While the EU’s accounts for the 2020 financial year give “a true and fair view” and revenue was considered error-free, payments remain affected by too many errors. That is the conclusion of the European Court of Auditors’ (ECA) annual report for the 2020 financial year, published today. The auditors have issued an adverse opinion on expenditure for the second consecutive year. They have also identified risks and challenges relating to the implementation and sound financial management of the EU funds being made available in response to the coronavirus crisis.
The auditors found that the overall level of irregularities in EU spending has remained stable, at 2.7 % in 2020 (2019: 2.7 %). In 2020, more than half of the audited spending (59 %) was considered high-risk expenditure, a further increase compared to 2019 (53%) and before. The rules and eligibility criteria governing this type of expenditure are often complex, which makes errors more likely. Material error continues to affect high-risk expenditure at an estimated rate of 4.0 % (2019: 4.9 %). As in the previous year, the auditors have therefore concluded that the level of error in this substantial type of spending is pervasive, and issued an adverse opinion on EU expenditure for 2020.
Six cases of suspected fraud were reported in 2020 arising from our audit work– fewer than in 2019, when nine cases were reported. The European Anti-Fraud Office (OLAF) has opened investigations into all of them.
“In view of the great challenges that lie ahead of us, we must remain even more vigilant about the financial soundness of the EU”, said ECA President Klaus-Heiner Lehne. “Over the next seven years, the EU will spend significantly more than in the previous programme period. The 27 Member States agreed on a COVID-19 recovery programme, which will be financed by issuing public debt. This decision marks a major shift in EU finances. It entails an obvious need for effective checks on how EU money is spent, and on whether the intended results are achieved.”
The EU response to the COVID-19 pandemic will have a very substantial impact on the EU’s finances: for the 2021-2027 financial period, the combined funding allocation from the Next Generation EU (NGEU) instrument and the multiannual financial framework (MFF) will be €1 824 billion, almost twice the amount of spending in the previous MFF period. In view of this, the auditors point out the risk of a delayed start to the implementation of shared management funds in the 2021-2027 financial period. A delayed start affected the implementation of funds the 2014-2020 financial period as well.
The ECA points out that Member States’ absorption of the European Structural and Investment (ESI) Funds has continued to be slower than planned. By the end of 2020, the final year of the current seven-year budget, only 55 % of the agreed EU funding for the 2014-2020 period had been paid out. This has had the effect of inflating outstanding commitments, which reached €303.2 billion by the end of 2020, the equivalent of nearly two annual budgets. The auditors note that there are considerable differences between Member States. While Finland, for example, had absorbed 79 % of its total allocation by the end of 2020, the three Member States where the absorption rate was lowest (Italy, Croatia and Spain) had only used around 45 % of their committed amounts.
On 1 February 2020, the United Kingdom ceased to be an EU Member State. The auditors note that on 31 December 2020, the EU accounts showed an amount of €47.5 billion due from the United Kingdom based on mutual obligations set out in the withdrawal agreement.