REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the follow-up to the discharge for the 2020 financial year
Date: 2022-06-30
Institutions: Directorate-General for Budget, European Commission
Subjects: EU budget, EU control, EU expenditure, audit, budgetary control, budgetary discharge, financial year, management audit, multiannual financial framework

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 30.6.2022  COM(2022) 331 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the follow-up to the discharge for the 2020 financial year  
 
 
REPORT ON THE FOLLOW-UP TO THE REQUESTS MADE BY THE EUROPEAN PARLIAMENT IN 
ITS DISCHARGE RESOLUTIONS AND THE COUNCIL IN ITS DISCHARGE RECOMMENDATION 
FOR THE FINANCIAL YEAR 2020 

1.  INTRODUCTION 

2020  was  a  crucial  year  for  the  EU  budget.  Thanks  to  the  budgetary  flexibilities  and 
instruments put in place at the beginning of the COVID-19 pandemic, EU funds were used 
to provide medical  equipment,  to  support research for treatments  and vaccines, and to save 
jobs  and  businesses.  The  EU  budget  also  continued  to  fund  its  horizontal  priorities  and 
especially  the  green  and  digital  transitions.  2020  also  saw  the  adoption  of  the  largest 
stimulus package ever financed by the EU, NextGenerationEU (NGEU). 

On 4 May 2022, the European Parliament decided, taking account of a recommendation 
from  the  Council,  to  close  the  chapter  on  this  unprecedented  year  by  granting  the 
Commission discharge on the way it implemented the EU budget in 2020.  

Within the framework of the 2020 discharge procedure, the European Parliament and the 
Council also made a number of requests to the Commission. The Commission shares the 
main objectives reflected by these requests:  

  Putting  performance  at  the  heart  of  budget  implementation.  Money  should  be 
spent  in  line  with  the  EU’s  priorities  and  should  deliver  the  expected  results  on  the 
ground,  thus  bringing  about  tangible  results  and  positive  changes  for  the  general 
public and other beneficiaries.  

  Protecting  the  EU  budget.  The  Commission  is  following  up  on  allegations  or 
suspicions of misuse or mismanagement of EU funds. It takes all necessary measures 
to protect the EU budget, including, where appropriate, the suspension of payments, 
financial  corrections,  and  regulatory  measures  to  strengthen  its  control  system,  such 
as  an  adjusted  Financial  Regulation  and  the  Regulation  on  the  general  regime  of 
conditionality for the protection of the EU budget (the ‘Conditionality Regulation’) 
  Overall,  the  Commission  strikes  the  right  balance  between  a  range  of  different 
objectives such as minimising errors, strong protection against misuse of funds, swift 
payments,  keeping  the  costs  and  burden  of  controls  for  public  authorities  and 
beneficiaries to a reasonable level and adding value through EU expenditure.  

This  report  on  the  follow-up  to  the  2020  discharge  procedure  provides,  as  part  of  the 
Integrated  Financial  and  Accountability  Reporting  (IFAR),  a  summary  of  the  actions 
taken  by  the  Commission  in  response  to  some  of  these  requests,  as  expressed  in  the 
section  on  political  priorities  of  the  discharge  resolution.  The  Commission  will  provide 
more  detailed  and  updated  information  in  response  to  specific  recommendations  when  the 
2021 discharge procedure begins later this year.  

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2.  IMPACT OF COVID-19 ON THE MANAGEMENT OF EU FUNDS  

The  Commission  brought  in  new  instruments  and  provided  flexibility  to  address  the  crisis 
brought by the COVID-19 pandemic, but the pandemic also created new challenges and risks 
for the EU budget.  

Firstly,  the  flexibility  provided  did  not  involve any  relaxation  of  controls.  For  example, 
the extension of deadlines for implementing projects and submitting proposals and offers did 
not  compromise  controls.  The  amended  rules  introduced  in  the  Member  States’  control 
procedures were limited in time and scope. 

Secondly, the COVID-19 pandemic made it impossible to conduct audits and controls on the 
spot.  The  Commission  therefore  applied  robust  mitigating  measures,  such  as  the 
performance of desk reviews, remote audits and the use of IT solutions (geo-tagged photos, 
satellite images, video meetings, etc.). 

