistics






1


0


2


4


5


6


31


59


108










30


Pensions and related expenditure






0


0


0


0


0


0


0


0


0










31


Language Services






0


0


0


0


0


0


0


28


28










90


Other Institutions






0


0


0


0


0


0


11


332


344




Total


1 623


1 055


2 116


16 455


4 895


27 359


60 136


80 757


194 395




14.   Summary of the implementation of budget revenue by Institution
















EUR millions




Institution


Income appropriations


Entitlements established


Revenue


Receipts as % of budget


Outstanding




Initial


Final


Current year


Carried


Total


On entitlements of Current year


On entitlements Carried


Total




European Parliament


129


130


158


109


267


154


89


243


186,52 %


24




European Council and Council


54


54


94


7


101


87


6


93


172,12 %


8




Commission


122 675


122 692


129 603


12 291


141 894


126 376


983


127 359


103,80 %


14 534




Court of Justice


40


40


44


0


44


44


0


44


110,33 %


0




Court of Auditors


20


20


19


0


19


19


0


19


94,72 %


0




Economic and Social Committee


10


10


15


0


15


15


0


15


147,07 %


0




Committee of the Regions


7


7


20


0


20


20


0


20


294,94 %


0




Ombudsman


1


1


1


0


1


1


0


1


96,40 %


0




European Data Protection Supervisor


1


1


1


0


1


1


0


1


68,01 %


0




Total


122 937


122 956


129 955


12 407


142 362


126 717


1 078


127 795


103,94 %


14 566




15.   Implementation of commitment and payment appropriations by Institution


Commitment appropriations





















EUR millions




Institution


Commitment appropriations authorised


Commitments made


Appropriations carried over to 2011


Appropriations lapsing




From the year's approps


From carry-overs


From assigned revenue


Total


%


From assigned revenue


Carry-overs by decision


Total


%


From the year's budget appropriations


from carry-overs


Assigned revenue
(EFTA)


Total


%




1


2


3


4


5=2 + 3 + 4


6=5/1


7


8


9=7 + 8


10=9/1


11


12


13


14=11 + 12 + 13


15=14/1




European Parliament


1 752


1 552


9


24


1 586


90,50 %


101


9


111


6,31 %


55


1


0


56


3,19 %




European Council and Council


703


593


0


41


634


90,08 %


29


0


29


4,14 %


41


0


0


41


5,79 %




Commission


144 100


137 733


319


1 780


139 833


97,04 %


3 395


250


3 645


2,53 %


621


0


1


622


0,43 %




Court of Justice


331


324


0


1


325


97,89 %


1


0


1


0,44 %


6


0


0


6


1,66 %




Court of Auditors


149


138


0


0


138


93,02 %


0


0


0


0,26 %


10


0


0


10


6,72 %




Economic and Social Committee


127


121


0


4


125


98,00 %


0


0


0


0,14 %


2


0


0


2


1,87 %




Committee of the Regions


91


79


0


11


90


99,39 %


0


0


0


0,02 %


1


0


0


1


0,59 %




Ombudsman


9


8


0


0


8


89,65 %


0


0


0


 


1


0


0


1


10,35 %




European Data Protection Supervisor


7


6


0


0


6


82,73 %


0


0


0


 


1


0


0


1


17,27 %




Total


147 270


140 554


328


1 861


142 744


96,93 %


3 528


259


3 787


2,57 %


738


1


1


740


0,50 %








Payment appropriations






















EUR millions




Institution


Payment appropriations authorised


Payments made


Appropriations carried over to 2011


Appropriations lapsing




From the year's approps


From carry-overs


From assigned revenue


Total


%


Automatic carry-overs


Carry-overs by decision


From assigned revenue


Total


%


From the year's approps


From carry-overs


Assigned revenue
(EFTA)


