In the European Court of Auditors’ annual report for the 2019 financial year, published today, the auditors sign off the EU accounts as giving “a true and fair view” of the EU’s financial position. At the same time, they conclude that payments were affected by too many errors, mainly in the category classified as ‘high risk expenditure’. Against this background, and despite improvements in certain spending areas, the auditors issue an adverse opinion on expenditure. They also take the opportunity to stress the need for robust and efficient management of the financial package that was agreed in response to the coronavirus crisis, which will almost double EU spending in the next few years.
The overall level of irregularities in EU spending has remained relatively stable, at 2.7 % in 2019, compared with 2.6% in 2018. There are also positive elements in EU spending, such as the development in natural resources and sustained results in administration. However, due to the way the EU budget is composed and evolves over time, high-risk expenditure in 2019 represents more than half of the audited spending (53 %), an increase on 2018. This mainly concerns reimbursement-based payments, for instance in the fields of cohesion and rural development, where EU spending is managed by Member States. High-risk expenditure is often subject to complex rules and eligibility criteria. In this category, material error continues to be present at an estimated rate of 4.9 % (2018: 4.5 %). Concluding that the level of error is pervasive, the auditors have therefore given an adverse opinion on EU expenditure.
The auditors take the opportunity to look ahead. In July 2020, the European Council reached a political agreement combining an EU budget for 2021-2027 with a temporary recovery instrument ‘Next Generation EU’, addressing the economic and social impacts of the COVID-19 crisis. As a result, in the next few years EU spending will be significantly higher.
Our adverse opinion on EU spending for the year 2019 is a reminder that we need clear and simple rules for all EU finances – and we also need effective checks on how the money is spent and whether the intended results are achieved. This is particularly important in view of the planned recovery fund to combat the effects of the COVID-19 pandemic. In these times of crisis, the European Commission and the Member States have a tremendous responsibility for managing the EU’s finances in a sound and efficient way.
In the meantime, Member States’ absorption of the European Structural and Investment (ESI) funds has continued to be slower than planned. Up to the end of 2019, the penultimate year of the current seven-year budget, only 40 % (€184 billion) of the agreed EU funding for the 2014-2020 period had been paid out, and some Member States had used less than a third. This has served to inflate outstanding commitments, which reached €298 billion by the end of 2019, the equivalent of almost two annual budgets. The situation has brought additional challenges and risks owing for the need for the European Commission and Member States to allow additional time for absorption in the new budgetary period.