Both  the  Commission  and  the  Member  States  managed  to  maintain  a  high  level  of  audit 
coverage  and  assurance.  The  Commission  therefore  considers  that  its  estimates  of  risk  at 
payment  and  risk  at  closure  are  reliable  and  reflect  the  level  of  error  in  the  financial 
transactions. The Commission has indeed set up multiannual control systems to protect the 
EU  budget  against  irregularities  and  frauds.  This  reflects  the  fact  that  programmes  are 
implemented over several years. For the 2021 financial year, the Commission estimated the 
risk  of  error  at  closure,  which  takes  estimated  future  corrections  for  all  programmes  into 
account, to be 0.8% overall - in line with previous years and with the objective to keep it well 
below 2%.  

3.  A REINFORCED CONTROL SYSTEM FOR A NEW AND LARGER BUDGET 

The 2021-2027 MFF and the largest share of the basic acts setting up spending programmes 
were  approved  in  2020.  2020  also  saw  agreement  on  the  largest  stimulus  package  ever 
financed in the EU - NGEU. This new expanded budget prompted the Commission to adjust 
and strengthen its control and audit system.  

The  Commission  will  continue  to  keep  the  European  Parliament  informed  about  the  audits 
and controls it performs - including in relation to NGEU.  

  3.1. The control and reporting system for the Recovery and Resilience Facility 

(RRF) 

The  RRF  is  based  on  performance.  RRF  funds  are  disbursed  when  Member  States  have 
fulfilled  key  steps  (known  as  milestones  and  targets)  in  implementing  the  reforms  and 
investments  included  in  the  national  recovery  and  resilience  plans.  In  2021,  dedicated 
governance structures, internal processes and control strategies  were  set up to take this 
into account. The Commission relies on the Member States’ controls and supplements them 
with its own controls when necessary.  

Specifically, the release of funds under the  RRF  is contingent on the satisfactory fulfilment 
by the Member States of the relevant milestones and targets set out in the national recovery 
and  resilience  plans.  The  Commission  ensures  that  it  has  reasonable  assurance  that  the 
underlying  milestones  and  targets  of  a  payment  are  satisfactorily  fulfilled.  The  Member 

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States ensure that the funds received from the RRF are spent in compliance with relevant 
EU  and  national  law.  National  control  systems  are  therefore  the  main  instrument  for 
safeguarding the EU’s financial interests.   

When  assessing  the  national  recovery  and  resilience  plans,  the  Commission  checks  that 
Member States put in place internal control systems that adequately address all relevant risks 
and  particularly  those  related  to  conflict  of  interests,  fraud,  corruption  and  double  funding. 
Where weaknesses are identified in the control systems, specific milestones can be defined to 
remedy those weaknesses, the fulfilment of which is a pre-condition for any payment under 
the RRF (except for pre-financing). The Commission can intervene if Member States fail to 
fulfil their own control duties. The Commission has the right to recover funding if:  

 

 

it  notices  a  case  of  fraud,  corruption  or  conflicts  of  interest  that  affects  the  EU’s 
financial interests, and which has not been addressed by the relevant Member State;  

it  notices  a  serious  breach  of  obligations  under  a  financing  or  loan  agreement 
(including double funding); or  

 

it finds that milestones and targets have not been satisfactorily fulfilled. 

In addition, the Commission will carry out audits on milestones and targets. It will also audit 
the  Member  States’  control  systems  to  determine  whether  they  can  adequately  prevent, 
detect  or  correct  fraud,  corruption,  conflict  of  interest  and  double  funding,  and  whether 
serious breaches of obligations have happened or are happening. The Commission may also 
carry out risk-based audits and controls in cases of doubt. It will not audit the compliance of 
the  Member  States’  RRF-related  expenditure  incurred  by  the  Member  States  with  EU  and 
national law (e.g. public procurement or state aid rules). When relevant, the European Anti-
Fraud  Office  (‘OLAF’),  the  European  Court  of  Auditors  (ECA)  and  the  European  Public 
Prosecutor's Office (EPPO) will exert their respective powers. 

Furthermore, in the framework of the support training activities delivered by the Commission 
to national authorities, OLAF presented an RRF fraud risk framework concept to national 
authorities. Member States are also encouraged to launch targeted risk management exercises 
linked to the RRF implementation.  

The  Commission  is  also  aware  that  its  new  borrowing  and  lending  operations  related  to 
NGEU have increased the need to provide sufficient transparency, for  the general public 
and investors, on the RRF’s achievements and on the EU’s financial exposure.  

