Last week the UK newspaper The Times of London reported that President Donald Trump handed the German chancellor Angela Merkel a bill for $350 billion, purportedly to cover what her country “owed” NATO. Both the Trump administration and the German government denied it happened.

Does Germany—or any other NATO member—“owe” NATO billions of dollars? Here’s what you should know about how NATO is funded.

What is NATO?

The North Atlantic Treaty Organization (NATO) is a political and military security pact that was started in 1948. The stated purpose of NATO is “to safeguard the freedom and security of its members through political and military means.”

How many countries are in NATO?

There are currently 28 member nations (the date is parentheses is the year they joined): Albania (2009), Belgium (1949), Bulgaria (2004), Canada (1949), Croatia (2009), Czech Republic (1999), Denmark (1949), Estonia (2004), France (1949), Germany (1955), Greece (1952), Hungary (1999), Iceland (1949), Italy (1949), Latvia (2004), Lithuania (2004), Luxembourg (1949), Netherlands (1949), Norway (1949), Poland (1999), Portugal (1949), Romania (2004), Slovakia (2004), Slovenia (2004), Spain (1982), Turkey (1952), the United Kingdom (1949), and the United States (1949).

NATO membership is open to “any other European state in a position to further the principles of this Treaty and to contribute to the security of the North Atlantic area.”

What is NATO’s budget?

NATO’s civil budget provides funds for personnel expenses, operating costs, and capital and program expenditure of the International Staff at NATO Headquarters.

The civil budget for 2017 is $252.3 million (€ 234.4 million).

NATO’s military budget covers the operating and maintenance costs of the NATO Command Structure. The military budget for 2017 is $1.39 billion (€ 1.29 billion).

Do other countries “owe” the United States for NATO expenses?

No. Member nations fund NATO based on an agreed upon formula (see below).

How is NATO funded?

NATO has two sources of funding, direct and indirect. The largest type are indirect contributions, which come, for instance, when a member nation volunteers equipment or troops to a military operation and pays the cost out of their own national budget. Direct contributions are made to finance requirements of the Alliance that serve the interests of all members.

According to NATO, costs are borne collectively, often using the principle of common funding. Within the principle of common funding, all 28 members contribute according to an agreed cost-share formula, based on Gross National Income, which represents a small percentage of each member’s defense budget.

What is the “agreed cost-share formula”?

Member countries contribute to NATO in accordance with an agreed cost-sharing formula based on Gross National Income. Currently, the formula for common-funded budgets and programs within NATO is:

How much does the United States pay to NATO?

The budgeted amount from the Department of Defense for direct NATO funding is $416.6 million. (About 25 percent of the total NATO budget.)

Aren’t member nations required to spend 2 percent of their budgets on NATO?

No. In 2006, NATO member countries agreed to commit a minimum of two percent of their Gross Domestic Product (GDP) in spending on defense. However, that is for total defense spending—not direct NATO contributions. Alliance member have until 2024 to reach that goal.

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Joe Carter is an adjunct professor of journalism at Patrick Henry College, an editor for several organizations, and the author of the NIV Lifehacks Bible.

Feature Photo Credit: The NATO flag is raised during the Opening Ceremony for Ex STEADFAST JAZZ at the Drawsko Pomorskie Training Area, Poland, on Nov. 3, 2013. Exercise Steadfast Jazz 2013 took place in a number of Alliance nations including the Baltic States and Poland. The purpose of the exercise was to train and test the NATO Response Force, multinational force made up of land, air, maritime, and special forces components that the Alliance can deploy quickly wherever needed. (NATO photo/SSgt Ian Houlding GBR Army)