EP Finance Academy Budgetary and General Accounting PDF

Budgetary and General accounting Mr Ville TIMBERG Head of Accounting and Treasury Unit / Accountant  I. Budgetary Accounting 4 Budgetary II. and general accounting...

Budgetary and General accounting Mr Ville TIMBERG Head of Accounting and Treasury Unit / Accountant  I. Budgetary Accounting 4 Budgetary II. and general accounting General Accounting 14 III. Inventory – Fixed assets 23 IV. Keeping of Supporting Documents 26 V. Legal Entity FIF Form 28 VI. VAT 30 VII. Imprest Accounts 34 3 VIII. Q & A Accounting and Treasury Unit I. Budgetary Accounting  I. Budgetary accounting Budget Funds Fund 0: Current year appropriations Fund 2: Commitments carried-over from previous year Voted budget of the year N. Outstanding commitments of Fund 0 at the 31.12.N will be automatically Anticipated budget is made available 15 October. carried over to Fund 2 year N+1, commitments to be reduced in year N to the real need of carry-over. The commitments made on anticipated budget (max. 25%) will be transferred to voted budget once the EP has voted on the budget. Has to be paid by 31 December year N+1, non-paid budget commitments Has to be committed by 31 December year N, non- will lapse. committed appropriations lapse. Appropriations for remuneration and allowances can not be Open Purchase Orders will be carried over to N+2, but they will use carried over (listed in the SG closure note). “fresh” voted budget in Fund 0 of year N+2. Fund 6: Appropriations carried-over on decision Fund 1: Appropriations carried-over on decision When most of the preparatory stages of the commitment related to building projects procedure have been completed by the 31 December When most of the preparatory stages of the commitment procedure year N, the needed budget appropriations may be have been completed by the 31 December year N, the needed budget carried over by a decision. appropriations may be carried over by a decision. To be committed by the 31 March N+1 and paid by the To be committed by the 31 December N+1 and paid by the 31 31 December N+1. December N+2. 5 Accounting and Treasury Unit  I. Budgetary accounting Assigned revenue related budget appropriations Recovery of amounts receivable can in certain Internal assigned revenue can be: cases generate assigned revenue linked to o Revenue from third parties in respect of goods, services budget appropriations. or works supplied at their request. o Revenue arising from repayment of amounts wrongly paid Recovery order will have a budget posting o Proceeds from supply of goods, services and works to other institutions. address that has a budget income line and a o Insurance payments received. budget expenditure line. o Revenue from lettings and sale of buildings and land. 6 Accounting and Treasury Unit  I. Budgetary accounting Assigned revenue related budget appropriations Structure of revenue budget line : I3300.3242-01-00 PART 1. PART 2 PART 1 – WHAT FOR is revenue? – Nature / Origin of the revenue. PART 2 – WHERE to RE-USE? - Expenditure budget line which will get assigned revenue. I3300 – “Repayment of amounts wrongly paid — Assigned Revenue”. 3242-01-00 – “Expenditure on information campaigns”. 7 Accounting and Treasury Unit  I. Budgetary accounting Assigned revenue related budget appropriations – Recovery examples Example 1: Communication grant paid to beneficiary was higher than eligible expenses. Overpayment has to be recovered. I3300.3242-01-00 I3300 – “Repayment of amounts wrongly paid — Assigned Revenue”. Example 2: EP receives contribution from EC to shared costs for Europe Experience I3202.3243-01-00. I3202 – “Revenue from the supply of goods, services and work — For other Union institutions, agencies and EU bodies — Assigned Revenue”. Example 3: Supplier issued credit note to correct the hours of IT specialist invoiced in previous period. I3300.2103-15-00 I3300 – “Repayment of amounts wrongly paid — Assigned Revenue. 8 Accounting and Treasury Unit  I. Budgetary accounting Revenue budget lines most used in recovery orders Revenue budget line AR Heading I3202AR Revenue from the supply of goods, services and work — For other Union institutions, agencies and EU bodies — Assigned Revenue I3220AR Revenue from third parties in respect of goods, services or work — Assigned Revenue I3300AR Repayment of amounts wrongly paid — Assigned Revenue I3390- Other revenue from administrative operations — Non Assigned Revenue I3330AR Insurance payments received — Assigned Revenue Budget follows CASH basis – you get assigned revenue only when RO is paid ! 