Regarding achievements, the Commission has set up a recovery and resilience scoreboard 
that  shows  how  the  implementation  of  the  RRF  is  progressing.  This  displays  information 
about the status of milestones and targets and contains results aggregated at EU level thanks 
to regular reporting by the Member States on common indicators. The Commission has also 
created  an  NGEU  green  bond  dashboard  to  provide  the  general  public  with  a  real-time 
overview  of  the  climate-relevant  measures  that  are  financed  by  the  funds  raised  through 
NGEU  green  bonds  -  many  of  which  are  allocated  to  the  RRF.  The  dashboard  enables 
investors to analyse investment opportunities and to monitor the implementation of ongoing 
measures financed by NGEU green bonds. 

Regarding  financial  exposure,  Article  250  of  the  Financial  Regulation  already  requires  the 
Commission  to  provide  a  yearly  overview  report  on  financial  instruments,  budgetary 
guarantees  and  financial  assistance.  With  NGEU,  the  Commission  has  now  additionally 
undertaken to provide annual, semi-annual and quarterly reports specifically dedicated to the 

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assets and liabilities arising from the borrowing and lending operations of the new recovery 
instrument.  

  3.2. Close cooperation with national implementing bodies under shared 

management  

Once it has ensured that national implementing bodies (i.e. managing and audit authorities 
for  cohesion  policy,  paying  agencies  and  certification  bodies  for  the  common  agricultural 
policy  -  the  CAP)  function  properly,  the  Commission  relies  on  their  work  to  implement 
funds  under  shared  management.  Thanks  to  its  granular  and  detailed  knowledge  of  how 
systems  function,  the  Commission  can  detect  weaknesses  in  national  management  and 
control, and can apply all the tools at its disposal to protect EU funds.  

Overall, the work of national implementing bodies is considered reliable and robust. Only in 
a limited number of cases, which are transparently disclosed in the Annual Activity Reports 
(AARs)  of  the  Commission’s  Directorates-General  and  in  the  Commission’s  Annual 
Management  and  Performance  Report  (AMPR),  are  issues  identified  that  require  the 
Commission to take firm action. 

In the field of  cohesion policy, the Commission undertakes  actions  each year to improve 
the  effectiveness  of  management  and  control  systems  in  reducing  the  error  rate.  It 
supports programme authorities through meetings, guidance and training and by coordinating 
transnational  networks  aimed  at  sharing  good  practices  and  encouraging  authorities  to 
simplify procedures and to avoid unnecessary administrative burden. 

When  the  Commission  detects  cases  where  managing  authorities  have  missed  errors  or 
individual  audit  authorities  do  not  appropriately,  exhaustively  or  swiftly  detect  errors,  the 
Commission  requires  them  to  take  targeted  remedial  actions  to  improve  their  control 
system. the Commission can ask Member States to correct  errors where they have failed to 
correct  them  in  the  first  instance.  Lastly,  the  Commission  can  in  certain  circumstances 
suspend  or  interrupt  payments  until  it  has  evidence  that  the  necessary  system 
improvements have been made and/or appropriate financial corrections applied.  

In the field of the CAP, the Commission has helped Member States keep the error rate low 
by introducing several rule simplifications in the last 6 years.  

In  addition,  the  Commission  organises  meetings  with  paying  agencies  to  share  good 
practices  in  the  implementation  of  the  CAP  and  to  inform  them  about  strategic  issues  as 
regards  assurance,  audit  and  implementation,  including  on  the  implementation  of  the  area 
monitoring  system  and  on  anti-fraud  and  conflict  of  interests  matters.  Similarly,  regular 
expert  group  meetings  are  organised  with  the  certification  bodies,  in  order  to  share  best 
practices and provide guidance on different topics. 

In  view  of  the  new  CAP  legislative  framework,  the  Commission  has  also  initiated  a 
letters,  meetings  and 
structured  dialogue  with  Member  States.  This 
recommendations to help them prepare their CAP strategic plans.  

includes 

When necessary, the Commission  can use both  preventive  measures (such as  interruption, 
suspensions  and  reductions  of  payments)  and  corrective  measures  (in  the  form  of  net 
financial  corrections).  If  serious  deficiencies  are  identified  in  the  framework  of  conformity 

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procedures,  the  Commission  can  request  Member  States  to  draw  up  and  implement  action 
plans with corrective actions and a clear timetable.  

Furthermore, the Commission continues to develop and refine its tools to tackle fraud. The 
Commission’s  anti-fraud  strategy  provides  the  Commission  with  a  stronger  analytical 
capacity to prevent and detect fraud, and to improve anti-fraud cooperation. 