Total


%




1


2


3


4


5=2 + 3 + 4


6=5/1


7


8


9


10=7 + 8 + 9


11=10/1


12


13


14


15=12 + 13 + 14


16=15/1




European Parliament


1 938


1 321


165


20


1 507


77,74 %


231


9


111


351


18,10 %


55


25


0


81


4,16 %




European Council and Council


748


543


34


43


620


82,89 %


50


0


31


81


10,76 %


41


7


0


48


6,35 %




Commission


127 031


116 982


732


1 661


119 374


93,97 %


550


622


3 901


5 073


3,99 %


1 855


718


11


2 584


2,03 %




Court of Justice


350


307


15


1


323


92,40 %


17


0


1


18


5,24 %


6


3


0


8


2,36 %




Court of Auditors


210


122


60


0


182


86,90 %


16


0


0


17


7,94 %


10


1


0


11


5,15 %




Economic and Social Committee


134


112


5


4


121


90,36 %


8


0


1


9


6,95 %


2


1


0


4


2,68 %




Committee of the Regions


97


73


5


12


89


92,03 %


7


0


0


7


6,91 %


1


0


0


1


1,06 %




Ombudsman


10


8


1


0


8


84,26 %


1


0


0


1


5,23 %


1


0


0


1


10,50 %




European Data protection Supervisor


8


4


1


0


5


61,11 %


1


0


0


1


16,79 %


1


1


0


2


22,10 %




Total


130 527


119 472


1 018


1 741


122 231


93,64 %


881


631


4 045


5 557


4,26 %


1 972


756


11


2 739


2,10 %




16.   Agencies income: budget forecasts, entitlements and amounts received











EUR millions




Agency


Forecasted income budget


Entitlements established


Amounts received


Outstanding


Funding Commission Policy Area




European Aviation Safety Agency


137


109


106


4


06




Frontex


93


84


84


0


18




European Centre for the Development of Vocational Training


18


19


19


0


15




European Police College


8


8


8


0


18




European Chemicals Agency


75


386


386


0


02




European Centre for Disease prevention and control


58


48


49


0


17




European Monitoring Centre for Drugs and Drug Addiction


16


16


16


0


18




European Environment Agency


51


46


46


0


07




Community Fisheries Control Agency


11


10


10


0


11




European Food Safety Authority


73


74


74


0


17




European Institute for Gender Equality


6


6


6


0


04




European GNSS supervisory authority


9


16


16


0


06




Fusion for Energy


242


273


236


37


08




Eurojust


32


32


32


0


18




European Maritime Safety Agency


51


45


45


0


06




Office For Harmonisation in the Internal Market


174


179


179


0


12




European Medicines Agency


208


221


209


12


02




European Network and Information Security Agency


8


8


8


0


09




European Union Agency for Fundamental Rights


20


22


22


0


18




European Railway Agency


24


24


24


0


06




European Agency for Safety and Health at Work


15


14


14


0


04




Translation Centre for the Bodies of the EU


56


59


51


8


31




European Training Foundation


20


19


19


0


15




Community Plant Variety Office


13


12


12


0


17




European Foundation for the Improvement of Living and Working Conditions


21


21


21


0


04




Education, Audiovisual & Culture Executive Agency


49


49


49


0


15




Executive Agency for Competitiveness and Innovation


16


16


16


0


06




European Research Council Executive Agency


29


29


29


0


08




Research Executive Agency


34


36


34


3


08




Executive Agency for the Public Health Programme


7


7


7


0


17




Trans-European Transport Network Executive Agency


10


10


10


0


06




Total


1 677


1 993


1 929


64


 
