9 Accounting and Treasury Unit  I. Budgetary accounting Budget funds Fund 7: Internal assigned revenue of the year Fund 5: Internal assigned revenue – appropriations When an amount receivable is cashed in, the FMS will carried over generate assigned revenue linked budget appropriations in fund 7. Budget appropriations carried over from year N. These appropriations can be committed in year N. Has to be committed in year N+1 or the appropriations will lapse. These appropriations can be carried over as available Exception: internal assigned revenue from lettings and the sale of budget appropriations to year N+1. buildings and land may be carried over until it is fully used. Fund 3: Internal assigned revenue – commitments carried-over Budget commitments carried-over related to assigned revenue. Fund 7 commitments carried over are in fund 3. Fund 5 commitments carried over are in fund 3. Has to be paid by 31 December (exception lettings and sale of buildings and land). Assigned revenue related appropriations can be used and paid max in 3 years 10 Accounting and Treasury Unit  I. Budgetary accounting Budget funds Fund 9: External assigned revenue (only once in the EP) Specific financial contributions from Member States. Revenue earmarked for a specific purpose. Financial contributions to Union activities from third countries or from other bodies. Fund 8: Revenue from recovery orders of the year. Fund 4: Revenue from carried-over recovery orders. 11 Accounting and Treasury Unit  Fund Definition De- Type Carry-Over Legal basis Nature in Year commitment allowed in N+1 N possible in year N Available appropriations No FR Art. 12.1 - Available appropriations Yes FR Art. 12.2.a Fund 6 Fund 0 Current year voted budget Yes Available appropriations Yes FR. Art. 12.2.a Fund 1 Commitments Yes FR Art. 12.7 Fund 2 Fund 2 Commitments carried over No Commitments No FR Art. 14.1 - Available appropriations Yes FR Art. 12.4.b Fund 5 Fund 7 Current year internal assigned revenue Yes Commitments Yes FR Art. 12.7 Fund 3 Available appropriations No FR Art. 12.4.b - Carried over internal assigned revenue Yes Commitments Yes FR Art. 12.7 Fund3 Fund 5 Lettings and Sale of buildings and land Available appropriations Yes FR Art. 12.4.b Fund 5 Carried over internal assigned revenue (list Yes Commitments Yes FR Art. 12.7 Fund 3 of flagged budget lines) Carried over internal assigned revenue Commitments No FR Art. 14.1 - No commitments Fund 3 Lettings and Sale of buildings and land Commitments Yes* IR Art. 25.2 Fund 3 Carried over internal assigned revenue No commitments (list of flagged budget lines) Non-automatic carried over of appropriations Available appropriations No FR Art. 13.3 - Fund 1 for building projects - to be committed by Yes Commitments Yes FR Art. 12.7 Fund 1 31/12/N+1 Non-automatic carried over of appropriations Available appropriations No FR Art. 13.3 - Fund 6 other than building projects to be committed Yes Commitments No FR Art. 13.3 - by 31/03/N+1 * Confirmation by DG INLO that the PO still open 12 Accounting and Treasury Unit  I. Budgetary accounting Budget reporting “Report on Budgetary and Financial management” prepared by the Budget unit. Budget execution figures for all Funds are reported to the Commission by accounting. Commission prepares the EU budget execution report in which the expenditure of the EP appears under title 7 European Public Administration: Administrative expenditure of the institutions 2021 4.436 million EUR. EU budget result in 2021 was 3.230 million EUR in surplus and was returned to Member States through deduction of their amounts due in 2022 13 Accounting and Treasury Unit II. General Accounting  II. General accounting FR articles 77 – 87 Accounting officer Accounting officer is responsible for properly Accounting officer shall obtain from authorising officers implementing payments and recovering amounts all the information necessary for the production of established as being receivable. accounts (according to the SG closure note). General accounting follow the EU accounting rules Authorising officers shall guarantee the reliability of that which are based on the IPSAS. information. General accounting is kept according the accruals Authorising officer by delegation shall send the accounting principle. accounting officer any financial and management information required for the performance of the All transactions are registered in the General accounting officer’s duties. accounting in FMS. Authorising officers shall remain fully responsible for the Annual accounts are prepared by the service of the proper use of the funds they manage, the legality and accounting officer and the accounts are certified by the regularity of the expenditure under their control and the accounting officer before their adoption (provisional completeness and accuracy of the information sent to accounts 1 March and final accounts 1 July). the accounting officer. 