  3.3. Providing sufficient funding for audits and controls in the Commission  

The increased amount of funds to be disbursed in the coming years requires additional control 
and audit capacity  within the Commission. In this  context, some  190 full  time equivalents 
(FTEs)  are  being  recruited  for  NGEU-related  tasks,  including  control  and  audit,  and  an 
additional 94 FTEs have already been redeployed to these tasks from elsewhere within the 
Commission.  

The  Commission  is  not  only  increasing  its  capacity  in  terms  of  number  of  staff  but  is  also 
improving  audit  quality.  In  the  field  of  research  and  innovation  policy,  for  example,  the 
Commission has set up information campaigns and intensive training for auditors; improved 
the  terms  of  reference  in  the  new  framework  contract  with  external  audit  firms;  and 
undertaken joint audit missions involving both the Commission’s audit services and external 
audit firms.  

  3.4. Reinforcement of the ECA, the OLAF and the EPPO 

In view of the increase in workload linked to the new spending programmes for the ECA, the 
budgetary authority has approved an extra 20 posts for the ECA on a temporary basis until 
2027. 

Provision has similarly been made for seven extra external staff for OLAF in 2022 to help 
it address the increase in its workload. The proposal for the draft 2023 budget provides for a 
reallocation  of  six  additional  posts  to  OLAF  from  other  parts  of  the  Commission  for 
additional workload including NGEU. 

Lastly,  the  EPPO  will  almost  double  its  staff  during  the  2022  budget  year  -  with  118 
additional  posts.  The  Commission  proposes  to  consolidate  this  significant  reinforcement  of 
the EPPO’s resources by maintaining this new staffing level in the 2023 Draft Budget. 

  3.5  Beyond  safeguarding  the  budget:  protecting  the  rightful  beneficiaries  of 

funds, and deterring and pursuing misuse of EU funds  

The EU has developed a multilevel (EU, national, regional) management and control system 
that  ensures  its  budget  is  safeguarded.  The  EU  must  not  only  protect  its  budget,  but  also 
ensure that the rightful beneficiaries of funds are protected and do not get the impression 
that fraud or corruption can go unpunished.  

The EU has therefore strengthened its judicial capacity. The newly operational EPPO can 
directly prosecute crimes against the EU’s financial interest. The EPPO’s arrival on the EU’s 
anti-fraud  landscape  greatly  helps  deter  misuse  of  EU  funds,  and  ultimately  reassures  the 
general public that fraudsters and corrupt politicians are not beyond the law.  

For  Member  States  that  do  not  participate  in  the  EPPO, the  current  framework  for  fighting 
fraud  against  the  EU’s  financial  interests  remains  in  place.  OLAF  -  strengthened  by  its 

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recently  revised  regulation  -  will  continue  its  administrative  investigations  in  all  Member 
States and will cooperate with national authorities just as it does already. 

To make certain that EU companies do not suffer from unfair competition, the EU has 
also  developed  rules  on  public  procurement  to  ensure  that  public  contracts  are  awarded 
through transparent, non-discriminatory, and competitive tender procedures. In addition, the 
International Procurement Instrument should, once it has been adopted by the European 
Parliament and the Council (the co-legislators), allow the Commission to issue a decision that 
would make it harder for bidders from non-EU countries that do not play by the same rules to 
obtain EU procurement contracts.  

In 2021, the Commission also proposed a Regulation to address distortion of competition in 
the internal market caused by foreign subsidies. 

The new general regime of conditionality complements these new instruments.  

4.  RULE OF LAW AND FUNDAMENTAL VALUES  

The  Regulation  on  a  general  regime  of  conditionality  for  the  protection  of  the  EU  budget1 
(the  ’Conditionality  Regulation’)  has  been  in  force  and  applicable  since  1  January  2021.  It 
covers  all  relevant  breaches  of  the  principles  of  the  rule  of  law  in  a  Member  State  that 
affect  or  seriously  risk  affecting  the  sound  financial  management  of  the  EU  budget  or  the 
protection of the EU’s financial interests in a sufficiently direct way. 

The Conditionality Regulation allows the EU to take measures (e.g. suspension of payments 
or financial corrections) to protect the EU budget, while at the same time ensuring that the 
final  beneficiaries  of  EU  funds  continue  to  receive  their  payments  directly  from  the 
Member States concerned.  

