Brussels, 25/11/2014 (Agence Europe) - In its “landscape review” of risks to the financial management of the EU budget, published on Tuesday 25 November, the European Court of Auditors identifies key issues for good financial management of the EU's finances. All players dealing with the EU budget, say the EU auditors, should focus on obtaining results and EU added value, while ensuring that EU money is properly accounted for and spent as intended.
The Court says that the start of the new financial framework in 2014, the introduction of related implementing legislation and the new financial regulation, together with the Commission's commitment to ensuring that the budget is more performance-oriented, “all provide opportunities for simplifying and improving the financial management of the EU budget”.
Eligibility rules. The rules for paying out the money from the EU budget and the conditions for receiving it are set out in legislation and are often complemented by other eligibility criteria and conditions set by those managing EU funds in the member states. These additional requirements may be “unnecessary”, and impose an administrative burden, the Court states. It says control systems at various levels may not be sufficient to check compliance with all the conditions. Complex eligibility rules and other conditions can lead to “poor targeting of EU funds and sub-optimal use of the EU budget: potential beneficiaries may be put off from applying for support from the EU budget”. The Court also takes the view that, in some budget areas there are too many layers of rules.
Application of public procurement rules and procedures. The results of the Court's audit work shows that “many of the errors found by the Court relate to the poor application of procurement rules and procedures. This may occur deliberately, in order to favour some suppliers over others, or inadvertently because the rules are not well understood”.
Capacity of member states' authorities to manage and spend EU monies. EU funds are spent via 28 national administrations and many regional and local authorities with “unequal” administrative capacity (skills and resources). This, the Court says, increases the risk of errors occurring, as well as the risk of poor quality spending. It may also slow down the implementation of EU-funded activities and projects, affect the quality of regulatory activities and hamper the exchange of information between the Commission and member states.
Coordination of EU and national budgets. Many activities and projects are financed from both the EU and national budgets (“co-financed expenditure”), on condition that both the EU budget and national budget are available. Austerity measures in member states may result in national funds being significantly reduced or not being available at all to carry out the actions, the report says. Because there is so much emphasis on spending the EU budget (“the input-orientated approach”), those managing the activities and projects often focus on compliance with the conditions for getting and using the money, regardless of the results achieved, it is regretted.
Impact of annual EU budgets on activities and cash flow management. Member states' authorities, other intermediaries and beneficiaries may receive cash advances (“pre-financing”) to start up their activities. Unnecessarily long periods of pre-financing can increase the possibility of error and loss, and make it especially difficult to re-orientate activities to achieve objectives, according to the Court.
Member states will be required to contribute €1,234 billion in the future to cover disbursements of commitments. This amount consists of €908 billion agreed for the multi-annual financial framework (MFF) 2014-20 (payments), and an additional €326 billion, being disbursements for commitments under previous MFFs “which may affect the Commission's ability to meet all requests for payments in the year in which the requests are made”, the Court states in its report.
Benefits from spending from the EU budget. The Court says that, in some cases, the EU budget may do no more than simply increase total funds available, “without adding a particular EU dimension”; EU funds may be used for activities that would have been carried out by the Member States and other beneficiaries anyway (“deadweight”); or these funds may be insufficient to achieve the intended outcomes.
Expenditure not chargeable to the EU budget, and audits. The Court says that the Commission cannot directly and systematically check all parts of the EU budget spent by member states, other countries, international organisations, nor the expenditure declared by beneficiaries. It relies on independent auditors. However, the certification of expenditure by independent auditors may be affected by the quality and timeliness of their work, or their independence. (LC)