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04/12/2016

Court of auditors warns of multi-billion EU budget gap

EU Priorities 2020

Court of auditors warns of multi-billion EU budget gap

The European Court of Auditors in Luxembourg. [European Commission]

Member states will be required to contribute a further €326 billion to the 2014-2020 EU budget. This may affect the Commission’s ability to meet all the requests for payments, and of countries to pay their dues, the European Court of Auditors (ECA) warned.

The ECA published today (25 November) an unprecedented 100-page report, highlighting the many deficiencies in the use of EU finances.

The Commission welcomed the report, but also said that with such communications, the ECA may be bypassing its role.

The so-called ‘Landscape review’ is a new product of the ECA. A first review addressed issues of EU accountability and public audit arrangement. This second Landscape review examines risks to the financial management of the EU budget.

One of the issues highlighted in the report is that in the period 2014-2020, member states will be required to contribute 1.234 billion to cover disbursements of commitments. This amount consists of €908 billion agreed for 2014-2020 in payments, and an additional €326 billion, being disbursements committed under at least two previous budgeting periods.

“Assuming that commitments will not be de-committed, and we don’t see how most of them could, it might be problematic to get this money from member states to finance the expenditure foreseen,” said Dr. Igor Ludboržs, ECA member responsible for the review, speaking to a small group of journalists.

‘The commitments are there, the money is not’

As he explained, the commitments were a legal obligation and member states will be “requested one day to pay”. “The commitments are there, the money is not there,” he said.

Asked by EurActiv to clarify the mentioned “de-commitment”, Ludboržs explained that the member countries had the obligation to pay, but it was not clear if the given moment they would have the ability to disburse the money.

He explained that this was why the Commission was asking member states to present their infrastructure projects in the first half of the year – because in the second half there would be no money.

Asked what was to be expected, when member states were bickering over €4.7 billion for the amending budget for 2014, Ludboržs said, “We don’t see (a) happy ending. The amounts are getting bigger and bigger,” referring to the accumulating disbursements for commitments for previous budget periods.

Asked to comment on the ECA report, the Commission first tried to play down its importance, but later said the ECA was going “beyond its classical role”.

‘No need to worry about big numbers’

Commission spokesperson Jakub Adamowicz said the EU executive had noted the ECA report with “certain interest” and that although it “did not reveal any new findings”, it was “good food for thought”.

He further said the Commission shared the spirit of the report, but found it unclear how ECA arrived at the figure of €326 billion, while the Commission had retained the figure of €322 billion based on data from ECA itself.

Adamowicz said that de-commitment was possible when the Commission standards in project management were not met. “We very much live by this concept,” he said.

Regarding the €4.7 billion amending budget compared to the €326 or €322 billion of commitments under previous budget periods, he said that it may sound a big number, but was just a “projection of payments in the future”. “There is no need to worry about this huge number”, he said.

‘What goes wrong and why?’

In a chapter called “What goes wrong and why”, the ECA explains at length the various problems identified with EU budget expenditure.

One of the issues Ludboržs raised was that due to the austerity measures introduced following the Eurozone crisis, some of the member states would be unable to pay their share for projects to be co-financed.

Ludboržs also warned that from now on, countries would end up losing money if they put forward bad projects.

All actors dealing with the EU budget, say the EU auditors, should focus on obtaining results and added EU value, and not for activities that would be carried out anyhow by the member states (“deadweight”) in ECA jargon.

As Ludboržs explained, throughout the 2007 to 2013 spending period, the priority was given to spending the money – ‘use it or lose it’ – rather than to achieving good results. For instance, the choice of projects to receive EU funds focused first on disbursing the EU money available, secondly on complying with the rules, and only then – and to a limited extent – on results and impact.

The situation was likely to change in the current 2014-2020 budgeting period, and countries presenting “bad” projects were risking losing the money allocated to them.

The report doesn’t “name and shame” any countries, but highlights the problems related to the co-management of EU spending with 28 national administrations, some with weak administrative capacity. This increases the risk of errors and of poor quality spending. Many of the errors found by the auditors relate to poor application of procurement and accountancy rules, either deliberately or because the rules are not well understood.

Another issue highlighted in the report is that member states often unnecessarily add their own national requirements when businesses or citizens apply for EU grants and subsidies. 

Timeline

  • 2016: Mid-term budget review is expected to address all the shortcomings with the 2014-2020 EU budget

Further Reading