Treaty amending certain financial provisions

SUMMARY OF:

Treaty amending certain financial rules

WHAT IS THE AIM OF THE TREATY?

It amends certain financial provisions in the treaties establishing the European Coal and Steel Community, the European Economic Community, the European Atomic Energy Community and a single Council and a single Commission of the European Communities.

The amendments:

revise the annual budgetary procedure, giving the European Parliament more powers over certain expenditure and the right to reject the European Union (EU) draft budget;
create a European Court of Auditors, set up to audit the EU’s finances.

These reforms were necessary following the implementation of the financial system of own resources, which established the financial autonomy of the European Communities.

KEY POINTS

The treaty introduces the following changes to the budgetary procedure.

First reading

The European Parliament proposes changes to the draft budget drawn up by the Council of the European Union on the basis of the European Commission’s preliminary draft budget.
If these do not increase total spending, the Council may, by a qualified majority, reject the changes. If it does not, the proposed changes are accepted and the budget is adopted.
If the Parliament’s proposed changes increase total spending, the Council may, by a qualified majority, accept the changes. The budget is then adopted. In the absence of a decision, the proposed changes are rejected.
If the Council, in either of the above scenarios, rejects the Parliament’s proposed changes, it may, by a qualified majority, keep the original amount or set another.

Second reading

If the Council rejects or modifies the Parliament’s amendments, it sends the draft budget back to the Parliament. The Parliament may amend or reject the changes the Council made and adopt the budget if a majority of its members have voted in favour of this and three-fifths of votes have been cast. The budget is also adopted if the Parliament does not change the Council’s figures.
The Parliament may, if there are important reasons, reject the entire budget and ask for a new draft, provided a majority of its members are in favour of this and two-thirds of votes have been cast.

The Court of Auditors:

examines the accounts of all EU administrative revenue and expenditure, including the finances of bodies the EU establishes;
assesses whether all revenue has been received, whether all expenditure has been incurred in a lawful and regular manner and whether financial management has been sound;
bases the audit on records and inspections in EU institutions and Member States;
draws up and forwards an annual report after each financial year to the EU institutions (this includes their replies to its earlier observations);
submits observations on specific issues and delivers opinions if any EU institution so requests.

Members of the Court of Auditors:

are appointed for 6 years and are eligible for a second term;
have national external audit experience or are well-qualified for the post;
must be completely independent when performing their duties;
may not be involved in any paid or unpaid outside work;
can be removed or lose their pension rights if they fail to comply with the terms of their appointment.

ENTRY INTO FORCE

The treaty entered into force on 1 June 1977.

BACKGROUND

For further information, see:

How the EU budget works (European Commission).

MAIN DOCUMENT

Treaty amending certain financial provisions (OJ L 359, 31.12.1977, pp. 1–19).

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