EUR millions




Type of revenue


Forecasted income budget


Entitlements established


Amounts received


Outstanding




Commission Subsidy


1 061


1 040


1 037


3




Fee income


443


765


751


14




Other income


173


188


141


47




Total


1 677


1 993


1 929


64




17.   Agencies: commitment & payment appropriations by agency












EUR millions




Agency


Commitment appropriations


Payment appropriations




Appropriations


Commitments made


Carried to 2010


Appropriations


Payments made


Carried to 2010




European Aviation Safety Agency


144


122


22


157


108


48




Frontex


95


89


3


118


82


27




European Centre for the Development of Vocational Training


21


19


2


21


17


3




European Police College


12


10


2


13


8


3




European Chemicals Agency


75


71


0


96


77


12




European Centre for Disease prevention and control


58


56


0


76


56


16




European Monitoring Centre for Drugs and Drug Addiction


16


16


0


17


15


1




European Environment Agency


52


44


8


58


44


13




European Police Office


93


91


0


93


68


22




Community Fisheries Control Agency


10


10


0


11


10


1




European Food Safety Authority


76


74


0


84


71


11




European Institute for Gender Equality


6


4


0


6


2


2




European GNSS supervisory authority


74


67


7


63


45


18




Fusion for Energy


551


550


1


302


192


56




Eurojust


34


31


3


38


28


9




European Maritime Safety Agency


55


53


0


53


46


1




Office For Harmonisation in the Internal Market


366


158


0


396


150


35




European Medicines Agency


210


201


0


248


196


45




European Network and Information Security Agency


8


8


0


10


8


2




European Union Agency for Fundamental Rights


20


20


0


27


19


8




European Railway Agency


24


24


0


29


23


5




European Agency for Safety and Health at Work


16


15


0


20


15


4




Translation Centre for the Bodies of the EU


56


43


0


60


43


4




European Training Foundation


19


19


0


21


20


1




Community Plant Variety Office


13


12


0


14


11


0




European Foundation for the Improvement of Living and Working Conditions


22


21


0


27


22


4




Education, Audiovisual & Culture Executive Agency


49


49


0


55


48


6




Executive Agency for Competitiveness and Innovation


16


15


0


17


15


2




European Research Council Executive Agency


29


29


0


32


30


2




Research Executive Agency


34


33


0


37


32


3




Executive Agency for the Public Health Programme


7


7


0


8


7


1




Trans-European Transport Network Executive Agency


10


10


0


11


9


1




Total


2 271


1 972


49


2 217


1 516


366


















EUR millions




Type of expenditure


Commitment appropriations


Payment appropriations




Appropriations


Commitments made


Carried to 2010


Appropriations


Payments made


Carried to 2010




Staff


673


656


3


688


649


19




Administrative expenses


283


264


2


365


249


93




Operational expenses


1 314


1 052


44


1 165


618


254




Total


2 271


1 972


49


2 217


1 516


366




18.   Budget outturn including Agencies










EUR millions




 


European Union


Agencies


Elimination of subsidies to agencies



Total





Revenue for the financial year


127 795


1 929


(1 037)



128 687





Payments against current year appropriations


(121 213)


(1 320)


1 037



(121 495)





Payment appropriations carried over to year N+1


(2 797)


(366)


0



(3 164)





Cancellation of unused appropriations carried over from year N-1


741


181


0



922





Exchange differences for the year


22


0


0



22






Budget Outturn




4 549




424




0




4 972






Explanatory notes to the consolidated reports on implementation of the budget

1.   BUDGETARY PRINCIPLES, STRUCTURE AND APPROPRIATIONS
1.1.   LEGAL BASIS AND THE FINANCIAL REGULATION

The budgetary accounts are kept in accordance with Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 (OJ L 248, 16.9.2002) on the Financial Regulation applicable to the general budget of the European Union and Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of this Financial Regulation. The general budget, the main instrument of the EU's financial policy, is the instrument which provides for and authorises the EU's revenue and expenditure every year.
Every year, the Commission estimates all the Institutions′ revenue and expenditure for the year and draws up a preliminary draft budget which it sends to the budgetary authority. On the basis of this preliminary draft budget, the Council draws up a draft budget which is then the subject of negotiations between the two arms of the budgetary authority. The President of Parliament declares that the budget has been finally adopted making the budget enforceable. The task of executing the budget is mainly the responsibility of the Commission.
1.2.   BUDGETARY PRINCIPLES

The general budget of the European Union is governed by a number of basic principles:
—   Unity and budget accuracy: all expenditure and revenue must be in a single budget, booked on a budget line and expenditure may not exceed authorised appropriations;
—   universality: this principle comprises two rules:
the rule of non-assignment, meaning that budget revenue must not be earmarked for specific items of expenditure (total revenue must cover total expenditure);
the gross budget rule, meaning that revenue and expenditure are entered in full in the budget without any adjustment against each other;
—   annuality: appropriations are authorised for a single year so must be used during that year;
—   equilibrium: the revenue and expenditure shown in the budget must be in balance (estimated revenue must equal payment appropriations);
—   specification: each appropriation is assigned to a specific purpose and a specific objective;
—   unit of account: the budget is drawn up and implemented in euros, as are the accounts;
—   sound financial management: budget appropriations are used in accordance with the principle of sound financial management, i.e. economy, efficiency and effectiveness;
—   transparency: the budget and amending budgets and final accounts are published in the Official Journal of the European Union.
1.3.   BUDGET STRUCTURE

The budget consists of:






(a)


a general statement of revenue;










(b)


separate sections giving the statements of revenue and expenditure of each Institution: Section I: Parliament; Section II: Council; Section III: Commission; Section IV: Court of Justice; Section V: Court of Auditors; Section VI: Economic and Social Committee; Section VII: Committee of the Regions; Section VIII: Ombudsman; Section IX: European Data Protection Supervisor.




