Billions of euros in cohesion funds have been misspent in recent years due to the failure of the European Commission and member states to implement appropriate safeguards, according to a report published on Monday (8 July) by the European Court of Auditors.
The study found that roughly €15 billion of the €317 billion in cohesion funds paid out over the 2014-2020 budget period were used in ways that did not comply with national or EU rules.
The auditors further noted that the “assurance framework”—a set of measures aimed at reducing the spending “error rate” relative to previous budgets—helped reduce the level of misspending from 6% to 4.8%, but that this remained well above the EU’s own 2% legal threshold.
“Overall, our analysis shows that the assurance framework for cohesion policy, while helping in reducing the overall level of error since 2007, has not been effective in bringing it below the 2% materiality threshold set in the rules,” the study noted.
The report comes amid a growing debate about the future of cohesion policy, which aims to boost development in the bloc’s economically deprived regions and represents roughly a third of the bloc’s regular budget.
Earlier this year, an independent report commissioned by the EU concluded that cohesion policy should be urgently revamped to stem the rise of Eurosceptic parties that threaten the “survival” of the European project.
The auditors highlighted significant problems with all three “lines of defence” meant to ensure cohesion funds are spent appropriately—namely, member states’ managing authorities, their audit bodies, and the Commission itself.
However, they emphasised that the EU executive “retains ultimate responsibility for protecting the EU’s financial interests”.
“The Commission mostly conducts desk reviews, which means it’s mainly checking the figures included in the accounts,” the study’s author, Helga Berger, told Euractiv.
“But desk reviews are not really an assessment of legality and regularity. So this is an inherent limitation: if you don’t check payments’ legality and regularity, you don’t cover everything,” she added.
Built-in risk of error?
Berger also explained that cohesion policy’s “reimbursement-based” payment structure means that there is “inherently” a high risk of error.
“For reimbursement-based payments, you really have to deliver the evidence that all the procurement rules have been respected, that all the state aid rules and the eligibility criteria have been fulfilled, that the money has really been paid out, etc,” Berger said.
The criteria used to make traditional EU agricultural budget payments are “not so complicated” in comparison, she said, while payments from the bloc’s €723 billion pandemic recovery fund “depend mainly on the satisfactory fulfilment of milestones and targets”.
Compliance versus performance
Berger also emphasised that there is “always a trade-off” between ensuring that EU funds comply with policy objectives and the possibility of them being improperly allocated.
“If you want to ensure that funds are spent on green projects, on social projects, that employment is ensured, then you need to comply with more rules,” she said.
“I’m Austrian. We have quite an ambitious rural development programme. If you do a compliance audit there, we identify errors. But if you do a performance audit, we are quite positive because the money has a large positive impact. So this is really a trade-off.”
[Edited by Anna Brunetti/Alice Taylor]
