EUROSAI 68 Information on EU Concerning the significant areas of EU spending1 for which the ECA provides a specific assessment, the level of error was material for ‘Cohesion’ and ‘Competiveness’. For ‘Natural resources’, the estimated level of error was close to materiality (2.0 %). The level of error was below materiality in ‘Administration’. Error rates reflect the level of risk In 2020, the ECA found once again that the way expenditure was disbursed had an impact on the risk of error. EU spending is characterised by two types of expenditure involving distinct patterns of risk. The risk of error is lower for entitlement payments, which are based on beneficiaries meeting certain (less complex) conditions: these include student and research fellowships (under ‘Competitiveness’), direct aid for farmers (‘Natural resources’) and salaries and pensions for EU staff (‘Administration’). The risk of error is high for cost reimbursements, where the EU reimburses eligible costs for eligible activities (involving more complex rules): these include research projects (under ‘Competitiveness), investment in regional and rural development (‘Cohesion’ and ‘Natural resources’) and development aid projects (‘Global Europe’). The most common errors in high-risk expenditure were: - ineligible projects and expenditure, as well as infringements of internal market rules (in particular non-compliance with state aid rules) in ‘Cohesion’; - ineligible costs, administrative errors and absence of essential supporting documents in the rural development, market measures, environment, climate action and fisheries spending area (altogether around 31 % of total spending in ‘Natural resources’); - ineligible costs, in particular direct personnel and direct other costs, in research spending (around 57 % of total spending in ‘Competitiveness’); and - absence of supporting documents, non-compliance with public procurement rules as well as costs not incurred and ineligible costs in the spending area of ‘Global Europe’. In 2020, high-risk expenditure further increased compared to the previous four years and clearly made 1 In the annual report the ECA presents the results of its audit of the legality and regularity of transactions, and the review of the regularity information provided by the Commission for the main headings of the 2014-2020 MFF: ‘Competiveness’, ‘Cohesion’, ‘Natural resources’, ‘Security and citizenship’, ‘Global Europe’ and ‘Administration’. up the majority of the audit population, accounting for around 59 % of it (2019: 53 %). The increased share taken by this expenditure type was mainly due to a further €20 billion increase in the ‘Cohesion’ audit population. The estimated level of error for high-risk expenditure was 4.0 % (2019: 4.9 %). Low-risk expenditure accounted for the remaining 41 % of the audit population (2019: 47 %) and mainly included entitlement payments. The estimated level of error in this part of the population was below the materiality threshold of 2 %. Comparing the error level estimates with those of the Commission The ECA compared its error level estimates with those of the Commission. The annual management and performance report, for which the college of Commissioners has ownership and is responsible, summarises key information from the annual activity reports on internal control and financial management. It includes the risk at payment, which is the Commission’s estimate of the amount that is paid without being in accordance with the applicable rules. Overall, the Commission’s estimate of the risk at payment for 2020 was 1.9 %, below the ECA’s materiality threshold (2.0 %) and estimated level of error (2.7 %). In addition, the annual activity report of each Commission directorate-general (DG) includes a declaration in which the director-general provides assurance that the report presents financial information properly and that the transactions under their responsibility are legal and regular. For this purpose, all DGs provided estimates of the risk at payment in their spending. The ECA considered that, as reported last year, issues still exist concerning ex post audits by the Commission’s Common Audit Service (‘Competiveness’), Member States’ controls reflected in their control statistics (‘Natural resources’), checks by Member State audit authorities (‘Cohesion’), and the annually commissioned residual error rate study (‘Global Europe’). These issues affect the Commission’s estimation of the risk at payment for 2020, which is lower than the ECA’s estimated levels of error for ‘Competitiveness’, ‘Cohesion’ and ‘Natural resources’.
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