EU financial watchdog airs concerns over way some EU funds spent

Written by Martin Banks on 8 October 2019 in News

Klaus-Heiner Lehne, President of the European Court of Auditors, said there had been improvements in the last year but "there continue to be some problems."

Photo credit: Fotolia

Speaking in Parliament on Tuesday, Lehne addressed members of the budget control committee after the Luxembourg-based court published its annual report earlier in the day.

This year’s report was “different” from past years, he told MEPs, because the EU was currently “at a watershed.”

He said that one EU member is leaving, the EU budget is being negotiated and the EU has just had elections.


Lehne told the committee that errors in EU spending had to be addressed as a “matter of urgency.”

He said the report looks at the “reliability” of EU funds, if they have been spent legally and gives a “clear picture” of how EU funds have been spent.

The Commission, he said, had taken “measures” to correct failings and that, for the third successive year the court had given a “positive declaration albeit with a few caveats.”

He said, “This is encouraging as it means the EU has identified those areas where improvement was needed.”

“Overall the audit is comparatively positive although considerable concerns still remain in some areas and these need tackling urgently” Klaus-Heiner Lehne, European Court of Auditors

“Overall the audit is comparatively positive although considerable concerns still remain in some areas and these need tackling urgently.”

In 2018, EU spending totalled €156.7bn, the equivalent of 2.2 percent of the general government spending of Member States taken as a whole and 1.0 percent of EU gross national income.

He said, “We tested as many as 728 individual transactions. Our auditors have gone far and wide to examine the accounts, revenue and expenditure covering all parts of the EU budget for 2018. In our view, they present the EU’s financial position fairly in all material respects and are not affected by material mis-statements.”

Lehne added, “We estimated the level of error at 2.6 percent. This is not a measure of fraud, inefficiency or waste. It is an estimate of the money that should not have been paid out from the EU budget because it was not used in accordance with EU rules. However, this overall estimate obscures an important distinction: the way in which funds are disbursed has a major impact on the risk of error.”

“For expenditure subject to complex rules and representing around half the EU budget, mainly ‘reimbursement-based payments’ where beneficiaries have to submit claims for eligible costs they have incurred - research projects, employment-related projects, regional and rural development projects, and developments projects in non-EU countries – the level of error is estimated at 4.5 percent, which is relatively high.”

He told the meeting, “This is why, for the third year in succession, we have issued a ‘qualified opinion’ on expenditure – meaning ‘yes, but’.”

"We see this as an encouraging sign that the Commission and Member States have sustained the progress we noted in the previous two years. Our auditors found some good things to say about low-risk areas, but at the same time serious issues still need to be tackled in high-risk areas.”

Lehne said the ECA had audited a case in Poland where different members of the same family had applied separately for support to develop a pigsty, claiming that they operated independent SMEs.

“However, taken together - and this was the reality our audit discovered – the family company did not meet the conditions for support for SMEs,” noted Lehne, who has been President since 2016 and was recently re-elected for three more years.

He told the committee, “We highlight shortcomings in the application of public procurement rules and also system weaknesses in the Asylum and Migration Fund.”

He added, “I’d like to stress that this annual report is not like previous ones. We find ourselves at a crossroads – a fresh legislative term of the European Parliament, one Member State in the process of withdrawing from the EU, and the other 27 Member States in the last stretch of negotiations on the Multiannual Financial Framework for 2021-2027.”

He told MEPs, “Policymakers should grasp this a window of opportunity to focus EU policies and spending on delivering results and added value.”

Each year for the annual report, the auditors check the EU accounts and provide their opinion on two questions: whether the accounts are accurate and reliable, and to what extent there is evidence of money having been received or paid out in error.

They test samples of transactions to provide statistically-based estimates of the levels of error in the EU’s revenue and in the different spending areas such as natural resources or cohesion.

About the author

Martin Banks is a senior reporter at The Parliament Magazine

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