Each Institution's items of revenue and expenditure are classified according to their type or the use to which they are assigned under titles, chapters, articles and items.
A part of the funds of the ECSC in liquidation were placed at the disposal of the operational budget of the ECSC in liquidation. This operational budget was adopted annually by the Commission, after consultation with the Council and the European Parliament. The last budget was drawn up for the period of 1st January to 23 July 2002. As from 24 July 2002, the revenue and charges connected with the operational budget are included in the revenue and expenditure account of the ECSC in liquidation. The remaining commitments to be fulfilled are shown on the liability side of the balance sheet.
1.4.   STRUCTURE OF THE BUDGETARY ACCOUNTS

1.4.1.   
General overview


Only the Commission budget contains administrative appropriations and operating appropriations. The other Institutions have only administrative appropriations. Furthermore, the budget distinguishes between two types of appropriation: non-differentiated appropriations and differentiated appropriations.
Non-differentiated appropriations are used to finance operations of an annual nature (which comply with the principle of annuality). They cover all the administrative chapters of the budget of the Commission Section and the whole of every other section, EAGF appropriations of an annual nature and certain technical appropriations (repayments, borrowing and lending guarantees, etc.) In the case of non-differentiated appropriations, the amount of commitment appropriations is the same as that of payment appropriations.
Differentiated appropriations were introduced in order to reconcile the principle of annuality with the need to manage multi-annual operations. They are intended to cover multi-annual operations and comprise all the other appropriations in all Chapters except Chapter 1 of the Commission Section. 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, in accordance with Article 76(3) of the Financial Regulation, 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.
1.4.2.   
Origin of Appropriations


The main source of appropriations is the Union's budget for the current year. However, there are other types of appropriations resulting from the provisions of the Financial Regulation. They come from previous financial years or outside sources:






—



Initial budget appropriations adopted for the current year can be supplemented with transfers between lines in accordance with the rules laid down in Articles 22 to 24 of the Financial Regulation (No 1605/2002 of 25 June 2002) and by amending budgets (covered by Articles 37 and 38 of the Financial Regulation).










—



Appropriations carried over from previous year or made available again also supplement the current budget. These are (i) non-differentiated payment appropriations which may be carried over automatically for one financial year only in accordance with Article 9(4) of the Financial Regulation; (ii) appropriations carried over by decision of the Institutions in one of two cases: if the preparatory stages have been completed (Article 9(2)(a) of the Financial Regulation) or if the legal base is adopted late (Article 9(2)(b)). Both commitment and payment appropriations may be carried over (Article 9(3)) and (iii) appropriations made available again as a result of decommitments: This involves the re-entry of commitment appropriations concerning structural funds which have been decommitted. Amounts can be re-entered by way of exception in the event of error by the Commission or if they are indispensable for completion of the programme (Article 157 of the Financial Regulation).










—



Assigned revenue which is made up of (i) refunds where the amounts are assigned revenue on the budget line which incurred the initial expenditure and may be carried over without limit; (ii) EFTA appropriations: The agreement on the European Economic Area provides for financial contribution by its members to certain activities in the EU budget. The budget lines concerned and the amounts projected are published in Annex III of the EU budget. The lines concerned are increased by the EFTA contribution. Appropriations not used at the year-end are cancelled and returned to the EEA countries; (iii) Revenue from third parties/ other countries that have concluded agreements with the European Union involving a financial contribution to EU activities. The amounts received are considered to be revenue from third parties which is allocated to the budget lines concerned (often in the field of research) and may be carried over without limit (Article 10 and Article 18(1)(a) and (d) of the Financial Regulation); (iv) Work for third parties: As part of their research activities, the EU research centres may work for outside bodies, (Article 161(2) of the Financial Regulation). Like the revenue from third parties, the work for third parties is assigned to specific budget lines and may be carried over without limit (Article 10 and Article 18(1)(d) of the Financial Regulation); and (v) Appropriations made available again as a result of repayment of payments on account: These are EU funds which have been repaid by the beneficiaries and may be carried over without limit. In the area of Structural Funds the re-inscription is based on a Commission Decision (Article 18(2) of the Financial Regulation and Article 228 of its Implementing Rules).




