Head of Accountability and
Accountancy Services Division
BANGOR BT19 7NA
Tel No: 028 9185 8203 (x 68203)
Fax No: 028 9127 7690
DAO (DFP) 16/06
18 December 2006
Dear Accounting Officer
INTRODUCTION OF EU NEGATIVE DEL* REGIME FROM 2006-07
ONWARDS – ACCOUNTING AND BUDGETING IMPACTS
1. This guidance is primarily aimed at government Departments and sets
out the arrangements for budgeting and accounting for EU income from
2006-07 onwards. Treasury has changed the budgeting principles so
as to treat EU income as negative DEL* where it is in support of DEL
expenditure. The accounting treatment of EU Income therefore follows
the reclassification in the budgeting principles (there is no change in
2. Prior to 2006-07, the budgeting treatment of EU receipts was that they
benefited the 'EU net payments' line (i.e. outside departmental budgets)
and were not offset against departmental expenditure. The reason for
this was that EU receipts reduce the abatement the UK receives from
the EU in respect of its large positive net contribution to
* For some bodies where the related expenditure is in AME, the DEL
consequences described in this DAO will apply to the Department’s
AME rather than its DEL
Reference : FE001694
EU finances. Departmental expenditure financed by EU receipts
scored against departmental budgets in the normal way.
3. In Estimates and accounting terms, EU income was treated as a
Consolidated Fund Extra Receipt (CFER). When income became due
from EU, a CFER debtor was created which was treated as income in
the Operating Cost Statement. An equal creditor was also required,
showing the amount due to be paid over to the NI Consolidated Fund
(the double entry to the General Fund).
4. In August 2005, HM Treasury circulated a memorandum seeking
departmental comments on the practical issues around their wish to
consider changing the budgeting system for EU income. The main
drivers cited for the proposed change included:
• departments had long pressed HM Treasury to simplify the
budgeting regime in this area, and had sought automatic spending
cover for expenditure financed by the EU; and
• HM Treasury were also keen to simplify the budgeting system for
EU income and for government departments to manage exchange
These new arrangements have now been adopted and are applicable
from 2006-07 onwards.
SUMMARY OF THE TREATMENT OF EU INCOME FOR 2006-07
Closing EU Debtor Balances at 31 March 2006
5. Cash receipts in relation to EU debtors recorded in accounts at 31
March 2006 are subject to the 2005-06 rules and consequently must
be surrendered to the Consolidated Fund;
6. EU debtor balances as at 31 March 2006 that need to be written off
will follow the 2005-06 treatment as described in FD (DFP) 10/06.
This treatment is also applicable to exchange rate losses on these
balances. There will therefore be no DEL budgetary consequences
for these balances.
EU Income from 1 April 2006 Onwards
7. From 2006-07 EU income scores in DEL as a receipt in budgets and
as an accruing resources in estimates and accounts. Income should
be treated as resource, capital or capital grant to match the
expenditure it finances. EU income is no longer required to be
recorded in Estimates and accounts as a CFER.
8. Write off of EU debts arising after 31 March 2006 will score in DEL in
Department’s budgets and Estimates. All write offs will require to be
reported as losses and the relevant approval sought.
Cost of Capital
9. Cost of Capital on ALL EU Debtors (including the balance at 31
March 2006) will also score in DEL.
Exchange Rate Gains and Losses
10. Foreign exchange gains below the budgetary de-minimis threshold
may be offset against EU related losses IN YEAR ONLY until such
time when they are fully utilised.
11. Net foreign exchange losses in relation to EU income will score in
DEL. Such losses require to be reported as losses and the relevant
approval sought. Gains that are not offset against in year losses
must be offered up as a Reduced Requirement at the earliest
12. Whilst hedging exchange rate fluctuations is permitted by GANI
under certain conditions, it is DFP’s view that the uncertainty of
timing of EURO receipts from the EU, coupled with the costs
associated with building the correct level of expertise in Departments
are unlikely to make hedging a viable or value for money option.
13. Further detail is given in Annex A.
14. If you have any queries regarding this letter please contact:
Budgeting or Paul Duffy (CED)
Estimate Issues Paul.email@example.com
028 91858081 (GTN: 68081)
Accounting Issues Brigitte Worth (AASD)
028 91858025 (GTN 68025)
028 91858133 (GTN 68133)
15. The content of this letter has been agreed with the Northern Ireland
Audit Office (NIAO) and other divisions within the Central Finance