The European Commission’s proposal for the next seven-year EU budget (MFF) fails to address several ways to make it more accountable and transparent to citizens, according to a review report issued on Wednesday by the European Court of Auditors (ECA).
As EU policymakers negotiate the final shape and volume of the new budget, the auditors warn that the proposals do not consider important concerns they have already raised. They remain particularly concerned about financing not linked to actually incurred costs.
The review is one of many opinions and special audit reports that ECA have published on the shortcomings and risks in the multiannual financial framework (MFF) for 2028 – 2034 and on the spending model in the Recovery and Resilience Facility (RRF) which the new MFF replicates. The latest audit report was on RRF funding to public administration reform.
The new review report draws on 12 previous opinions on proposals and findings in previous reports. In total, ECA has identified 28 opportunities to improve key areas in the EU budget, such as how to simplify, adapt, and finance it.
“We also identified concrete opportunities for the control and audit architecture,” a senior auditor at ECA told The Brussels Times.
“For financing not linked to costs, we said responsibilities should be clearly allocated, minimum Member State controls and Commission checks should be defined before implementation, full traceability should be ensured, and recovery should be possible where funding is disproportionate to achievements or rules are not respected. In this review we find that these elements are still not sufficiently defined.”
Under the proposals, definitive reductions in funding through Commission financial corrections may only crystallise in February 2036 if problems remain uncorrected. According to ECA, this could weaken their deterrent effect.
One of the the main issues in the review where ECA and the Commission disagrees is the performance concept of the EU budget. “It should be about more than completing activities,” ECA says. “The proposed framework prioritises outputs, with insufficient focus on results and impacts."
“Our analysis can help EU policymakers as they finalise the rules for the next long-term budget,” commented Jan Gregor, the Czech ECA Member responsible for the review. “We need a budget that clearly shows what the EU brings to the table, makes sure that the money is well managed, and strengthens accountability and transparency.”
Of the 28 opportunities the ECA listed, the Commission has fully addressed only one, which was to simplify the rules that allow the EU budget to respond flexibly to changing needs. In general, the proposals go furthest in improving budget flexibility, but make the least progress in addressing the issues related to financing not linked to costs.
Overall, the proposals address 19 of the auditors’ warnings only partly, and leave eight entirely unaddressed.
The unaddressed opportunities leave significant gaps in the MFF. These concern the following. 1. defining EU added value in legislation; 2. improving the methodology for mobilised investment and additionality; 3. clearly linking financing not linked to costs to results; 4. ensuring performance orientation goes beyond payment conditions;
5. avoiding or finding alternatives to zero-cost measures; 6. enabling effective recovery where funding is disproportionate or rules are not respected; 7. require full traceability of funding; and 8. ensuring audit coverage of bodies outside the EU legal order, including interim board representation where necessary.
While the proposals make progress towards consolidating the EU financial landscape and simplifying the EU budget, certain limitations remain. For example, simplifying rules at EU level does not necessarily reduce the administrative burden on final recipients.
Consolidating programmes can reduce the number of rulebooks, but the burden on the recipients depends on the implementing rules, operational requirements and control arrangements,” the auditors explained. “The review notes that differing arrangements may exist inside the consolidated programmes, so complexity can remain even when the architecture looks simpler at EU level.”
For the purpose of financing the EU budget, introducing new resources makes the EU financing system more complex. ECA argues that addressing weaknesses previously identified in VAT and customs collection could reduce the need for new own resources.
“We cannot really say how much, as it depends on many factors like the VAT gap or the collection mechanisms in the Member States,” the senior auditor added.
As regards external audit, proposals such as Global Europe do not explicitly enshrine the ECA’s audit rights. Global Europe is the main instrument for funding EU's foreign policy, international development aid and global partnerships. This creates uncertainties about the ECA’s remit, particularly for bodies established outside the EU legal framework or for new forms of financial support involving third parties.
“What we find is that the Global Europe proposal relies on recitals or delegation agreements rather than explicitly putting the ECA’s audit rights in the legal text,” ECA told The Brussels Times. “The audit of bodies established outside the EU legal framework, such as international organisations and banks, can be more difficult due to incomplete, fragmented or delayed information.”
