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10 November 2015

ECA: 2014 EU audit in brief

The ECA audited the revenue and expenditure of the 2014 EU budget and the European Development Funds and provided its opinion on the extent to which the annual accounts are reliable and income and spending transactions comply with the applicable rules and regulations.

The ECA gives a clean opinionon the reliability of the 2014 accountsof the EU. Revenuefor 2014, taken as a whole, is legal and regular. Paymentsfor 2014 are materially affected by error. The ECA therefore gives an adverse opinionon their legality and regularity.

The financial year 2014 was the first year of the EU programming period 2014-2020. However, most of the EU’s spending in 2014 was planned during 2007-2013. So, as would be expected, ECA´s report highlights similar financial management issues to previous years.

For many years now, the ECA has identified persistently high levels of error in EU spending. So, the ECA highlights the scope for making better use of available information and full use of corrective powers to reduce errors further and recover more misspent funds.

Of course, the EU must always strive to do more with what it already has in place. So, the ECA has advocated that the focus should be more on performance when spending EU money during the current period.

The ECA also considers that EU policymakers need to develop a wholly new approach to the management of EU spending and investment for the future. The upcoming mid‑term review of the EU’s financial planning programme offers an opportunity to consider how best to both reduce errors and improve the overall performance of the EU budget.

In the meantime, the ECA also draws attention to the pressing need for the Commission and Member States to deal with a number of financial backlogs that have built up. In some Member States, the total not yet claimed from EU funds represents a significant portion of their governments’ annual spending.

If the EU institutions and the Member States want to achieve the full potential of the EU budget to invest in Europe’s future, there needs to be a concerted effort to improve its effectiveness. That means improving the EU budget’s potential to invest in the future of Europe by reducing errors, paying correct claims more quickly, investing in projects that match the Union’s objectives, and measuring the returns on those investments to ensure they deliver and add value.

Citizens have a right to know the status of those investments and how they have performed. The ECA is committed to playing an important role in assuring that EU funds are soundly invested and performing well, warning where they are at risk and advising on how to improve their performance.

Overall results:

-       The EU accounts for 2014 were correctly prepared in accordance with international standards and present a true and fair view. The ECA was therefore able, once again, to give a clean opinion on their reliability. However, the ECA gave an adverse opinion on the regularity of payments.

-       The estimated level of error, which measures the level of irregularity, for 2014 payments is 4.4 %, close to that of 2013 (4.5 %) and persistently above the materiality threshold of 2 %.

-       The ECA found the same estimated level of error(4.6 %), under shared management with the Member States and for expenditure managed directly by the Commission. The highest levels of error were found in spending under ‘economic, social and territorial cohesion’ (5.7 %) and for ‘competitiveness for growth and jobs’ (5.6 %). Administrative expenditure had the lowest estimated level of error (0.5 %).

-       There is a clear relationship between expenditure types and levels of error. Our estimated level of error for cost reimbursement schemes(5.5 %), where the EU reimburses eligible costs for eligible activities on the basis of cost declarations made by beneficiaries, is double that for entitlement programmes (2.7 %), where payments are made on meeting conditions rather than reimbursing costs.

-       Corrective actionby authorities in the Member States and by the Commission had a positive impact on the estimated level of error. Without this action, the ECA´s overall estimated level of error would have been 5.5 %. There is further scope for the Commission to improve its assessment of risk and the impact of corrective actions.

-       If the Commission, authorities in the Member States or independent auditors had made use of all information available to them, they could have prevented, or detected and correcteda significant proportion of the errors before these were made.

-       Amounts to be paid in the current and future yearsremain 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 2020strategy 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 budgetto Europe 2020.

-       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 erroras soon as possible and assesses opportunities for reducing this while strengthening the focus on performance in spending. 

2014 EU audit in brief

Related articles:

European Court of Auditors signs off the EU accounts for 8th year in a row

EU must align spending with political priorities, says budget control committee

© European Court of Auditors

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