EU crisis: Brussels warned by European Court of Auditors over ‘pervasive’ funding errors

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The annual report found payments provided through entitlements and direct payments – such as the Common Agricultural Policy subsidies – had a low rate of error. But payments made as reimbursements had a much higher rate – for example, in the area of competitiveness, including funding to start-ups and small and medium-sized businesses, there was an error rate of four percent. The error rate in cohesion funding, which is aimed at flattening out economic disparities between the various EU member states, was estimated at 4.4 percent.

Much of the funding assessed was deemed to be at high risk for error, leading the European Court of Auditors to consider this rate of error to be “pervasive”.

The auditing body said its annual report for the 2019 financial year has signed off the EU accounts as giving “a true and fair view” of the bloc’s financial position.

But auditors also found that “payments were affected by too many errors, mainly in the category classified as ‘high risk expenditure’”.

The findings come as the EU prepares to pump €750billion into Europe’s economies to repair some of the damage inflicted by the coronavirus pandemic.

The report said: “In the European Court of Auditors’ annual report for the 2019 financial year, published today, the auditors sign off the EU accounts as giving “a true and fair view” of the EU’s financial position.

“At the same time, they conclude that payments were affected by too many errors, mainly in the category classified as ‘high risk expenditure’.

“Against this background, and despite improvements in certain spending areas, the auditors issue an adverse opinion on expenditure.

“They also take the opportunity to stress the need for robust and efficient management of the financial package that was agreed in response to the coronavirus crisis, which will almost double EU spending in the next few years.”

Auditors found the overall level of irregularities in EU spending last year remained relatively stable at 2.7 percent, a slight increase from 2.6 percent the year before.

But while there have been positive elements in EU spending, “high-risk expenditure in 2019 represents more than half of the audited spending (53 %), an increase on 2018”.

The report said: “The overall level of irregularities in EU spending has remained relatively stable, at 2.7 percent in 2019, compared with 2.6 percent in 2018.

“There are also positive elements in EU spending, such as the development in natural resources and sustained results in administration.

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“However, due to the way the EU budget is composed and evolves over time, high-risk expenditure in 2019 represents more than half of the audited spending (53 percent), an increase on 2018.

“This mainly concerns reimbursement-based payments, for instance in the fields of cohesion and rural development, where EU spending is managed by Member States.

“High-risk expenditure is often subject to complex rules and eligibility criteria. In this category, material error continues to be present at an estimated rate of 4.9 percent (2018: 4.5 percent).

“Concluding that the level of error is pervasive, the auditors have therefore given an adverse opinion on EU expenditure.”

ECA President Klaus-Heiner Lehne said alongside the report: “Our adverse opinion on EU spending for the year 2019 is a reminder that we need clear and simple rules for all EU finances – and we also need effective checks on how the money is spent and whether the intended results are achieved.

“This is particularly important in view of the planned recovery fund to combat the effects of the COVID-19 pandemic.

“In these times of crisis, the European Commission and the Member States have a tremendous responsibility for managing the EU’s finances in a sound and efficient way.”

In response, the European Commission said it “welcomed the decision of the European Court of Auditors (ECA) to give the EU annual accounts a clean bill of health for the 13th year in a row, finding them true and fair”.

The Commission added it “welcomes the Court`s assessment of the EU budget in several key policy areas”, such as in the field of cohesion and natural resources, which also includes agriculture, where the “budget was spent in a more correct way than in the previous year”.

In a statement the Commission continued: “In 2019, 55 percent of the audited expenditure was represented by natural resources and administrative expenditure. In these areas, the estimated level of error identified by the Court was even below the ECA’s materiality level.

“This is the level above which auditors would conclude that spending is affected by a significant level of error. Overall, the level of error estimated by the Court on EU expenditure remains stable compared to last year.

Johannes Hahn, Commissioner for Budget and Administration, said: “The European Commission upholds the highest standards of transparency and accountability and is committed to ensure that every cent is spent in line with the rules and legal provisions.

“The Commission also continues to uphold the highest standards with regard to performance by constantly assessing and verifying whether programmes are on track to achieve their objectives and continue to be in line with political priorities.

“The comprehensive approach and methodology followed by the European Commission and the implementing partners in Member States according to the principle of shared management allow us to be confident in our management and control systems and in the effectiveness of the implementation of our spending programmes.

“Finally, it is about the protection of taxpayers’ money.

“We will continue to improve our risk-based approach, incorporating into our multiannual framework the recommendations by ECA while seeking to maintain the delicate balance between controls, administrative burden, costs, simplification and efficiency.”

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