1.4.3.   
Composition of Appropriations Available


—   Final budget appropriations= initial budget appropriations adopted + amending budget appropriations + transfers;
—   Additional appropriations= assigned revenue (see above) + appropriations carried over from the previous financial year or made available again following decommitments;
—   Total appropriations authorised= final budget appropriations + additional appropriations
—   Appropriations for the year (as used to calculate the budgetary result)= final budget appropriations + assigned revenue.
1.5.   BUDGET IMPLEMENTATION

The implementation of the budget is governed by the Financial Regulation, Article 48(1) of which states: "The Commission shall implement... the budget in accordance with this Regulation, on its own responsibility and within the limits of the appropriations authorised." Article 50 states that the Commission shall confer on the Institutions the requisite powers for the implementation of the sections of the budget relating to them.
1.6.   OUTSTANDING COMMITMENTS (RAL)

With the introduction of differentiated appropriations, a gap developed between commitments entered into and payments made: this gap, corresponding to outstanding commitments, represents the time-lag between when the commitments are entered into and when the corresponding payments are made.
2.   EXPLANATION OF THE REPORTS ON THE IMPLEMENTATION OF THE BUDGET
2.1.   BUDGET OUTTURN FOR THE YEAR (Table 1)


2.1.1.   
General


The amounts of own resources entered in the accounts are those credited in 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 outturn for the previous financial year. The other revenue entered in the accounts is the amount actually received in the course of the year.
For the purposes of calculating the budget outturn for the year, expenditure comprises payments made against the year's appropriations for payments plus any of the appropriations for that year that are carried over to the following year. Payments made against the year's appropriations for payments means payments that are made by the accounting officer by 31 December of the financial year. In the case of the European Agricultural Guarantee Fund, the payments are those effected by the Member States between 16 October 2009 and 15 October 2010, provided that the accounting officer was notified of the commitment and authorisation by 31 January 2011. EAGF expenditure may be subject to a conformity decision following controls in the Member States.
The budget outturn comprises two elements: the result of the European Union and the result of the participation of the EFTA countries belonging to the EEA. In accordance with Article 15 of Regulation No 1150/2000 on own resources, this outturn represents the difference between:






—


total revenue received for that year;










—


and total payments made against that 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 balance of exchange-rate gains and losses recorded during the year.





The budget outturn is returned to the Member States the following year through deduction of their amounts due for that financial year.

Appropriations carried over from the previous financial year in respect of contributions by and work for third parties, which by definition never lapse, are included with the additional appropriations for the financial year. This explains the difference between carryovers from the previous year in the 2010 budget implementation statements and those carried over to the following year in the 2009 budget implementation statements. The payment appropriations for re-use and appropriations made available again following the repayment of payments on account are disregarded when calculating the outturn for the year.
The payment appropriations carried over include: automatic carryovers and carryovers by decision. The cancellation of unused payment appropriations carried over from the previous year shows the cancellations on appropriations carried over automatically and by decision. It also includes the decrease in assigned revenue appropriations carried over to the next year in comparison with 2009.
2.1.2.   
Reconciliation of the budget outturn with the economic outturn


The economic outturn for the year is calculated on the basis of accrual accounting principles. The budget outturn is however based on modified cash accounting rules, in accordance with the Financial Regulation. As both are the result of the same underlying transactions, it is a useful control to ensure that they are reconcilable. The table below shows this reconciliation, highlighting the key reconciling amounts, split between revenue and expenditure items.

Reconciliation: economic result – budget outturn








EUR millions




 


2010


2009
restated





ECONOMIC OUTTURN FOR THE YEAR




17 232




6 887






Revenues





Entitlements established in current year but not yet collected


(3 132)


(2 806)




Entitlements established in previous years and collected in current year


1 346


2 563




Accrued revenue (net)


(371)


436





Expenditure





Accrued expenses (net)


(7 426)


2 951




Expenses prior year paid in current year


(386)


(432)




Net-effect pre-financing


(678)


(9 458)




Payment appropriations carried over to next year


(2 798)


(1 759)




Payments made from carry-overs & cancellation of unused payment appropriations


1 760


4 573




Movement in provisions


(323)


(329)




Other


(257)


(153)





Economic outturn agencies + ECSC



(418)


(209)





BUDGET OUTTURN FOR THE YEAR*




4 549




2 264






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 outturn 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 outturn for reconciliation purposes.
The net accrued revenue mainly consists of accrued revenue for agricultural levies, own resources and 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.

