EU auditors see an increase - from 2.7% to 3% - in the overall level of error in spending financed by the EU budget in 2021, according to the Court of Auditors’ annual report, published on Thursday 13 October.
The auditors pointed to risks related to the funds released by the EU in response to the coronavirus crisis and Russia’s war against Ukraine. The report includes a separate opinion on the ‘Recovery and Resilience Facility’ (RRF), the EU’s temporary post-Covid-19 economic recovery instrument.
Unfavourable opinion on EU budgetary expenditure. As in the previous two years, the auditors concluded that the errors for high-risk expenditure were widespread and therefore issued an adverse opinion on EU expenditure for 2021.
“We estimate the error level to be between 2.2 and 3.8%. The mid-point of this range, formerly known as the ‘most probable error’, has increased from 2.7 to 3.0% compared to the previous year”, explains the Court of Auditors’ report.
In 2021, high-risk expenditure increased again compared to previous years and accounted for almost two-thirds (63.2%) of controlled expenditure (in 2020, this percentage was 59%).
“Material error continues to affect high-risk expenditure, at an estimated rate of 4.7% (in 2020 it was 4.0%)”, the report states. “We are talking mainly about cohesion, but also about other European policies, including the Single Market, migration, security, neighbourhood and parts of natural resources”, Court of Auditors President Tony Murphy told the press on Wednesday 12 October.
Low-risk expenditure accounted for 36.8% of the expenditure examined (in 2020: 41%) and consisted mainly of rights-based payments. In this part of the expenditure, the estimated error level is below the 2% significance level.
Cohesion. The Court estimates the error level in this heading to be 3.6% (3.5% in 2020). The Court’s audits over the past five years “show that the work of national audit authorities does not yet sufficiently offset the high inherent risk of error in this area, which currently limits the confidence that can be placed in their work”, warned Tony Murphy.
Other sections. According to the Court of Auditors, the error level for the ‘natural resources’ heading is close to the materiality threshold, i.e. 1.8% in 2021 (2% in 2020).
For the ‘Single Market, innovation and digital’ heading, the Court found a significant increase in the level of error from 3.9% in 2020 to 4.4% in 2021. Research expenditure (mainly Horizon 2020) remains the main source of errors (especially ineligible costs such as personnel costs).
In the area of migration, borders, security and defence, “we found errors in almost a third of the operations we examined”, Murphy noted.
In the ‘neighbourhood and the world’ section, almost half (48%) of the transactions checked contained errors, according to the report. “We quantified 24 errors that had an impact on the amounts charged to the EU budget”, the report says.
Favourable opinion on the first RRF payment. In 2021, for the first time, the Court’s work covered the legality and regularity of expenditure under the RRF. The Court examined the single disbursement for 2021: a payment to Spain of €11.5 billion.
Overall, the evidence obtained by the Court indicates that one of the 52 milestones associated with the first Spanish payment request had not been fully met. This is the milestone on the “corporate tax reform, including the introduction of measures to ensure a minimum rate of 15% for taxpayers”, the President of the Court pointed out.
The Commission has not yet established a method for quantifying the impact of a missed milestone or target, regrets the Court, which is of the opinion that the error is however “not material”.
Outstanding commitments from the EU budget have decreased in 2021, mainly due to the delayed implementation of funds under shared management in the 2021-2027 MFF.
At the end of 2021, they amounted to €251.7 billion (in 2020, they were €303.2 billion). However, total outstanding liabilities (including €89.9 billion for Next Generation EU) reached a record high of €341.6 billion.
The Court criticises the clear differences that persist in Member States’ absorption of European structural and investment funds under the 2014-2020 Multiannual Financial Framework (MFF). While Ireland, Finland and Cyprus, for example, had claimed more than three quarters of their allocated funds, the three EU countries with the lowest absorption rates (Croatia, Slovakia and Malta) had used just over half of their committed amounts.
The auditors refer to the written notification sent by the Commission to Hungary in April 2022, which triggered the procedure that could lead to the imposition of measures against the country for breaches of the Rule of law. In its annual management and performance report (information on internal controls and financial management), the Commission “does not disclose how this notification may affect the regularity of expenditure in Hungary”, regret the auditors.
See the annual report of the Court of Auditors: https://aeur.eu/f/3lb (Original version in French by Lionel Changeur)