In  March  2021,  Hungary  and  Poland  challenged  the  Conditionality  Regulation  before  the 
Court of Justice of the European Union (CJEU). On 16 February 2022, the CJEU dismissed 
their actions and confirmed the validity of the Conditionality Regulation2. On 2 March 2022, 
the  Commission  published  guidelines  on  applying  the  Regulation  that  take  the  CJEU’s 
judgment into account. 

On 27 April 2022, the Commission sent a written notification to Hungary. This is the first 
step in the procedure set by the Conditionality Regulation to protect the EU budget, either by 
prompting effective remedial measures by the Member State concerned or by the adoption of 
measures by the Council.  

The  Conditionality  Regulation  complements  other  tools  and  procedures  established  by  EU 
legislation to  protect  the budget. These include investigations by OLAF,  checks and audits, 
and financial corrections.  

Amongst these other tools and procedures, the Financial Regulation contains obligations and 
mechanisms to ensure that EU funds in the field of external actions do not reach entities or 
persons that are in breach of the rule of law and democratic principles. 

1 Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council of 16 December 2020 on 
a general regime of conditionality for the protection of the Union budget (OJ L 433 I, 22.12.2020, p. 1). 
2 Cases C-156/21 Hungary v Parliament and Council and C-157/21 Poland v Parliament and Council 

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The rule of law and the respect for human rights in recipient countries, together with the EU’s 
fundamental  values,  are  further  embedded  in  basic  acts  related  to  external  funding, 
including the Neighbourhood, Development and International Cooperation Instrument – 
Global  Europe  (NDICI-GE)  and  the  Instrument  for  Pre-Accession  Assistance  (IPA  III). 
NDICI-GE excludes from EU funding any actions or measures that may lead to breaches of 
human  rights  in  partner  countries.  Under  IPA  III,  the  Commission  examines  the  current 
guarantees  for  fundamental  rights  in  a  beneficiary  country  to  decide  on  the  assistance  to 
provide. 

Both  instruments  foresee  the  possibility  to  modulate  assistance  to  ensure  compliance 
with democratic principles, human rights or the rule of law. 

Lastly,  the  Commission  awards  funds  in  conformity  with,  and  in  application  of,  EU 
restrictive measures (sanctions). 

5.  THE COMMISSION’S PROPOSALS TO STRENGTHEN THE DIGITALISATION OF 

MONITORING, CONTROL AND AUDIT OF EU FUNDS THROUGH THE TARGETED 
ADJUSTMENT OF THE FINANCIAL REGULATION  

For the 2021-2027 MFF and NGEU, the Commission has put forward proposals to improve 
the quality and interoperability of data on recipients of EU funding where the budget is 
implemented under shared management and under the RRF.  

The  co-legislators  accepted  the  Commission’s  proposal  to  require  the  Member  States  to 
record  and  store  data  on  the  recipients  of  EU  funding  and  on  those  recipients’  beneficial 
owners. For the CAP, Member States will, where applicable, collect data on groups to which 
the beneficiaries belong.  

The Commission wants to use the targeted adjustment of the Financial Regulation to further 
improve  the  monitoring  and  transparency  of  the  use  of  funds.  The  Commission  has 
proposed to require Member States (and other entities) implementing the EU budget to send 
to the Commission information on recipients of EU funding in their Member States (or, for 
other  entities,  in  their  areas  of  responsibility)  at  least  once  a  year.  The  Commission  would 
supplement  that  information  with  the  data  it  has  on  direct  management  and  would  be 
responsible for consolidating, centralising, and publishing the information in a database on a 
single  website  that  would  cover  all  management  modes.  The  resulting  single  website 
would be an improved version of the Financial Transparency System currently in use for 
direct management. 

The targeted adjustment of the Financial Regulation also provides  an opportunity to further 
protect the EU budget against irregularities, fraud, corruption, and conflicts of interest.  

-  First,  the  Commission  has  proposed  to  make  the  use  of  a  single  integrated  IT 
system  for  data-mining  and  risk-scoring  compulsory.  This  IT  system  allows 
identifying  measures,  contracts  and  recipients  that  are  vulnerable  to  irregularities, 
fraud,  corruption,  and  conflicts  of  interest.  The  Commission  has  developed  and 
supplied  this  IT  tool,  known  as  Arachne,  to  Member  States  implementing  the  EU 
budget under shared management and under the RRF. The use of Arachne is currently 
voluntary.  It  is  already  widely  used  in  the  field  of  cohesion  policy  and  is  being 
introduced  for  agricultural  spending  but  making  its  use  compulsory  would  be  an 
important step forward. 

