The verification of gross national income data for the calculation of EU Member States’ contributions to the EU budget is not sufficiently focused and prioritised, according to a new audit report published last week by the European Court of Auditors (ECA).
The Gross National Income (GNI)-based on own resources is the main source of financing for the EU budget, totalling €116 billion in 2021 or about two-thirds of total revenues. The Commission calculates this own resource as a percentage of Member States’ annual GNI. In 2021, the rate was 0.84 %. The other own resources are customs duties and resources based on VAT and the amount of non-recycled plastic packaging waste (from 2021).
The GNI represents the total primary income received in a country by resident institutional units and corresponds to the better-known macroeconomic indicator GDP (gross domestic product) after some adjustments.
“It is important to ensure that the EU countries’ GNI-based contributions to the EU budget are fair and predictable,” said Marek Opioła, the Polish ECA member who led the audit. “For verifications to be effective and efficient, cross-cutting issues and countries with the highest risk factor should be in Eurostat’s priority lane for checks.”
The EU legislation requires the Commission to verify the statistical sources and methods used by Member States to compile their GNI data. At the Commission level, Eurostat is responsible for these verifications in its role as the statistical office of the EU. The verification process is a complicated and multi-annual process with revisions up to 4 years after the financial year.
“The verifications are similar to an audit process, but they are specific to the statistical methodology for national accounts,” the audit team told The Brussels Times. In its audit, ECA checked whether Eurostat managed its verifications effectively during the latest completed 2016-2019 cycle.
In particular, it looked at significant changes in Eurostat’s verification approach. Eurostat has assigned member states to three risk categories (seven high-risk, nine medium-risk and 12 low-risk countries). It has also introduced a materiality threshold of 0.1 % of GNI to target verifications on issues likely to have a high impact on GNI.
According to Eurostat, the results of Eurostat's GNI risk assessment are internal to the EU Commission's services and therefore the ECA did not publish the names of the respective countries in its audit report.
No systematic check of high-risk issues
The audit team examined the verification files for six member states (Ireland, Spain, France, Malta, Netherlands and Poland) and sent surveys to all national statistical offices and to the national authorities responsible for making available own resources to the EU budget.
Overall, the auditors found that although Eurostat was effective overall in identifying and addressing high-risk issues for GNI data compilation, it did not systematically check high-risk issues and countries in the highest-risk category first, and did not always conduct those checks early enough.
Many issues remained open in the form of “reservations”, so the countries concerned could potentially be asked to pay more in the future.
Eurostat only carried out its checks early in the cycle, and before checking the lower-risk ones, for three of the seven high-risk countries. Around a quarter of specific reservations at the end of the verification cycle concerned the four high-risk countries that had not been effectively prioritised. Furthermore, it checked too many issues with a low impact on GNI.
Who will pay more or less
The Commission’s Directorate-Budget for Budget is responsible for the calculation of the member states’ contributions, based on the GNI data reported by member states and verified by Eurostat. It is informed about the outcome of Eurostat’s verifications and checks that member states pay their contributions of the GNI-based own resource and related adjustments to GNI data.
In absolute terms, Germany made the largest GNI-based contribution (€29.6 billion) in 2021, followed by France (€20.3 billion) and Italy (€14.5 billion). In the past, EU countries had had difficulties with paying large additional amounts at short notice.
The audit report did not include data about the changes made in the verification process and its impact on the member states’ contributions. ECA’s audit team referred to Eurostat which publishes GNI data and information on data revisions resulting from the verifications.
“The positive or negative revisions will result in adjustments of the same type to the contributions of the Member States concerned,” the team replied. “Our audit did not directly assess the quality of the member states’ sources and methods used to compile GNI, but the effectiveness and efficiency of the Commission’s management of the verification process.”
While Eurostat’s classification of member states in risk groups is confidential, its adjustments or revisions of their GNI data is public information and can be accessed on a site called Monitoring GNI for its resource purposes (Summary Report on the Quality of GNI data). The total revisions are shown with a breakdown by cause in country-specific tables.
For the GNI data relating to 2020, almost all EU member states are affected by Eurostat’s adjustments, with revisions ranging from -2 % (The Netherlands) to +2.9 % (Poland). Eurostat cautions that there is no straightforward link between the adjustments in the data and member states’ contributions to the EU budget.
M. Apelblat
The Brussels Times
