What we audited
The EDFs provide European Union assistance for development cooperation to the African, Caribbean and Pacific (ACP) states and overseas countries and territories (OCTs). EDF spending and cooperation instruments aim to overcome poverty, and to promote sustainable development and the integration of ACP countries and OCTs in the world economy.
The EDFs are funded by the Member States. They are managed outside the framework of the EU budget by the European Commission and, for some assistance, by the European Investment Bank. Each EDF is governed by its own financial regulation. External aid financed by the EDFs is implemented in a high risk environment, notably due to the geographically dispersed activities and weak institutional and administrative capacity in partner countries.
What we found
|Reliability of the EDFs accounts:
|2014 accounts present fairly the financial position of the EDFs, the results of their operations, their cash flows and the changes in net assets.
|Is the revenue of EDFs affected by material error?
||Are the payments of the EDFs
affected by material error?
||Estimated level of error:
(2013: 3.4 %)
As in previous years, the level of error we found — including in some final claims which had been subject to external audits and expenditure verifications — point to weakness in the ex ante checks. Errors relating to noncompliance with procurement rules (see example) and the absence of supporting documents to justify expenditure were the cause of nearly two thirds of the estimated level of error.
Example: Failure by the beneficiary to comply with procurement rules
We examined the procurement of IT services by an organisation in charge of agricultural cooperation between ACP countries. The audit revealed that the beneficiary had not complied with the procurement procedure stipulated in the grant agreement which required the publication of a tender notice at international level. The beneficiary only sent invitations to tender to three selected companies in its country of location, resulting in restricted competition.
EuropeAid is the directorate‑general of the Commission which manages almost all of the spending under the EDFs. It is currently implementing an action plan to address weaknesses in its systems. As some actions are still under development, it is too early for us to assess the impact of these developments on the effectiveness of its systems.
What we recommend
We recommend that the Commission:
- strengthens controls over the clearance of pre‑financing and for ensuring the correct use of exchange rates by partner countries to convert budget support disbursements into their national currencies; and
- improves the arrangements in place to assess the efficiency and cost‑effectiveness of controls.