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-  Second,  the  Commission  also  proposes  to  extend  the  scope  and  effectiveness  of  the 
Early  Detection  and  Exclusion  System  (EDES).  This  system  provides  a  set  of 
measures to protect against fraudulent or unreliable economic operators. In particular, 
EDES  enables  authorising  officers  to  detect  and  possibly  blacklist  (exclude) 
fraudulent  or  unreliable  economic  operators  at  an  early  stage.  The  Commission  has 
proposed to  better target the application of the EDES  to  funds under both  shared 
management,  and  direct  management  where  funds  are  disbursed  as  financial 
contributions  to  Member  States,  for  instance  under  the  RRF  (i.e.  the  Commission 
would be able to act on the most serious grounds for exclusion). The objective is also 
to make sure that exclusion decisions taken at  the EU level  are enforced  at  national 
level  in  the  context  of  shared  management.  The  Commission  has  also  proposed  to 
allow  affiliated  entities  and/or  beneficial  owners  of  a  primary  excluded  entity  to  be 
excluded from bidding for public contracts and ultimately from obtaining EU funds.  

-  Third,  the  proposed  adjustment  to  the  Financial  Regulation  will,  if  endorsed  by  the 
co-legislators, increase the efficiency and quality of controls and audits with the help 
of  digitalisation  and  emerging  technologies  such  as  machine  learning,  robotic 
process  automation  and  artificial  intelligence.  This  should  in  turn  help  to  further 
ensure the proper use of EU funds, while reducing the cost of audits and controls. 

6.  PERFORMANCE OF THE EU BUDGET  

As  underlined  in  its  Communication  of  8  June  2021  (COM/2021/366),  the  Commission 
attaches  the  greatest  importance  to  maximising  the  effectiveness  of  EU  spending  and  is 
committed to continuing to ensure that EU spending delivers results - and that these results 
help the EU to achieve its objectives.  

For  the  2021-2027  MFF,  much  progress  has  already  been  made  in  terms  of  performance 
monitoring.  The  Commission  has  streamlined  the  key  performance  indicators  for  the 
various EU spending programmes, with their inclusion in the respective basic acts. It has also 
through  dedicated 
information  more  available,  for  example 
made  performance 
performance websites. Furthermore,  methodologies to better evaluate the contribution of 
the  EU’s  various  spending  programmes  to  horizontal  priorities  are  being  updated  or 
developed. The 2021 AMPR reports on the extent to which both the 2014-2020 and the 2021-
2027 MFF contribute to climate-relevant actions. For the 2021-2027 MFF, the methodology 
to track climate-relevant expenditures has been updated to be consistently applied throughout 
the  various  spending  programmes,  including  the  RRF,  and  is  strengthened  by  a  general 
requirement  that  the  funded  interventions  do  not  lead  to  any  significant  harm  to  the  EU’s 
environmental  objectives.  This  methodology  is  described  in  detail  in  a  Commission  Staff 
Working  Document3  titled  “Climate  Mainstreaming  Architecture  in  the  2021-2027  MFF” 
(SWD(2022)225 final). 

In line with its commitment under the Interinstitutional agreement (IIA) adopted in parallel to 
the MFF Regulation, the Commission has also made progress in establishing a methodology 
to  track  biodiversity-relevant  expenditures,  which  the  Commission  will  use  to  monitor 
compliance with its spending commitments in this area for the 2024, 2026 and 2027 budgets. 

3 Commission Staff Working Document SWD(2022) 225 final, Climate Mainstreaming Architecture in the 2021-
2027 Multiannual Financial Framework 

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Great progress has also been made in integrating gender equality in the EU’s policies and 
budget.  The  Commission  has  developed  a  range  of  tools  to  ensure  that  equality  (including 
gender equality) is always taken into account when designing, implementing, monitoring and 
evaluating EU policies, legislation and funding programmes. In addition, and in line with the 
gender  equality  strategy,  all  Commission  departments  have  appointed  an  equality 
coordinator.  

Likewise, and in line with its undertaking in its gender equality strategy 2020-2025 and with 
the  IIA  on  the  MFF  2021-2027,  the  Commission  has  been  developing  a  methodology  to 
track  relevant  expenditure  related  to  gender  equality  across  the  EU  budget.  With  its 
draft budget for 2023, the Commission proposes to apply this methodology for the first time 
in a test phase across all programmes. On this basis, the 2021 AMPR reports on the extent to 
which the 2021-2027 MFF contributes to the promotion of gender equality.  