15 Accounting and Treasury Unit  The EP Accounts 2023 16 Accounting and Treasury Unit  II. General accounting Comparison between budgetary accounting and general accounting Budgetary accounting General Accounting CASH Basis: ACCRUALS basis: - Revenue is recorded at Receipt of bank - Revenue is recorded upon Recovery incoming payment. transfer. establishment of the debt order. which books 7-account entry. - Expenses are recorded Invoice - Expenses are recorded upon Goods upon outgoing payment. validation and delivery of goods and services Receipt payment. which books 6-account entry. (GR). These events can be in different financial years, which makes budgetary accounting and general accounting information to differ, e.g. service delivery in year N and invoice validation and payment in N+1. Records budgetary commitments Records Assets & Liabilities. (reservation of money for legal commitment) and cash outflow (inflow). 17 Accounting and Treasury Unit  Expenditure example GL 61001020 Rent buildings BL 2000 Rent BRU 18 Accounting and Treasury Unit  II. General accounting Comparison between Budgetary accounting and General accounting Budgetary accounting General Accounting CASH Basis: ACCRUALS basis: e.g. Acquisition of a building or a service car. Spending is recorded in full in the year of Asset is created and amortised (expensed in invoice validation and payment. P/L) over its useful life (multi-annual). e.g. Pre-financing payment to beneficiary of a grant. Spending is recorded in the year of pre- Advance payment is recognised as amount financing payment. receivable from beneficiary until subsidised activities are performed, reported to EP and approved by AO. Expenses are only recognised after report validation. e.g. Service is delivered in year N and paid in N+1. Expenses are recorded upon invoice Expenses are recorded upon delivery in N – validation and payment in N+1. liability is recorded towards supplier in N. 19 Accounting and Treasury Unit  II. General accounting Advance payment – pre-financing Recorded in FMS via DOWN PAYMENT transaction which is a budgetary transaction and consumes the budget. Mostly used for grants, sometimes for procurement, building projects. Advances and pre-financing remain in the general accounting as ‘amount receivable from beneficiary’ until delivery of goods/services or execution of subsidised activity. Clearing the advance payment and pre-financing in the general accounting discharges beneficiary for the eligible expenditure. 20 Accounting and Treasury Unit  II. General accounting Pre-financing cycle in FMS Based on contract a budgetary Down payment is Pre- created to pay pre-financing to beneficiary financing Booked in BS account – Advance payments (GL 40200000). Upon delivery, execution: GR GR recognises expenses incurred to 6 account (charges). Clears pre-financing – records liability towards Invoice validation BP and offsets it with pre-financing paid - no longer on BS (reduces GL 40200000). RO, if balance is not spent Records the debt. /approved 21 Accounting and Treasury Unit  II. General accounting Goods receipt By recording Goods receipt (GR) in FMS the AO service confirms that the ordered item or service has been delivered/received by the EP. GR records assets/expenses and liability to supplier in the period, when delivery took place. GR capitalises the asset in EP accounts. DEBIT CREDIT ASSET or Liability to Expenses supplier 22 Accounting and Treasury Unit  II. General accounting Invoices Invoices received via mail or e-Invoicing (exceptionally due COVID also by email). Central registration by the Accounting MAI Unit. Original archived by the Accounting MAI Unit. e-Invoicing promoted: o Member state administrations go for compulsary electronic invoices. o Digital transformation in the EP. o EMAS. o Data quality. o Time efficiency. New contracts needs to have e-invoicing as invoicing method. In the EP in February 2024 = > 36 % e-invoices. Contact for advice and on-boarding of suppliers on e-invoicing: [email protected] 23 Accounting and Treasury Unit III. Inventory – Fixed assets  III. Inventory – Fixed assets Purchasing assets will be encoded in the Purchase Order with code A; indicating Material to be purchased Financial regulation in articles 36 and 87 require and the quantity. safeguarding of assets by the institution. Purchase order validation by the AO will create the The AO by delegation is responsible to safeguard asset record in FMS. assets given to disposal of the DG. Posting the Goods receipt will provide the quantity of The EP has an Insurance policy also for the movable assets delivered, will give value for the asset and will start the depreciation of the asset. assets, insurance coverage and fee is based on the assets in the official FMS inventory => only assets in Low Value Assets will be fully depreciated in the month the inventory are covered. of delivery => expenditure of the year; inventory record will allow safeguarding and tracking of LVA. 25 Accounting and Treasury Unit  III. Inventory – Fixed assets Tangible fixed assets 31.12.2023 26 Accounting and Treasury Unit  IV. Keeping of Supporting Documents  IV. Keeping of supporting documents FR article 75 AO responsible shall set-up archives for keeping the original supporting documents (paper-based or electronic). Documents shall be kept for at least 5 years from date on which the EP gives discharge for the financial year to which the documents relate. Documents relating operations shall in any case be kept until the end of the year following that in which those operations are definitively closed. 28 Accounting and Treasury Unit V. Legal Entity FIF Form  V. Legal entity financial identification form - FIF According to FR article 86, authorising officer shall check that legal entity information and payment details are valid before (s)he authorise any payment. FIF is used to collect the coordinates and the payment details FMS provides very good controls which are automated: of the legal entity / payee. 1) Purchase order = EP has ordered an item or a service. Based on FIF the coordinates and the payment details of the 2) Goods receipt = EP has been delivered an item or a service. payee are entered or modified in FMS by the Accounting. 3) Invoice that match PO and GR = EP will make a payment for an item or a service that has been ordered and that has been o Very strict control who can enter and modify the vendor master delivered. data in FMS. During the budget implementation life cycle the legal entity is Having original FIF and copy of the bank statement / RIB is identified by vendor number. the best guarantee / “insurance” for the Authorising officer that the supplier / legal entity is known by the EP, the payment is Vendor Master Data management is the key for having right made to the right supplier and to the right bank account. identification and payment details of the legal entity based on original FIF. Experience in the EP: False invoices with wrong bank account, hacking the email-addresses of companies etc. 30 Accounting and Treasury Unit VI. VAT  VI. VAT Exemption According to PPI the EP has a VAT exemption on the purchases that the EP makes for its official use: Two exemption schemes Purchase made in the name of the EP. Direct exemption scheme: Delivery to an official address of the EP. o Invoices are issued without VAT. Invoice addressed to and paid by the EP, political group or the secretariat of non-attached MEPs. Refund (indirect) scheme: Supplier must be liable to VAT in the EU (EU VAT number). o Invoices include VAT. o EP requests VAT reimbursement from the Member Purchase is substantial, threshold per Member State state. (per invoice Belgium 124 EUR excl. VAT, LUX 240 EUR excl. VAT). 32 Accounting and Treasury Unit  VI. VAT Intracommunity or local purchases Intracommunity purchases: Local purchases: Goods are transported between Member States. Goods are not transported from outside the Member State in Service transaction is taxed in a different Member State from which the transaction is taxable. that in which the Institution placing the order has is located. Services: place in which the transaction is taxed is the same Direct exemption scheme. Member State in which the Institution placing the order is Threshold is of the Member State where the order is placed located. (BE/LUX). Direct exemption scheme BE, BG, CY, ES, GR, HR, IR, IT, LU, VAT exemption certificate, form 151, duly filled and approved. RO, SL. Belgium and Luxembourg have granted a special dispensation Refund exemption scheme other Member States (STR => to stamp the 151 form; names of EP signatories with France is the most important for the EP). specimen of signature have to be provided to the national VAT authorities. Exception: Portugal Intra-community services => refund scheme. 