The EU has failed to correct "persistent" irregularities in the use of budget funds, which were intended to mitigate differences between members. Both the authorities and auditors in the EU countries and the Commission are responsible for inadequate control mechanisms, according to the European Court of Auditors.

From 2014 to 2022, the Union has allocated 409 billion euros for Cohesion, representing about a third of the budget, while control mechanisms for spending at all levels are still deficient, according to an analysis published on Monday by the European Court of Auditors (ECA).

Member States could detect and prevent more irregularities, the auditors emphasised.

The Commission, on the other hand, has underestimated improperly spent money and has not made sufficient use of the tools available to encourage Member States to improve their administrative systems, the ECA added.

Cohesion policy is an important area of EU spending. Over the years, it has been the area with the highest number of spending errors in the EU budget. The estimated error rate is not a measure of fraud, inefficiency or waste, but an estimate of the amount of money that has not been spent in accordance with EU and national rules. Looking at the 2007-2013 and 2014-2020 multi-annual budget cycles, the overall error rate in Cohesion spending fell from 6% to 4.8%, but remained above the 2% threshold set by the rules each year, with a peak of 6.7% in 2022, the ECA reports on its website.

Croatia exceeds threshold

The prescribed ceiling is two per cent and was exceeded in all seven years from 2014 to 2022, with a maximum of 6.7% in 2022.

“Our analysis shows that in new calculations, the Commission has found that the rates of uncorrected errors well above the prescribed threshold are particularly frequent in certain countries – Greece (in 45% of the ‘guarantee package’), France (22%), Italy (26%), Lithuania (36%), Portugal (36%) and Slovakia (39%).”

Croatia also exceeded the threshold with a rate of uncorrected errors in Cohesion spending of 15%, the report shows.

“The authorities confirm in the guarantee packages that their accounts are complete, accurate and true and that the internal controls of the programme (or group of programmes) are effective,” the ECA said. The Commission accepts the accounts and transfers the remaining EU funds only if it ultimately agrees with this declaration, taking into account the auditors’ opinion.

Leaky “lines of defence”

In a pyramid of controls, controls by Member State managing authorities are the first line of defence to ensure proper expenditure. These have weaknesses and could have prevented more than a third of the errors identified by the auditors between 2017 and 2022.

The second line of defence is the controls carried out by the Member States’ own audit bodies. Here, too, the EU auditors found weaknesses of varying types and severity that affected the work of 40 of the 43 audit bodies reviewed.

The Commission – as a third line of defence – relies only to a limited extent on reliable controls at national level in its assessments, while some national authorities are more effective than others in detecting erroneous expenditure. The Court of Auditors pointed to numerous shortcomings in the Commission’s tools for detecting, preventing and correcting errors.

Most errors in Cohesion spending in recent years were due to ineligible expenditure and projects, followed by non-compliance with state aid rules and procurement by beneficiaries of funds, the Court’s report said.