EUROSAI. Magazine N21 - 2015

EUROPEAN ORGANISATION OF SUPREME AUDIT INSTITUTIONS Information on EU 42 www.eurosai.org · N.º 21 - 2015 Beneficiaries of EAGF direct support and of EARDF area- related support have a legal obligation to fulfil cross- compliance requirements. These requirements relate to the protection of the environment, public health, animal and plant health, animal welfare and to the maintenance of agricultural land in good agricultural and environmental condition. The cross-compliance errors had an impact of 0.7 percentage points on the estimated level of error. In rural development, environment, climate action and fisheries, the ECA found errors in all 18 Member States audited. The main reasons for errors in this spending area were ineligibility of the beneficiary, activity, project and/ or expenditure, or non-compliance with agri-environment commitments to use agricultural production methods compatible with protection of the environment, landscape and natural resources. In some cases of quantifiable errors made by final beneficiaries, national authorities had sufficient information to prevent, or detect and correct the errors before declaring the expenditure to the Commission. If all information had been used to correct errors, the estimated level of error for this spending area would have been 3.3 percentage points lower. In addition, the ECA detected a few cases of errors made by the national authorities. These contributed 0.6 percentage points to the estimated level of error. The spending area of Global Europe (€7.4 billion) covers expenditure in the fields of foreign policy, support to EU candidate and potential candidate countries, as well as development assistance and humanitarian aid to developing and neighbouring countries (with the exception of the European Development Funds). The estimated level of error was 2.7 %. The majority of errors involve ineligible expenditure claimed by final beneficiaries, particularly expenditure incurred outside the eligibility period, inclusion of ineligible taxes, non- compliance with the rule of origin, and indirect costs wrongly charged as direct costs. The European Development Funds (EDFs) (€3.1 billion) provide European Union assistance for development cooperation to the African, Caribbean and Pacific (ACP) states and overseas countries and territories (OCTs). EDF spending and cooperation instruments aim to overcome poverty, and to promote sustainable development and the integration of ACP countries and OCTs in the world economy. As for the reliability of the EDFs account, the ECA concluded that the 2014 accounts present fairly the financial position of the EDFs, the results of their operations, their cash flows and the changes in net assets. However, payments of the EDFs were affected by material error, with an estimated level of error of 3.8 %. As in previous years, the errors found point to weakness in the ex-ante checks. Errors relating to non-compliance with procurement rules and the absence of supporting documents to justify expenditure were the cause of nearly two thirds of the estimated level of error. Conclusion In conclusion, the ECA signed off the 2014 accounts of the European Union, but calls for a wholly new approach to the management of EU investment and spending. Major changes are required by all those responsible for the way EU funds are managed. EU decision-makers must align the budget better with the EU’s long-term strategic priorities and make it more responsive in a crisis. EU legislators need to ensure spending schemes are clear about the results to be achieved and the risks it is acceptable to take. Financial managers have to ensure that the money spent complies with the rules and achieves the intended results. The upcoming mid-term review of the 2014-2020 multiannual financial framework is a key point in the management of EU spending. It is important that the Commission analyses the areas of persistently high levels of error as soon as possible and assesses opportunities for reducing this while strengthening the focus on performance in spending. Also, amounts to be paid in the current and future years remain at a very high level. It is essential for the Commission to take measures to deal with this persistent problem. For some Member States the backlog of unused funds represents a significant share of overall government spending. The periods of the 10-year Europe 2020 strategy and the EU’s 7-year budgetary cycles (2007-2013 and 2014-2020) are not aligned. Member States give inadequate attention to Europe 2020 achievements in partnership agreements and programmes. Both issues limit the Commission’s ability to monitor and report on performance and the contribution of the EU budget to Europe 2020. The ECA’s annual reports on the implementation of the 2014 EU budget and European Development Funds can be found on http://www.eca.europa.eu .