Each year, the European Parliament and the Council adopt an annual EU budget as part of a longer-term budget agreed for a period of seven years (known as the ‘multiannual financial framework’ or MFF). The current MFF, covering the 2021-2027 period, totals over €1200 billion, which is less than 2 % of the EU member states’ public spending.
In addition to the EU’s standard long-term budget, payments are made from the Recovery and Resilience Facility (RRF), which is a one-off, temporary financial instrument (NextGenerationEU) created to drive the post-pandemic recovery and reforms. Almost €600 billion in financial support will have been made available to the member states over the 2021-2026 period.
Under the current MFF, the largest share of the EU budget (about 45 %) is financed by amounts that member states contribute in proportion to their gross national income. Other sources include a contribution based on value-added tax (about 10 %), customs duties (about 10 %), and a contribution based on plastic packaging waste (about 3 %). Amounts borrowed to finance support for member states as part of NGEU also provide a substantial share of EU revenue (about 18 %).
EU funds are disbursed to beneficiaries either through single payments/annual instalments or through a series of payments under multiannual spending schemes. The largest shares of the EU MFF budget currently go to:
- ‘Natural resources and environment’ (about 34 %): this comprises the EU’s climate action and common agricultural policy;
- ‘Cohesion, resilience and values’ (about 30 %): this includes investments in regional growth and transport;
- ‘Single market, innovation and digital’ (about 14 %): this comprises support for R&D in various sectors and the Horizon Europe programme;
- and ‘Neighbourhood and the world’ (about 10 %): this is also known as ‘Global Europe” and refers mainly to the EU’s external action and international development cooperation.
Every year, we audit the EU’s annual accounts and the underlying revenue and expenditure. We assess whether:
- the accounts are reliable;
- EU revenue has been received; and
- payments have been made in accordance with the rules.
For each area, we provide a distinct opinion: ‘clean’, ‘qualified’ or ‘adverse’. It should be noted that we provide two separate opinions for expenditure: one on the standard EU budget, and another on the temporary Recovery and Resilience Facility (RRF), which is the main pillar of the EU’s pandemic recovery package known as NextGenerationEU (NGEU).
These checks form the basis of our statement of assurance, which we are required to provide to the European Parliament and to the Council under Article 287 of the Treaty on the Functioning of the European Union.
A ‘clean’ opinion means that the figures in the accounts present a true and fair view, and follow the rules on financial reporting and financial management. The underlying transactions are legal and regular in all material respects.
A ‘qualified’ opinion means that the auditors are unable to give a clean opinion, but the problems they have identified are confined to specific areas.
An ‘adverse’ opinion means that the problems are widespread.
This figure, expressed as a percentage, is our estimate of the share of money that should not have been paid out from the EU budget because it has not been spent in accordance with EU rules or specific national rules.
Typical errors include payments to ineligible beneficiaries or projects, or for the purchase of services, goods, or investments, without the public procurement rules having been applied correctly.
In audit terminology, this means the level above which errors are regarded as having a significant effect. A material level of error is one that is likely to influence the way in which the intended users of an audit report make decisions. Both the ECA and the European Commission use a 2 % threshold to determine materiality.
No. It would be inaccurate to say this, because there is a significant difference between ‘error’ and ‘waste’.
In our testing of EU budget spending, we check whether EU money has been spent in accordance with the rules, whether the costs charged have been calculated properly, and whether eligibility conditions have been met from the outset. If at least one of these requirements has not been met, we call it an ‘error’. This is what our estimated error rate reflects.
Although these errors involve payments for projects or beneficiaries that have not met eligibility conditions (e.g. errors in relation to the procurement procedure), these projects or beneficiaries may still provide the intended benefits and so cannot be considered wasteful.
Obviously, expenditure can be legal and regular but still be wasteful. One example we reported on in the past was port infrastructure that had been built without adequate regard for projected levels of freight.
In most cases, we have no such indication. By definition, fraud is a deliberate act of deception to gain an advantage. Although it can be difficult to identify fraud through standard audit procedures, our testing does reveal several cases of suspected fraud each year.
Although the ECA is not tasked with investigating cases of suspected fraud against the EU’s financial interests, we help to combat fraud against the EU budget by reporting instances of suspected fraud to OLAF, the European Union’s Anti-Fraud Office, and/or to the European Public Prosecutor’s Office (EPPO).
Our job is to provide a statement of assurance on the reliability of the EU’s accounts and the legality and regularity of the underlying transactions. We examine the EU budget, and how the European Commission manages it with the member states. Our audit is therefore not designed to produce error rates for individual member states, as doing so would require substantial additional resources. It is the task of the European Commission, as the institution responsible for managing the EU budget, to provide detailed information on each member state in its annual activity reports.
However, we do name certain member states, beneficiaries and regions when we provide illustrative examples in our annual report. We also provide several geographical insights from transaction testing in the ‘Cohesion’ and ‘Natural Resources’ spending areas and in relation to RRF expenditure. These examples provide an indication of the number of transactions audited for each member state, and the number of transactions containing quantified errors. However, these figures should not be understood as demonstrating the level of error in a particular member state.