The Commission also organised in 2021 training courses for staff on why and how to take 
due account of gender equality at every stage of EU actions, including in the EU budget. The 
Commission will continue to provide such specialised training courses in 2022.  

Separately,  the  Commission  has  also  begun  to  work,  on  a  pilot  basis,  on  methodologies  to 
gauge the overall impact of EU spending programmes on the EU goals in terms of climate 
and digital transition.  

7.  SIMPLIFICATION OF RULES AND PROCEDURE FOR APPLICANTS TO EU FUNDS  

Simple  funding  rules  and  procedures  are  key  to  enable  applicants  to  receive  EU  funds, 
especially  those  with  limited  experience  and  administrative  capacities  such  as  small  and 
medium-sized  enterprises  (SMEs).  The  Commission’s  simplification  of  rules  should  also 
have  a  positive  impact  in  reducing  the  level  of  errors.  The  2018  revision  of  the  Financial 
Regulation  introduced  further  simplifications  such  as  the  reduction  of  information 
required from applicants, the non-duplication of checks and audits, and the increased use of 
simplified forms of grants). 

The  Commission  has  undertaken  several  other  simplification  initiatives  in  recent  years.  By 
2022 almost all programmes directly managed by the Commission will have moved to the e-
Grants system - so that all applicants to EU grants will have an electronic ’one-stop-shop’. 
Applicants will also use the same electronic documentation and the same seamless electronic 
procedures  throughout  the  grant  process.  In  addition,  the  Commission  is  updating  the 
Annotated  Grant  Agreement,  which  will  be  made  available  to  applicants  for,  and 
beneficiaries of, grant funding so that they all receive consistent and practical guidance. 

The  Commission  is  also  increasing  the  use  of  simplified  cost  options  (SCOs)  when 
providing  grants.  This  is  because  simplified  forms  of  funding  such  as  unit  costs  and  lump 
sums  can  greatly  reduce  administrative  burden  and  are  more  closely  linked  to  the  actual 
achievement of the funded actions. 

Lump  sum  funding  is  being  phased  in  gradually  for  the  Horizon  Europe  funding 
programme,  starting  slowly  in  2022  and  a  first  significant  wave  planned  for  2023.  The 
Commission  is  also  developing  a  unit  cost  system  for  personnel  costs.  This  measure  has 
enormous potential because personnel costs are more than 60% of the budget of an average 
grant  and  are  by  far  the  biggest  source  of  errors.  In  parallel  with  these  simplifications,  the 
Commission  provides  support  to  Horizon  Europe  applicants  through  communication 
campaigns, including workshops, and by targeting more ‘error-prone’ beneficiaries such as 
SMEs and first-time applicants.  

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The Commission is also promoting the use of SCOs by the Member States in cohesion and 
agricultural policies, by helping national authorities prepare and assess SCO schemes for the 
2021-2027  programmes.  This  will  eventually  reduce  the  administrative  burden  for  many 
applicants under shared management. 

Lastly,  the  CAP’s  new  delivery  model  offers  flexibilities  to  the  Member  States  to  design 
their agricultural interventions in accordance with their agricultural reality and needs, whilst 
still respecting the general Union rules.  The new model should help reduce complexity and 
errors. 

8.  OUTSTANDING BUDGETARY COMMITMENTS – ‘RESTE À LIQUIDER’ (RAL) 

The  level  of  outstanding  commitments  (known  as  ‘the  RAL’  -  from  the  French  ‘reste  à 
liquider’)  resulting  from  the  MFF  2021-2027  and  its  predecessors  decreased  during  2021. 
This  was  largely  due  to  the  accelerated  payments  made  for  ongoing  cohesion  policy 
programmes, while the new generation of cohesion funds is expected to be launched in 2022 
only.  Cohesion  funding  accounts  for  the  biggest  share  in  the  RAL  and  therefore  has  a 
particular influence on the ongoing development of the RAL as a whole. 

By  contrast,  there  was  a  nominal  increase  in  the  value  of  the  RAL  during  2021  when 
taking  NGEU  into  account.  NGEU  temporarily  increases  the  overall  level  of  the  RAL, 
which will peak by the end of 2023 (the last year for making NGEU commitments). The RAL 
linked to NGEU will start to be settled in 2024 and this will continue until the end of 2026, 
which is the deadline for completing payments for NGEU.  