33 Accounting and Treasury Unit  VI. VAT Local purchases Belgium and Luxembourg Belgium Luxembourg Order form has to be signed by the competent AO and Contract over 240 EUR threshold must be shall mention: accompanied by a national certificate: o En Belgique, l’utilisation de ce bon de commande vaut présentation d’une demande d’exemption de la TVA no. 450 ‘ATTESTATION NATIONALE LUXEMBOURGEOISE’ (exonération de la TVA – article 42, § 3, 3 du code de la TVA; circulaire no. 2/1978). Names of EP signatories with specimen of signatures Invoice has to mention: have to be communicated to Luxembourg authorities. o Exonération de la TVA, article 45,§ 3,3 du Code de la TVA – circulaire 2/1978. Names of EP signatories with specimen of signatures Certification by Luxembourg authorities is necessary have to be communicated to Belgium authorities. before sending the national certificate to supplier or Special form for restaurant services service provider. No threshold for supplies of water, gas, electricity, telephone... 34 Accounting and Treasury Unit VII. Imprest Accounts  VII. Imprest accounts FR articles 88 and 89 Imprest accounts may be set up for the payment of Imprest accounts can be permanent or temporary and it can expenditure where, owing to the limited amounts involved, it is be with or without funds. materially impossible or inefficient to carry out payment Temporary imprest accounts (around 150 per year) are operations by budgetary procedures. normally for a parliamentary delegation and with funds. Creation decision of an Imprest account by the accounting Permanent imprest accounts with funds (21) can be for EPLO officer on the basis of duly substantiated proposal from the AO small running expenditure, EUVP programme, Sports centre, responsible. Child care centres etc. Payments made by IA shall be followed by formal final Permanent imprest account without funds (5) can be for MEP validation decisions or payment orders signed by the AO travel and daily allowance, MISS, invited Journalists etc. responsible. Eventual bank account shall be opened and monitored by the Imprest transactions shall be settled by the AO responsible by accounting officer. the end of the following month. Procurement rules and other FR provisions are applicable. 36 Accounting and Treasury Unit  VII. Imprest accounts Imprest administrator Imprest administrator shall be chosen on grounds of their knowledge, skills and particular qualifications as evidenced by diplomas or by appropriate professional experience, or after an appropriate training programme. Manages imprest account in accordance with the rules set up by the accounting officer and instructions given by the AO responsible. Imprest administrator validates provisionally the expenditure and executes the payment and eventually collects the revenue. Imprest Administrator is responsible for safekeeping of funds at his/her disposal (EP has an insurance policy to cover against armed rubbery; not against loss of funds). Imprest administrator can delegate the task, but not the responsibility. Charter for Imprest Administrator. 37 Accounting and Treasury Unit  VII. Imprest accounts Normal invoice vs Imprest account invoice IMPREST ACCOUNT PAYMENT IS “HORS BUDGET (HB)” PAYMENT AND THEREFORE SPECIFIC WORKFLOW APPLIES 38 Accounting and Treasury Unit  VII. Imprest accounts Accounting officer provides the imprest administrator with Eligible expenditure: all expenditure covered by the same funds. budget commitment can be grouped together and charged to the budget with regularisation order. IA makes provisional validation of the expenditure and executes the payment and prepares a monthly statement of Eligible invoices if PO or VAT involved: normal invoice the account, Cash journal in FMS. validation workflow applies. Imprest account service in the accounting verifies the financial AO service verifies and validates the legality and regularity of correctness of the transactions, validates the accounting the imprest transaction by charging the transaction to the entries and replenish the imprest account. budget. 39 Accounting and Treasury Unit VIII. Q & A  Thank you for your attention. Questions and answers? 41 Accounting and Treasury Unit