The annual EU budget is one of the three components of the EU budgetary system. The other two are:
The annual budget lays down all the European Union's expenditure and revenue for one year. It ensures the financing of EU programmes and actions in all EU policy areas, for example, agriculture, research, regional policy, and other.
The annual budget also ensures that the EU receives the revenue necessary to finance its expenditure. The annual EU budget - expenditure and revenue - must be in balance.
Expenditure in the annual EU budget is divided into commitments and payments.
Commitments (the full term is 'commitment appropriations') cover the total cost of legal obligations that could be signed in a given financial year. Legal obligations can be contracts, grant agreements and decisions.
Payments (the full term is 'payment appropriations') cover expenditure due in the current year, arising from legal commitments entered into in the current year and/or earlier years.
The amounts of commitments and payments usually differ for multiannual projects, for example the building of a bridge. The commitment appropriations in such a case would be made in one year, and the payment appropriations would be divided into smaller amounts to be paid over several years.
Commitments and payments are identical for expenditure which must be made in the same year, for instance, direct financial support to farmers.
The amount committed but not yet paid out to beneficiaries is called 'outstanding commitments' or 'RAL', which is an acronym for 'reste à liquider' in French.
The expenditure side of the annual EU budget has to remain within the expenditure limits ('ceilings') set in the multiannual financial framework. The EU usually sets its annual budget at a lower level than the expenditure ceilings established in the MFF regulation - to be able to meet unforeseen expenditure, if necessary.
The annual budget also indicates the sources of revenue. Currently, these are:
Revenue from own resources has to remain within the limit ('ceiling') set by the rules on own resources.
The EU annual budget contains a specific section (Section II) dedicated for the shared budget of the Council of the EU and the European Council.
The Council and the European Council budget is managed by the General Secretariat of the Council of the EU.
The Council of the EU: