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09/12/2016

EU auditors push for more oversight and smarter spending

Euro & Finance

EU auditors push for more oversight and smarter spending

Vitor Caldeira [Left]. [Martin Schulz/Flickr]

Signing off on the 2013 accounts, the European Court of Auditors urged the European Commission to reorient spending towards results-oriented and added-value projects, and tighten controls.

At the beginning of a new budget period and a new institutional cycle, with a new team in place in the EU executive and in the Parliament, auditors stressed the need to use this momentum to change the way money is spent.

“Even if the worst of the financial and economic crisis may be behind us, the need to make best use of limited financial resources remain,” said Vitor Caldeira, president of the Court of Auditors (ECA), presenting the Court’s 2013 financial report today (5 November)

In the last budgetary period (2007-2013), project selection has focused first on the need to spend the EU money available – ‘use it or lose it’ – and then on compliance, in order to receive the funding, and third, and to a limited extent, on their expected performance, EU auditors insisted.

“This needs to change if performance is to improve significantly,” said Caldeira. “Compliance and performance should be given equal weight throughout the project cycle.”

The tension between the two is a fundamental flaw in the design of much of the EU budget, argue EU auditors.

In the past, the Parliament has asked for increased scrutiny of spending programmes, well aware that the crisis afflicting the EU today goes beyond the economy, and spreads to a deep legitimacy crisis in which financial accountability plays a prominent role.

The Court of Auditors has increased the number of performance reviews to 19 in 2013, covering a wide range of projects, but would need additional resources to investigate more projects. In its latest reports, overall, the auditors have been highly critical of performance of EU projects.

Sense of urgency

In their first meeting with Commissioner Kristalina Georgieva, in charge of Budget and Human Resources, MEPs urged Georgieva to make this shift. Managing expectations, Georgieva said there is a gap between the time objectives are set, and the achievement of results.

But she agreed that the EU had to walk on two legs. “We have to build up a performance culture and the ability to measure impact,” she added.

Georgieva said that performance can be assessed only after a few years from the start of the project.

The debate is even more relevant as the UK, the Netherlands and seven other member states have been asked for extra payments, to rebalance adjustments to gross national income and their contributions to EU budget.

Dutch MEP Gerben-Jan Gerbrandy complained that there was too much focus on small irregularities, when the bulk of the budget might have not brought any tangible results.

“I miss the sense of urgency,” he told the Commissioner.

Focusing more on performance might help avoid overlap and duplication between national and European programmes, said MEP Dennis de Jong.

EU auditors stressed indeed that the new Commission should work hand-in-hand with member states to improve the performance of the EU budget: Clear targets, good information on progress being made by funding programmes, but also effective financial incentive to reward good performance or sanction poor results.

“Results means financing airports that get used, and green projects that benefit the environment, and youth training programmes that lead to new jobs,” insisted Caldera.

Number crunching – Pointing the finger at member states

As for numbers, EU auditors signed off on the accounts, saying that the €150 billion EU budget has been spent, as payments totaled 99% of the money available to €148 billion. However, the court put its estimated “error rate” – a statistical measure of what was spent in breach of EU rules – at between 3.5% and 5.9% or an average of 4.7%, similar to 2012.

Even though the numbers are improving from the 6.9% of 2007, they are above levels seen in 2009-11 below 4%.

According to the Court, most errors occurred in spending areas where management is shared between the member states and the European Commission. The two areas where most errors occurred were in areas absorbing the bulk of EU spending: rural development, environment, fisheries and health where the estimated error averaged 6.7%.

The Court reported that the error rate could have been significantly reduced in these areas if national authorities, which “had the right information available to have corrected many of them before claiming reimbursement from the Commission.”

 

Background

The presentation of the annual report of the Eueopean Court of Auditors marks the formal launch of the “discharge” procedure, whereby Parliament assesses whether EU money is spent correctly. Errors are unintentional mistakes in administration, which should not be equated with fraud.

The 2013 procedure will conclude with a plenary vote in April 2015. The MEPs in charge of assessing spending by the various institutions are as follows:

  • Ingeborg Grässle (EPP, DE) - European Commission
  • Martina Dlabajová (ALDE, CZ) - European Development Fund
  • Gilles Pargneaux (S&D, FR) - European Parliament
  • Ryszard Czarnecki (ECR, PL) - European Council, Council, European External Action Service, Court of Justice, Court of Auditors, Economic and Social Committee, Committee of the Regions, European Ombudsman, European Data Protection Supervisor, agencies
  • Ryszard Czarnecki (ECR, PL) and Mr Anders Primdahl Vistisen (ECR, DK) - joint undertakings

Timeline

  • April 2015: Plenary vote on discharge of 2013 budget

Further Reading