Reconciling items - Expenditure

The net accrued expenses mainly consist 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.
While accrued expenses are not considered as budgetary expenditure, the payments made in the current year relating to invoices registered in prior years are part of current year's budgetary expenditure.
The net effect of pre-financing is the combination of (1) the new pre-financing amounts paid in the current year and recognised as budgetary expenditure of the year and (2) the clearing of the pre-financing paid in current year or previous years through the acceptance of eligible costs. 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.
Besides the payments made against the year's appropriations, the appropriations for that year that are carried to the next year also need to be taken into account in calculating the budget outturn for the year (in accordance with Article 15 of Regulation No 1150/2000). The same applies for the budgetary payments made in the current year from carry-overs and the cancellation of unused payment appropriations.
The movement in provisions relate to year-end estimates made in the accrual accounts (employee benefits mainly) that do not impact the budgetary accounts. Other reconciling amounts comprise different elements such as asset depreciation, asset acquisitions, capital lease payments and financial participations for which the budgetary and accrual accounting treatments differ.
Finally the economic outturns of the agencies and the ECSC that are included in the consolidated economic outturn need to be excluded since their budgetary execution is not part of the consolidated budget outturn.
2.2.   COMPARISON OF BUDGET AND ACTUAL AMOUNTS (Table 2)


In the initial adopted budget, signed by the President of the European Parliament on 17 December 2009, the amount of payment appropriations was EUR 122 937 million and the amount to be financed by own resources totalled EUR 121 507 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.

Revenue:

During 2010 eight amending budgets were adopted. Taking them into account, the total final revenue in the 2010 budget amounted to EUR 122 956 million. This was financed by own resources totalling EUR 119 270 million (thus EUR 2 237 million less than initially forecasted) and the remainder by other revenue. The reduced need for own resources stemmed mainly from the inclusion of EUR 2 254 million relating to the surplus of the previous year.
As far as the own resources are concerned, the collection of traditional own resources matched almost the forecasted amounts, namely because the budget estimates were modified at the time the Amending Budget No 4/2010 was established (they were increased by EUR 1 516 million). This adjustment was based on the new macroeconomic forecasts of spring 2010, which were more optimistic than the previous ones.
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.

Expenditure:

The year 2010, the fourth year of the current programming period, saw programmes reaching their cruising speed and the start of the final closure of old programmes. At the end of the year outstanding commitments made before 2007 represent some 10 % of the total RAL.
For commitments, the initial budget and hence the political targets set were carried out virtually as planned. The implementation rate, excluding the unused reserve of EUR 415 million for European Globalisation Adjustment Fund and EUR 28 million of unused provisional appropriations (amounts placed in reserve pending the fulfilment of certain conditions, which remain in reserve at the end of the budgetary year) reached 99,4 %. Adjustments during the year concerned EUR 80 million for the European Solidarity Fund, unforeseeable expenditure by nature, and for administrative expenditure EUR 10 million related to the setting-up of the European External Action Service and EUR 10 million for the European Parliament following the entry into force of the Lisbon treaty. The total implementation of EUR 140 554 left EUR 554 million unused. After the carryover of EUR 259 million to 2011, the largest item being Energy Projects to aid Economic Recovery for EUR 147 million, an amount of EUR 295 million lapsed.
The implementation rate for payments, excluding un-mobilised Emergency Aid Reserve (EUR 193 million) and provisional appropriations (EUR 48 million), was 97,4 % of the budget, total appropriations were amended during the course of the year only for the increases of administrative expenditure mentioned above.
Contrary to previous years, there was no reduction in payment appropriations via an amending budget at the year-end. The main adjustment was carried out via the global transfer which reinforced Regional policy by EUR 1 125 million by reducing appropriations for Rural Development. The Commission reinforced also the Cohesion Fund with some EUR 600 million via internal transfers. The unused voted appropriations, excluding reserves, amounted to EUR 3 243 million and after the carryover of EUR 1 513 million, a total of EUR 1 730 million spread across the Multi-annual Financial Framework (‘MFF’) headings lapsed.
A more detailed analysis of budgetary adjustments, their relevant context, their justification and their impact is presented in Commission's Report on Budgetary and Financial Management 2010, Part A overview at budget level and Part B dealing with each MFF Heading.
2.3.   REVENUE (Table 3)


The revenue of the general budget of the European Union can be divided into two main categories: own resources and other revenue. This is laid down in Article 311 of the Treaty on the Functioning of the European Union, which states that: ‘Without prejudice to other revenue, the budget shall be financed wholly from own resources.’ The main bulk of budgetary expenditure is financed by own resources. Other revenue represents only a minor part of total financing.
There are three categories of own resources: traditional own resources, the VAT resource and the GNI resource. Traditional own resources, in turn, comprise sugar levies and customs duties. A correction mechanism in favour of the United Kingdom as well as a gross reduction in the annual GNI-based contribution of Netherlands and Sweden are also part of the own resources system.
2.3.1.   
Traditional own resources


Traditional own resources: All established amounts of traditional own resources must be entered in one or other of the accounts kept by the competent authorities.






