Audit report shows errors in 'all main spending areas' of EU budget
The error rate on EU budget spending was almost 5% in 2012, according to the annual report by the European Court of Auditors, published on Tuesday (5 November).
The European Court of Auditors (ECA) presented its annual report to the European Parliament’s budgetary control committee on Tuesday (5 November). The report discussed the audit of the EU’s budget for 2012.
While the court of auditors signed off on projects funded by the EU budget, they reported that errors occurred too frequently and in too many areas. The rate of error in spending the budget was 4.8% for 2012, up from 3.9% in 2011.
Most common errors included “payments for beneficiaries or projects that were ineligible” or purchases of services, goods or investments “without proper application of public purchasing rules,” the auditors said.
Most errors occurred in spending the rural development fund, the report shows. This part of the budget, worth €15 billion in total, has an error rate of 7.9%. The budget allocated to regional policy, energy and transport accounts for some €40.7 billion, of which 6.8% contained errors in its expenditure.
‘Rethink the spending framework’
The auditors called for the EU to rethink the way it spends the budget across the 28 member states. Currently, the funding is allocated to member states, which are responsible for spending it according to set rules.
But the budget's legislative framework is too complex, the ECA said in its presentation. EU countries also have little incentive to spend their part of the EU budget correctly. The auditors called for a simplification of the rules, focused on the value the EU funds are intended to bring.
“[These errors] persist because the frameworks in place are not the right incentives to avoid them or are not being effectively applied. There is not sufficient attention being paid to the quality of expenditure,” said ECA President Vitor Caldeira in a video statement.
Algirdas Šemeta, the commissioner responsible for auditing, said that "breaches of national rules account for significant part of the error rate,” citing poor reliability of national checks and overcomplicated systems as the main sources of errors.
Naming and shaming
Although the European Commission carries the final responsibility for how EU money is spent, member states have significant room for manoeuver on allocating funds, and carry a shared responsibility for the monitoring of such spending.
MEPs were divided over who was to blame for the errors.
Michael Theurer of the liberal ALDE group said “the member states are chiefly to blame for the majority of the errors and not the European Commission”. Philip Bradbourn, from the European Conservatives and Reformists (ECR) group, said that “the EU must accept ultimate responsibility for what happens to the money it dishes out.”
In 2012, the EU budget was €138.6 billion. Up to 80% of the budget is jointly managed by the EU member states and the Commission.
The European Parliament and the EU Council are currently entangled in a dispute over the budget for 2014. The European Parliament still has to hold a final vote on the long-term budget for 2014-2020, the multi-annual financial framework, on which a deal was struck over the summer.
Errors in the administration of the EU money are not rare, leading the European Court of Auditors to reject EU accounts many times in the past.
Most frequent errors occur in areas jointly administered by the European Commission and the member states, such as regional aid funding and the Common Agricultural Policy (CAP).
A 2007 report by the European Court of Auditors found that 12% of regional aid was not properly accounted for and listed a surprising list of “new beneficiaries” of EU agricultural aid – railway companies, horse riding and breeding clubs, golf and leisure clubs and city councils.
Michael Theurer, a German Liberal (ALDE) MEP who chairs the Parliament's budgetary control committee, said: "It is clear from the report that the member states are chiefly to blame for the majority of the errors and not the European Commission. We should be much clearer about pinpointing those responsible and holding them to account. Otherwise, the impression that money is being wasted at the European level will persist when it is actually up to the member states to take more seriously the good management of EU funds.”
German MEP Inge Gräßle, spokeswoman on budgetary control for the centre-right European People's Party (EPP), commented: “The third consecutive increase in error rates reveals that administrative authorities in Member States increasingly abandon working legally. If we do not act now and solve this problem, there will be a giant bill for each member state".
Conservative MEP and former European Commission Chief Accountant Marta Andreasen said: "Despite pressure from the European Council, the way the EU makes payments from its budget is getting steadily worse not better. This should send alarm bells ringing across member states’ governments. However, I fear there is a business as usual mentality, where ‘irregularities’ are tolerated despite the huge amounts of money involved. This mentality is not helped by the terminology used by the auditors, who refer to the payments being ‘underperforming’ – an insult to the taxpayers.”
Philip Bradbourn, spokesperson on budgetary control for the European Conservatives and Reformists (ECR), said: "I understand full well that much of the misspending occurs when member states fail to exercise proper supervision of spending within their borders, but the fact is that the EU must accept ultimate responsibility for what happens to the money it dishes out. Every year we are told the Commission is serious about tackling the problem. Every year it gets still worse. It is shameful to the EU's integrity and unacceptable to its taxpayers."
- April 2014: European Parliament to vote on the 2012 budget in a plenary session