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Added value at the heart of the EU’s budgetary decision-making

Within the European Commission, the Directorate-General for Budget is at the cross roads between money and performance. It not only deals with the resources that fuel the budget, but also promotes and funnels the growing attention paid to the performance of EU policies and programmes. Gert Jan Koopman is the Director-General for Budget and knows the ins and outs of the EU budgetary process. Below he explains what measures the Commission is currently taking to maximise the added value of EU policies and spending and also gives an outlook on the way forward.

By Gert Jan Koopman, Director-General for Budget, European Commission

‘Fit for purpose’ budgeting in a complex environment

The EU budget is primarily an investment-focused budget, ensuring the financing of EU policies in a wide range of areas through a number of spending programmes and by making use of multiple instruments and sources of funding under different management modes. EU money is spent in a complex environment and requires strong accountability and control mechanisms to guarantee budgetary discipline, to produce transparent reporting, and to verify alignment of spending with the EU’s political priorities.

The European Commission and its Directorate-General for Budget are paying ever more attention to the performance aspects of budgeting, demonstrating that the EU budget is well spent and fit for purpose to achieve EU goals and objectives. We want to enrich the budgetary debate with reflections on the policy challenges being tackled and the benefits the policies bring to citizens.

In preparing the proposal for the Multiannual Financial Framework (MFF) 2021–27, and benefiting from the feedback from the European Court of Auditors, the Commission has sought to ensure a comprehensive and well-structured performance framework. This is necessary in order to explain the rationale behind the multiannual budget proposals in a clear and credible way and to defend the annual budget proposal for each policy area.

Evidence of performance will allow the Commission to engage in budgetary discussions with stakeholders on a common information basis to demonstrate the use of EU funds and the contribution of spending programmes to EU-wide goals. In this sense, EU added value is becoming a guiding principle for EU budgeting.

EU added value and the performance framework

European added value is a long-standing concept and one of the key conditions for an action to be eligible for EU funding.(1) We define European added value as the value that results from an EU intervention which is additional to the value that would otherwise have been created by action on the part of the Member State alone.(2) The performance framework defines the objectives and a set of indicators that measure the output, results and impact of interventions. It serves as a tool for monitoring what has been achieved with the funds available, for tracking progress and showing the achievements of spending programmes.

Unless they fall within the exclusive competence of the Union,(3) actions are funded by the EU because their objective cannot be adequately achieved by the Member States and, by reason of the scale or effects of the proposed action, can be better achieved at Union level. The existence of EU added value is a necessary pre-requisite for setting priorities and justifying spending at EU level. Therefore, during the process of designing an EU policy within the multi-annual budgetary cycle, it must be demonstrated whether and in what way an intervention provides such EU added value. This makes EU added value the overarching concept of the multi-annual budgetary cycle.

As EU policies are developed on the basis of the best possible information (evidence-based) and taking into account the views of stakeholders (consultation and political support), evaluations and assessments play a central role in good policy-making: the Commission ensures there is policy review and continuity throughout the policy cycle through ex-ante impact assessments, mid-term and ex-post evaluations. Indeed, the Better Regulation Guidelines require that in areas outside the exclusive competence of the EU, impact assessment verifies whether EU action is compatible with the principle of subsidiarity, including ensuring that the action adds EU value.

In the ex-post evaluation phase, assessing whether EU added value has been achieved is a compulsory part of the exercise. Even earlier, however, during the implementation of a policy, performance monitoring provides insight into whether this policy is achieving its objectives and, consequently, whether it is generating EU added value. At the same time, performance indicators show in concrete terms how EU spending contributes to the achievement of the EU’s strategic objectives, allow stakeholders to examine and discuss any existing programme, and may already point to the need for corrective action during implementation.

Finally, EU added value and performance orientation are powerful communication tools: they demonstrate to stakeholders that EU funds are well spent and offer better value for money compared to national spending. They also ensure transparency about the benefits of EU policies and contribute to the quality of the dialogue between the ECA and the Commission. In this context, performance indicators and budgetary reports play an important role in ensuring the transparency and democratic accountability of the EU budget and in raising awareness. They communicate the value added of the spending programmes and help restore citizens’ trust and confidence in the European institutions.

The way forward

The preparation of the proposal for the next multi-annual budget has provided an opportunity to advance and further refine the EU budget performance framework. The wealth of information on the performance of the EU budget is a key element in the modernisation of the budgetary process and the management of spending programmes.

Source: sun ok /Shutterstock

Key budgetary documents have been streamlined and performance information is gradually being integrated. As part of the preparation of the annual draft budget, the Programme Statements report is a unique, comprehensive and valuable source of information on spending programmes, their implementation and results. Both being part of the Integrated Financial Reporting Package, the Programme Performance Overview summarises performance information on spending programmes in a concise and consistent way, and the Annual Management and Performance Report provides the latest information on the results achieved with the EU budget and on how the EU budget is managed and protected. Moreover, both documents include a dedicated section on EU added value.

The Commission wants to make greater use of the information available on programme performance, both in the annual budgetary procedure to support decision-making and in the discharge procedure to report on decisions taken. It has therefore taken steps to improve the quality of its reporting and to increase the credibility of the performance information produced, including by strengthening control and traceability of the quality standards of the underlying data. This will make it easier for the Parliament and the Council to engage more fully with the policy substance of the EU budget and for the ECA to take an independent perspective when assessing the qualitative aspects of budgeting, including the performance dimension.

Performance information makes it possible to increase the EU budget’s value for money, but also to ensure that — and make clear how — EU money serves the goals and the values of the European Union. Strengthening the performance orientation of EU spending is one way of linking the EU budget to the EU’s policy goals and high-level political ambitions, such as the European Green Deal, the Sustainable Development Goals, NextGenerationEU and gender equality.

Cover of the 2019 Annual Management and Performance Report for the EU Budget. Source: EC.

Under the coordination of the Directorate-General for Budget and in close collaboration with the Directorates-General directly concerned, a set of performance indicators has been selected to monitor progress and show the achievements of EU-funded interventions in a clear, accurate and concise manner. They are set out in the legal bases of the programmes and have therefore been discussed with the legislators. Finally, they are reported regularly in budget documents, which can be found at the dedicated website.

Performance culture as a condition sine qua non

An EU budget that finances sound performance provides effective support for the European Union’s response to emerging challenges and long-standing priorities. To foster transparency and awareness of the benefits of the EU budget, the European Commission has placed performance and European added value as analytical decision-making tools at the heart of its budgetary proposals, and subsidiarity needs to be verified in the impact assessment of each proposal. However, to ensure that EU policies are evidence-based, there needs to be recognition that a robust link between EU added value and budgetary performance exists.

The concept of European added value needs to be even further substantiated and operationalised to meet stakeholders’ expectations. It requires a fully-fledged performance framework based on high-quality data. This is a challenge that requires not only efforts on the part of the Commission, but also a change towards a stronger performance culture across all European Institutions, including the European Parliament, the Council and the ECA.

In these exceptional times, where significant investments from the EU Budget to respond to the crisis are indispensable and where we need to ensure that these are consistent with the EU’s long-term objectives, performance information is an indispensable tool.

This article was first published on the 3/2020 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.

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