—


In the ordinary account provided for in Article 6(3)(a) of Regulation No 1150/2000: all amounts recovered or guaranteed.










—


In the separate account provided for in Article 6(3)(b) of Regulation No 1150/2000: all amounts not yet recovered and/or not guaranteed; amounts guaranteed but challenged may also be entered in this account.




For the separate account, the Member States send the Commission a quarterly statement that includes:






—


the balance to be recovered during the previous quarter,










—


the established entitlements during the quarter in question,










—


rectifications of the base (corrections/cancellations) during the quarter in question,










—


amounts written off (which cannot be made available according to Article 17(2) of Reg. 1150/2000),










—


the amounts recovered during the quarter in question,










—


the balance to be recovered at the end of the quarter in question.




Traditional own resources must be entered in the Commission's account with the Treasury or the body appointed 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). Member States retain, by way of collection costs, 25 % of traditional own resources. The contingent own resources entitlements are adjusted on the basis of the likelihood of their recovery.
2.3.2.   
VAT-based resources and GNI-based resources


VAT-based own resource derive from the application of a uniform rate, for all Member States, to the harmonised VAT base determined in accordance with the rules of Article 2(1)(b) of the ORD 2007. The uniform rate is fixed at 0,30 % except for the period 2007-2013 in which the rate of call for Austria is fixed at 0,225, for Germany at 0,15 % and for Netherlands and Sweden at 0,10 %. The VAT base is capped at 50 % of GNI for all Member States.
VAT-based own resources derive from the application of a uniform rate, for all Member States, to the harmonised VAT base determined in accordance with the rules of Article 2(1)(c) of the Council Decision of 29 September 2000. The VAT base is capped at 50 % of GNI for all Member States.
The GNI-based resource is a variable resource intended to supply the revenue required, in any given year, to cover expenditure exceeding the amount collected from traditional own resources, VAT resources and miscellaneous revenue. The revenue derives from the application of a uniform rate to the aggregate GNI of all the Member States.
VAT and GNI-based resources are determined on the basis of forecasts of VAT and GNI bases made when the preliminary draft budget is being prepared. These forecasts are subsequently revised; the figures are updated during the budget year in question by means of an amending budget.
The actual figures for the VAT and GNI bases are available in the course of the year following the budget year in question. The Commission calculates the differences between the amounts due by the Member States by reference to the actual bases and the sums actually paid on the basis of the (revised) forecasts. These VAT and GNI balances, either positive or negative, are called in by the Commission from the Member States for the first working day of December of the year following the budget year in question. Corrections may still be made to the actual VAT and GNI bases during the subsequent four years, unless a reservation is issued. The balances calculated earlier are adjusted and the difference is called in at the same time as the VAT and GNI balances for the previous budget year.
When conducting controls of VAT statements and GNI data, the Commission may notify reservations to the Member States regarding certain points which may have consequences to their own resources contributions. These points, for example, may result from an absence of acceptable data, or a need to develop a suitable methodology. 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 VAT and GNI balances or by individual calls for funds.
2.3.3.   
UK correction


This mechanism reduces the own resources payments of the UK in proportion to what is known as its ‘budgetary imbalance’ and increases the own resources payments of the other Member States correspondingly. The budgetary imbalance correction mechanism in favour of the United Kingdom was instituted by the European Council in Fontainebleau (June 1984) and the resulting Own Resources Decision of 7 May 1985. The purpose of the mechanism was to reduce the budgetary imbalance of the UK through a reduction in its payments to the EU. Germany, Austria, Sweden and Netherlands benefit from a reduced financing of the correction (restricted to one fourth of their normal share).
2.4.   EXPENDITURE (Tables 4 to 13)


2.4.1.   
Financial Framework 2007-2013














EUR millions




 


2007


2008


2009


2010


2011


2012


2013










1.


Sustainable Growth






53 979


57 653


61 696


63 555


63 974


66 964


69 957










2.


Preservation & management of natural resources






55 143


59 193


56 333


59 955


60 338


60 810


61 289










3.


Citizenship, freedom, security & justice






1 273


1 362


1 518


1 693


1 889


2 105


2 376










4.


EU as a global player






6 578


7 002


7 440


7 893


8 430


8 997


9 595










5.


Administration






7 039


7 380


7 525


7 882


8 334


8 670


9 095










6.


