The European Court of Auditors (ECA) published its annual reports on the EU 2023 budget on Thursday 10 October. For the fifth year in a row, the Court of Auditors has issued an unfavourable opinion on EU budget spending and a “qualified” opinion on the Recovery and Resilience Facility (RRF). It also points to the increase in the EU’s debt, which is twice as high as it was in 2021, largely as a result of the loan taken out for Next Generation EU (NGEU).
Budget expenditure. The estimated level of error on expenditure financed by the EU budget (to the tune of €191 billion) in 2023 was “significant”, according to the Court of Auditors: 5.6%, compared with 4.2% in 2022 and 3.0% in 2021. The Court of Auditors attributes this increase in particular to errors detected in Cohesion expenditure (9.3% of errors detected compared with 6.4% in 2022, an increase of 45% compared with the previous financial year), which is the largest policy area in the EU budget, accounting for 38.4% of the EU’s audited expenditure. These errors could be due to pressure on national administrations “to spend money from competing EU funds”, as is the case “during the closure periods of the Multiannual Financial Frameworks”, explained the President of the Court of Auditors, Tony Murphy.
Reservations about the Recovery and Resilience Facility. The RRF, which aimed to mitigate the economic impact of the Covid-19 pandemic, resulted in 23 grant payments to 17 Member States in 2023, the third year of its implementation. In a third of these payments, the applicable rules and conditions were not complied with, six of which showed a significant level of error, according to the auditors. To trigger a payment request under the RRF, milestones and targets must be satisfactorily met, the Court of Auditors pointed out. 16 of the 542 milestones (and 135 targets) linked to RRF payments did not comply with payment or eligibility conditions, the report details. They concern seven payments in seven Member States. The report points to weaknesses in Member States’ control and reporting systems, and some milestones/targets were poorly defined, according to the auditors.
Debt pressure. “EU debt jumped”, noted the Court of Auditors, reaching €543 billion in 2023, compared with €452.8 billion the previous year. In particular, the NGEU has resulted in borrowings of €268.4 billion. The auditors point out that there is still uncertainty about the EU’s ability to repay the NGEU’s debt using new own resources. Inflation and EU aid to Ukraine are also putting pressure on the EU budget, while new financial needs will arise with enlargement and new priorities for the EU’s future, such as security and defence.
European Commission recalls the context of the crises. In response to the ECA’s report, the European Commission began by congratulating itself on receiving a clean bill of health for the seventeenth year running on the revenue side of the 2023 budget.
On the level of error estimated by the ECA, the Commission clarified that it did not concern fraud, inefficiency or waste, but “administrative irregularities which have no impact on the final outcome of a project”. With regard to the errors singled out under the RRF, the Commission insisted that 96.5% of the stages and objectives had been approved.
Committed to simplifying the spending rules and improving the clarity of any milestones or targets under review, the Commission said in particular that it was already implementing a previous ECA audit recommendation. With regard to the lack of “reliability” in Member States’ management declarations relating to RRF payment claims, the Commission adds that it has “itself” already requested clarifications and improvements in the future.
Nevertheless, of the sixteen errors highlighted by the ECA relating to the RRF, the European Commission refers in nine cases to differences in interpretation of the rules between the two institutions on “eligibility conditions”: for the ECA, a measure starts when it is legally committed, whereas the Commission puts the starting point at the date on which the costs are first incurred. According to this scheme, the ECA says that reforms were financed thanks to the RRF, even though they had been launched before the mechanism began. (Original version in French by Florent Servia)