The administrative costs of implementing the EU cohesion policy funds are comparatively lower than for other European and international funding programmes, according to a recent report by the European Court of Auditors (ECA).
On the other hand, the European Commission had not collected cost data in a complete, consistent and coherent way, making it difficult to use them for assessing the impact of simplifying EU rules on the administrative costs of running the programmes.
“Information on administrative costs for EU-funded programmes should be complete and publicly available to demonstrate to our citizens that policies are being implemented efficiently”, said Pietro Russo, the ECA Member responsible for the audit.
The report follows timely an opinion by ECA on the Commission proposal to relax the rules and use all uncommitted money from the three Cohesion Policy funds – the European Regional Development Fund, the European Social Fund and the Cohesion Fund – to address the economic effects of the coronavirus crisis.
The Coronavirus Response Investment Initiative (CRII) will provide about €8 billion of immediate liquidity to accelerate up to €37 billion of European public investment. In its second version (“Plus”), the flexibility is extended to allow for transfers across the three funds and the possibility of a 100% EU co-financing rate for cohesion policy programmes for the accounting year 2020-2021.
In its opinion, ECA warned for that the easing of rules should not lead to substantial compromises in terms of accountability. The proposal has been approved by the Parliament and the Council and entered into force on 24 April.
Administrative costs vary by member state and are generated by activities necessary for preparing and implementing programmes, including management, monitoring, evaluation, information and communication, control and audit. Administrative costs cover different types of costs as staff costs, material costs, overheads and external costs such as consultancy and services provided.
According to the audit report, current administrative costs are estimated by a Commission study in 2018 to only 2.3 % of the total expenditure. Is there much room for any savings?
“While the same study estimates that the most significant simplification measures could lead to a 0.2 percentage point reduction of the implementation costs, auditors believe that this cost reduction may be smaller than estimated or may not materialise at all,” the audit team told The Brussels Times.
Furthermore, some costs are covered by the member states budgets only and the Commission receives no information about these costs. For the non-declared costs, the examined member states did not have information recorded in a readily available manner as regards the amounts and type of costs.
The Commission has proposed several simplification measures in the regulations but the audit team is sceptical. “The complexity of the administrative practices has not been taken into account. Based also on previous work, we consider that some of the greatest scope for simplification may lie in the national and regional procedures that are independent of the EU regulations.”
ECA declined to specify what lessons could be learned for the managing of the cohesion funds during the coronavirus crisis, especially when the rules have become more flexible.
In its opinion, ECA stated that many of the new measures would require the modification of operational programmes, and subsequent approval by the Commission. “This may represent a significant administrative burden, particularly for the Commission, which would have to process a large number of modifications in a short space of time.”
Another issue totally outside the scope of the audit and the opinion is the allocation of the uncommitted funds among member states. The allocation intended for the coronavirus crisis follows the previous allocation. This will imply that Spain and Italy, the countries that were most hit by the outbreak, will receive less than for example Hungary and Poland.
The European Stability Initiative, a think tank, calculated in a recent report (18 April) that Hungary has received a total of €25 billion during the current budget period (2014 – 2021) or 17 % of its GDP in 2019.
According to the report, “European democracies must learn lessons from the often-invoked Marshall plan: assistance without strategy, funding without values, will not produce lasting positive impact. What the EU needs today is a strategy that simultaneously addresses both threats to economic cohesion and to democracy, in a way that strengthens both.”