Compensations






445


207


210


0


0


0


0





Commitment appropriations:




124 457




132 797




134 722




140 978




142 965




147 546




152 312





Total payment appropriations:


122 190


129 681


120 445


134 289


134 280


141 360


143 331




This section describes the main categories of EU expenditure, classified by heading of the financial framework 2007-2013. The 2010 financial year was the fourth covered by the financial framework 2007-2013. The overall ceiling on commitments appropriations for 2010 comes to EUR 140 978 million, equivalent to 1,18 % of GNI. The corresponding ceiling on the appropriations for payments comes to EUR 134 289 million, i.e. 1,12 % of GNI. The above table shows the financial framework at current prices estimated for 2013.

Heading 1 –   Sustainable growth

This Heading divided into two separate, but interlinked components:






—


1a. Competitiveness for growth and employment, encompassing expenditure on research and innovation, education and training, trans-European networks, social policy, the internal market and accompanying policies.










—


1b. Cohesion for growth and employment, 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 –   Preservation and management of natural resources

Heading 2 includes the common agricultural and fisheries policies, rural development and environmental measures, in particular Natura 2000. The amount earmarked for the common agricultural policy reflects the agreement reached at the Brussels European Council in October 2002.

Heading 3 –   Citizenship, freedom, security and justice

The new heading 3 (Citizenship, freedom, security and justice) reflects the growing importance attached to certain fields where the EU has been assigned new tasks – justice and home affairs, border protection, immigration and asylum policy, public health and consumer protection, culture, youth, information and dialogue with citizens. It is split in two components:






—


3a. Freedom, Security and Justice










—


3b. Citizenship





Heading 4 –   The EU as a global player

Heading 4 covers all external action, including pre-accession instruments. Whereas the Commission had proposed to integrate the European Development Fund (EDF) into the financial framework, the European Council and the European Parliament agreed to leave it outside.

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 total of their expenditure, but the Agencies and other bodies make both administrative and operational expenditure.

Heading 6 –   Compensations

In accordance with the political agreement that the 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 them to balance their budgetary receipts and contributions.
2.4.2.   
Policy areas


As part of its use of Activity Based Management (ABM) the Commission implements Activity Based Budgeting (ABB) in its planning and management processes. ABB involves a budget structure where budget titles correspond to policy areas and budget chapters to activities.
ABB aims to provide a clear framework for translating the Commission's policy objectives into action, either through legislative, financial or any other public policy means. By structuring the Commission's work in terms of activities, a clear picture is obtained of the Commission's undertakings and simultaneously a common framework is established for priority setting. Resources are allocated to priorities during the budget procedure, using the activities as the building blocks for budgeting purposes. By establishing such a link between activities and the resources allocated to them, ABB aims to increase efficiency and effectiveness in the use of resources in the Commission.
A policy area may be defined as a homogeneous grouping of Activities constituting parts of the Commission's work, which are relevant for the decision-making process. Each policy area corresponds, in general, to a DG, and encompassing an average of about 6 or 7 individual activities. Policy areas are mainly operational, since their core activities aim at benefiting a third-party beneficiary within their respective domains of activity. The operational budget is completed with the necessary administrative expenditure for each policy area.
2.5.   INSTITUTIONS AND AGENCIES (Tables 14 to 18)

The consolidated reports on the implementation of the general budget of the European Union include, as in previous years, the budget implementation of all Institutions since within the EU budget a separate budget for each Institution is established. Agencies do not have a separate budget inside the EU budget and they are partially financed by a Commission budget subsidy.
In order to provide all relevant budgetary data for the Agencies, the budgetary part of the consolidated annual accounts include separate reports on the implementation of the individual budgets of the traditional agencies consolidated.


(1)  The European Parliament has adopted a budget on 15 December 2010 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 2011. Additionally, under Article 83 of the Staff Regulations (Council Regulation (EEC) 259/68 of 29 February 1968 as amended), the Member States shall jointly guarantee the liability for pensions.

(2)  figures as reported by Member States at 31 March 2011 in SFC 2007

(3)  reports have not been sent for 10 programmes and have been requested from the responsible authorities.

(4)  with correction coefficient (‘cc’) applied

(5)  paid for the first 3 years following departure

(6)  Consolidated for the first time in 2010

(7)  It should be noted that due to the rounding of figures into millions of euros, some financial data in these budgetary tables may appear not to add-up

(8)  Of which EFTA amounts total EUR 9 million in 2010 and EUR 11 million in 2009.

(9)  including appropriations carried over and assigned revenue

(10)  including appropriations carried over and assigned revenue