- €409 billion on Cohesion spending in 2014-2020, more than a third of the EU budget
- Commission’s and member states’ spending checks are not robust enough
- Cohesion has suffered from consistently higher error rates than other budget areas
The EU has not managed to significantly reduce persistent spending errors in Cohesion policy, whose aim is to reduce social and economic disparities within the EU. European Commission and member state controls are still lacking at every level, according to a review by the European Court of Auditors. While member state authorities could detect and prevent more errors, the bloc’s executive not only underestimated the total level of irregular spending but also underutilised the tools available to encourage member states to improve their management and systems.
Cohesion policy is a major EU spending area. Over the years, it has also witnessed the largest number of spending errors in the EU budget. The estimated level of error is not a measure of fraud, inefficiency or waste: it is an estimate of the amount of money that was not used in compliance with EU and national rules. Looking at the multi-year budget cycles of 2007-2013 and 2014-2020, the overall level of error in Cohesion spending fell from 6% to 4.8%, but each year remained above the 2% threshold set in the rules, with a recent peak of 6.7% in 2022.
“The Commission and member states work hand in hand to deliver EU Cohesion policy benefits to citizens, but they must make a greater effort to ensure that spending follows the rules,” said Helga Berger, the ECA Member responsible for this review. “When we talk about controls, there are many players in the field, but the results are simply not there.”
In a pyramid of checks, the first line of defence in ensuring proper spending is the controls carried out by the member states’ managing authorities, which suffer from shortcomings and could have prevented more than a third of the errors the auditors found between 2017 and 2022. The second line of defence is the controls by the member states’ own audit bodies, where the EU auditors again found weaknesses of varying nature and seriousness – this was the case for the work of 40 out of 43 of the audit bodies under review. The Commission – as the third line of defence – bases its assessments on only limited reliable controls performed nationally, while some national authorities are more effective than others at detecting erroneous spending. At the same time, the Commission’s own tools for detecting, preventing or correcting errors display a number of weaknesses. As its desk checks are not designed to detect erroneous spending, the EU’s executive could achieve greater impact with more compliance audits in the field. The EU’s executive can also use financial corrections for serious control deficiencies in order to remedy the negative impact of erroneous spending on the EU budget, but these have so far not resulted in a direct loss of funding for the member state concerned. Instead, member states have been allowed to re-use these corrections for additional projects. Not only does this limit their deterrent effect, but it also fails to provide an incentive for member states to improve their systems and so avoid errors from the outset.
Most Cohesion spending errors in recent years have resulted from ineligible expenditure and projects, followed by failure on the part of funding recipients to comply with state aid and procurement rules. The auditors identified three root causes of errors: member states’ inadequate administration, including inappropriate decision-making and inefficient verifications by managing authorities; negligence or suspected intentional non-compliance by beneficiaries; and issues with interpreting the rules.
The auditors conclude that there is room for both the Commission and member states to improve how they perform their checks on Cohesion spending, and warn that the risk of irregular spending remains high. They emphasise that the overlap between multi-year spending periods and the EU Covid recovery funds is putting additional pressure on some member states to ensure that money is spent by the book.
Background information
The EU’s long-term budget is planned around seven-year funding cycles. Cohesion policy aims to reduce economic and social disparities between EU countries and regions. Cohesion funds have a multi-layered control system, as they are managed jointly by the Commission – which bears ultimate responsibility for the EU budget – and the member state authorities. For the 2014-2020 period, the Commission relied on the audit work of the member states, meaning that each layer of scrutiny is based on work done at the previous level.
Review 3/2024, “An overview of the assurance framework and the key factors contributing to errors in 2014-2020 cohesion spending”, is available on the ECA website. This is not an audit report, but a review based on the ECA’s previous audit work for the 2014-2020 Cohesion spending period and publicly available information.