9.2 The EU Financial Regulation: Budgetary & Financial Principles

9.2 The EU Financial Regulation: Budgetary & Financial Principles

Regulation (EU, Euratom) 2024/2509 is the current recast Financial Regulation applicable to the general budget of the Union. Adopted under Article 322 TFEU, it supplies horizontal rules for budget establishment and implementation, financial actors, grants, procurement, indirect management, accounts, external audit and discharge. Sector legislation and financing instruments add specific rules, but they do not displace the Regulation unless a lawful derogation applies.

The nine principles in Article 6

1. Unity and budgetary accuracy — Articles 7–8

Union revenue and expenditure must be entered in the budget, and expenditure may be committed or authorised only within an appropriation. An auditor tests completeness of budget recording, the legal basis, the correct line and whether the commitment preceded the obligation where required.

2. Annuality — Articles 9–16

Appropriations are authorised for a financial year, which runs from 1 January to 31 December. Multiannual programmes use commitment appropriations for the total cost of legal obligations entered into and payment appropriations for payments arising from current or earlier commitments.

Article 12 provides the default: unused appropriations are cancelled unless they are carried over under the specified conditions. Article 14 governs decommitments. Article 15 permits certain corresponding appropriations to be made available again in defined cases, including provisions linked to the sector regulations named there. Therefore, “all decommitted money is lost” and “all unused money rolls forward” are both wrong.

3. Equilibrium — Articles 17–18

Budget revenue and payment appropriations must be in balance. The Union does not use ordinary borrowing to cover an operating budget deficit within the budget framework. This principle does not erase borrowing-and-lending operations specifically authorised by Union law. The budgetary balance from a year is entered in the budget for the following year under Article 18.

4. Unit of account — Article 19

The multiannual framework, budget and accounts are drawn up and implemented in euro. Foreign-currency transactions still require controlled conversion, revaluation and disclosure procedures.

5. Universality — Articles 20–25

Universality contains two related rules. Under non-assignment, total revenue finances total payment appropriations unless a provision creates assigned revenue. Under the gross-budget principle, revenue and expenditure are not simply netted against each other unless the Regulation permits an adjustment. Article 21 identifies categories of internal and external assigned revenue.

If a service receives contractual damages, the auditor should not assume that it can spend the receipt off-budget on the same contract. The legal classification, budget entry and any assignment must be established first.

6. Specification — Articles 26–32

Appropriations are assigned to purposes through the budget structure. Transfers between titles, chapters or other subdivisions require the authority and procedure laid down in the Regulation. Audit work links the legal commitment and payment to the authorised purpose and tests transfers rather than treating available cash as freely interchangeable.

7. Sound financial management and performance — Articles 33–36

Article 33 expresses economy, efficiency and effectiveness. Objectives should be specific, measurable, achievable, relevant and time-bound where appropriate, and performance information should support monitoring and reporting. Article 36 requires effective and efficient internal control based on best practices and responsive to risk. Controls seek reasonable assurance; they do not eliminate judgment, fraud risk or operational failure.

8. Transparency — Articles 37–38

The budget, accounts and information on recipients are published under the applicable rules. Transparency is balanced with personal-data protection, security, confidentiality and proportionate exceptions. An auditor checks both publication completeness and whether a claimed restriction has a legal basis.

Connected provisions that auditors use

Budget principles interact with later provisions. Article 61 addresses conflicts of interest for financial actors and other persons involved in budget implementation, audit or control. Article 62 defines direct, shared and indirect management. Article 72 segregates the duties of authorising officer and accounting officer. Articles 137–146 govern the current early-detection and exclusion framework. Articles 266–268 govern the discharge timetable, procedure and follow-up.

Applying a principle as an audit criterion

Use a five-part test:

1. identify the operation—revenue, commitment, payment, transfer, carry-over or correction;
2. identify the general principle and the exact operational article;
3. check whether a lawful exception or sector rule applies;
4. trace approval, segregation, accounting and supporting evidence; and
5. determine the consequence, such as correction, recovery, disclosure, carry-over or cancellation.

This method avoids slogan-based auditing. A payment can respect annuality yet breach specification; assigned revenue can lawfully depart from non-assignment while still requiring gross and transparent accounting; and a formally legal payment can still display poor economy, efficiency or effectiveness.