Cohesion funds absorption should not become an end in itself, EU Auditors say

The European Court of Auditors is an independent financial watchdog. [Transparency International/Flickr]

Delays in the formulation of legal frameworks and spending plans create severe obstacles to an effective use of Cohesion funding, shifting the focus on quick use of money rather than on performance and results, a new Court of Auditors report published Thursday (13 September) underlined.

For the Auditors, the European Commission needs to establish a multilateral approach, by monitoring absorption continuously, identifying the impact of the measures taken and focusing on actual results. The EU executive should also work closely with national authorities to ensure smooth implementation of projects during the programme period.

“It is crucial to avoid a situation where large amounts of money need to be used in a rush at the end of a programme period, because insufficient consideration may be given to value for money. Making use of the money becomes an end in itself, rather than a means of achieving policy objectives”, said Henri Grethen, ECA member responsible for the report.

Cohesion money is allocated to Member States for a seven-year spending period in annual budgetary allocations with a specified spending schedule. The report focused on the comparison between spending patterns from the 2007-2013 programme period within the Czech Republic, Hungary, Italy and Romania, and the 2000-2006 and 2014-2020 periods.

Confusion with early and late allocations of money

The report highlights that late adoption of the legal framework during the 2007-2013 and 2014-2020 periods resulted in a belated start of the operational programs. Most laws governing the 2007-2013 framework were not approved until twelve months into the programming period.

Another crucial issue identified is the overlapping of the programme periods. For the Member States, this led to spending money from the previous budget, even after the next programs had started.

The Auditors conclude that the Commission lacks “a comprehensive overview of all the measures used and the impact of each measure on absorption”, a deficiency which is largely blamed on their having insufficient information from Member States, while in some cases “(such as retrospective projects and contractual advances)” the legislative framework does not require Member States to report to the Commission.

Responding to the criticism, the Commission stated that the adoption of the legislative framework depends on the co-legislators. The Commission has already presented its proposal for the 2021-2027 budget period.

However, in its response, the Commission also underlines that “while early adoption is important in relation to starting programme implementation, there are also other factors in terms of performance and absorption over the period – the n+2/3 regime, the level of pre-financing or requirements in terms of designation have a higher effect”.

Furthermore, the Commission underlined that “programs approved relatively late compared to the average can still easily catch up depending on the circumstances and achieve better than average absorption levels by the end of the period. The n+2 rule enforces a stronger budgetary discipline and incentivizes faster budgetary implementation. A list of ready-to-implement projects is also an important success for programme performance and absorption”.

Late adoption of the Task Force

It was only in late- 2014 that the Task Force for Better Implementation (TFBI) was set up in order to provide assistance to Member States.

Its contribution, along with the measures taken by the Member States assisted significantly in spending, with payments reaching 97.2% of budgetary allocations by the start of 2018. However, the report mentions, by the end of 2017, €4.4 billion had not yet been used. The Commission is still in the process of closing the 2007-2013 period, and the total value of payments and unused funding is still to be determined.

The Commission said that it was “satisfied” with the results of the TFBI, specifying that “while absorption can always be improved, the Commission considers that the average rate of 97% is comparable to the earlier periods and is satisfied with this result. To be more precise, this level of absorption exceeds the rate recorded for the ERDF and ESF programmes for the 2000-2006 period (96%)”.

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