For the 2021-2027 period, the Commission proposed a series of  simplification measures to 
facilitate and accelerate the implementation of cohesion policy. While many proposals were 
adopted,  the  Commission  regrets  that  the  return  to  the  n+2  decommitment  rule  was  not 
approved, except for the CAP’s Rural Development Fund, for which the de-commitment rule 
will change from n+3 to n+2.  

At this early stage of the new budgetary cycle, the Commission  considers that three factors 
will cause the trend of the nominally growing RAL to continue during the 2021-2027 MFF 
period: (1) the decision to keep the n+3 decommitment rule for the biggest share of spending; 
(2) the fact that the legislation governing most of the funds in shared management was only 
agreed at a late stage; and (3) the focus of national authorities on NGEU in the coming years. 

In particular, the preparation of the 2021-2027 national and regional programmes in the field 
of cohesion policy was affected not only by the late adoption of the 2021-2027 MFF, but also 
by the fact that preparations in the Member States took place in parallel with the preparation 
of  the  national  recovery  and  resilience  plans.  This  was  an  operational  challenge  for  some 
Member States. The Commission nevertheless expects that all programmes will be agreed by 
the end of 2022. 

A relevant additional metric when assessing  the RAL is its comparison  with the size of the 
EU economy (measured, e.g. by the Gross National Income or GNI). The RAL (excluding the 
RAL linked to NGEU) is projected to decrease between the end of 2021 and the end of 2027 
from  1.7% to  1.6% of the  EU’s GNI. This  shows that  the nominal  growth  of the RAL is 
outweighed by the nominal growth of the EU economy. The RAL’s existence does not in 
itself indicate that the budget has not been implemented but is strictly related to the time lag 
between commitments and payments.  

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Finally,  the  Commission  recalls,  on  the  one  hand,  that  the  adoption  of  the  budget  lies 
ultimately  within  the  remit  of  the  budgetary  authority,  which  involves  the  granting  of 
sufficient  level  of  payment  appropriations,  and  on  the  other  hand,  that  implementation  is 
managed by national authorities for most of the funds and largely depends on the rules set by 
the  co-legislators  in  the  relevant  basic  acts.  The  Commission  will  continue  to  cooperate 
closely  with  the  European  Parliament  and  the  Council,  as  well  as  with  the  national 
implementing bodies. 

9.   SHORTENING THE DISCHARGE PROCEDURE  

The  Commission  supports  the  idea  of  a  shorter  discharge  procedure.  It  delivered  the 
2020 and 2021 consolidated EU accounts one month earlier than the regulatory deadline of 
31 July in 2021 and 2022. The Commission also advanced the publication of the AMPR by a 
few weeks in these two years. Publishing the AMPR even earlier is challenging because some 
AARs, which are the basis for the AMPR, must include information from the Member States. 
The Commission receives this information at the earliest in February and needs time to assess 
and evaluate it.  

In  addition,  a significant  shortening of the discharge procedure  would  also require  both  the 
ECA  to  publish  its  annual  report  earlier,  and  the  Council  to  adopt  its  discharge 
recommendation earlier. 

10. LOOKING AHEAD 

The  Commission  is  committed  to  delivering  results  on  the  priorities  highlighted  by  the 
European Parliament and the Council as a result of the 2020 discharge procedure. It is also 
ready  to  face  new  challenges,  which  cannot  always  be  anticipated  and  usually  require  the 
Commission  to  respond  swiftly  and  with  great  flexibility.  The  most  recent  one  is  Russia’s 
invasion of Ukraine. On 18 May 2022, the Commission presented a package to respond to 
the  challenges  created  by  this  war,  including  energy  security  of  supply,  the  EU’s  defence 
investment gap and Ukraine’s longer-term reconstruction. All of them have implications for 
the EU budget.  

There  is  every  reason  to  expect  that  the  coming  months  will  continue  to  be  marked  by 
tremendous uncertainty and challenges.  

In  any  event,  the  Commission  will  make  sure  that  taxpayers’  money  continues  to  be 
spent in line with the rules and with maximum impact on the ground.  

The Commission counts on the support of the European Parliament and of the Council. 
Its proposals can only be carried out with their help. Upcoming discussions, especially on the 
revision of the Financial Regulation, will be key to improving mechanisms to safeguard the 
EU budget, and to making the monitoring, control and audit of EU funds more efficient and 
effective.  

* * * 

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