Auditors slam poor oversight of cohesion spending by Commission, member states

Auditors slam poor oversight of cohesion spending by Commission, member states

The EU's control system over more than a third of its budget has failed in recent years to significantly curb spending errors, auditors in Luxembourg said in a report published today (8 July) – meaning that cohesion money is not being spent according to the EU and national rules.

“We see that the Commission's and member states system checks are not robust enough,” Helga Berger, the lead auditor, told Euronews.

In the 2014-2020 budget cycle, the overall error rate in cohesion spending fell from 6% to 4.8% - an improvement, but still well above the 2% threshold.

"The system should prevent errors, but if errors happen, the system should help to detect and correct them," Berger noted, indicating substantial room for improvement in cohesion policy.

There are three levels of control over EU cohesion funds. First, cohesion spending is checked by the national managing authorities, then by the member states' audit authorities, and thirdly by the Commission, which is ultimately responsible for implementing the EU budget.

Despite these layers of oversight, the ECA's external auditors found 171 additional cases of errors, 170 of which could have been prevented by the audit authorities.

Spain, Germany, and Portugal were found to have a disproportionate number of errors relative to the funds received.

"We consider that these three member states in particular need to strengthen the detection capacity of their audit authorities, supported by the Commission," the report stated.

The EU auditors identified three root causes of irregularities in cohesion spending: inadequate management by member states, negligence or suspected deliberate non-compliance by beneficiaries, and problems with the interpretation of the rules.

"Managing authorities are very decisive here," Berger stressed. If these authorities fail to identify problems, subsequent checks depend on the effectiveness of the previous ones.

The auditors estimated that national managing authorities could have prevented more than a third of the errors found between 2017 and 2022.

EU Commission has work to do, say auditors

While campaigning for a second mandate, Commission president Ursula von der Leyen pledged to simplify the EU budget, eliminate redundancies, and enhance efficiency. She even hinted at the possibility of linking the hundreds of billions of cohesion funds to economic reforms.

However, the EU auditors cautioned that the Commission must improve its tools for detecting, preventing, and correcting errors in cohesion spending (which currently amounts to €392bn) to make these funds more effective.

For example, the auditors recommend providing clearer guidance to member states, simplifying the rules, and conducting more compliance checks.

"The Commission is currently focusing on a lot of desk audits," Berger said, noting that these are insufficient for detecting erroneous spending.

Berger emphasized the need for more compliance audits, as they offer greater value but are currently limited in number.

“Both the Commission and the member states should work hand in hand with all players in the field to improve the system,” the lead auditor concluded.

The EU executive does not have to give an official response to the review, as it does with its audit reports - but the auditors claim that despite some disagreement over the robustness of the control system, the Commission agrees that the error rate is above the 2% threshold.