The Parliament approved last week the implementation of the 2021 budget for all the EU institutions except for the Council.
The annual discharge debate on the EU budget is a crucial part of the Parliament’s oversight role, to ensure that the budget is spent according to the principles of sound financial management and to hold the EU institutions and agencies accountable. The debate follows the annual audit (last October) by the European Court of Auditors (ECA) and the recommendations of the Committee on Budgetary Control.
Most of EU’s expenditure is managed by the European Commission, whose budget was approved by the Parliament with 421 votes in favour, 151 against and 5 abstentions. In 2021, the EU budget increased by roughly 30% compared to 2020, mainly because of the money spent from the Next Generation EU programme to fight the effects of the COVID-19 pandemic.
2021 was also the first implementation year of the Recovery and Resilience Facility (RRF), to recover from the coronavirus crisis and strengthen Europe’s resilience. However, only one payment was made in 2021 under the facility (€11.5 billion to Spain).
This payment was criticized by ECA because one of the milestones was not satisfactorily fulfilled but the impact was not material. The Parliament writes that it regretted to note that ECA was not able to quantify the error because the Commission had not developed a methodology to quantify the impact of not achieving a milestone or target.
The Commission welcomed the Parliament’s final approval of how the EU budget was implemented. “The vote granting the 'discharge' to the Commission is an acknowledgement that EU funds were spent in line with the rules, were well protected from fraudsters, and contributed to the economic recovery on the ground. With this final approval the 2021 financial year is effectively closed.”
In fact, the EU budget is not free of material errors. ECA President Tony Murphy recalled in his speech at the discharge debate in the Parliament that the auditors had given an adverse opinion on the EU budget spending for the third year in a row.
ECA found that the overall level of irregularities (or financial errors) increased significantly from the previous year, reaching 3.0 % in 2021. The error rate for high-risk spending, which makes up a clear majority (63%) of the audit population, was estimated at 4,7 %.
The Parliament is worried by the fact that, contrary to ECA, the Commission estimated its error rate to be both below the materiality threshold and goes even lower than the bottom range of the estimated level of error of the auditors.
Furthermore, the ECA President referred to a special audit report last March on the Commission’s control system for the RFF. In that report, ECA identified an assurance and accountability gap in protecting the EU’s financial interests.
While the Parliament granted discharge to the Commission and its agencies with overwhelming majority, it also voiced a number of remarks and recommendations to improve the management and protection of the EU budget. The co-rapporteurs in the budgetary control committee were also not satisfied.
“I have the impression that the ambition when launching the RRF has by far exceeded the reality of how it is being implemented on the ground,” said Monika Hohlmeier (EPP, DE).
Another co-rapporteur, Jeroen Lenaers (EPP, NL), called on the Commission to establish an effective mechanism to ensure that NGO activities funded by EU money align with EU values.
The Parliament proposed that a public black list of non-governmental organisations (NGOs) that engage in activities such as hate speech, incitement to terrorism, religious extremism, supporting or glorifying violence or misused EU funds should be set up to block them from accessing EU institutions.
The MEPs stressed the need for a thorough pre-check in the registration in a transparency register to disclose all funding sources and noted that funding to NGOs from EU funds must be traceable from the direct recipient to the final beneficiary when funds are passed on in a chain.
The Parliament continues also to be worried about the application of the rule of law conditionality mechanism. The Commission should continuously monitor the situation of rule of law in Hungary and Poland and keep funds frozen for “as long as the rule of law violations threaten the sound financial management of the Union budget”.
In the case of Hungary, 55 % of three cohesion policy programmes (around €6,35 billion) were frozen in December 2022 “although the facts would have justified the freezing of 100 %”, according to the Parliament. To show its concerns, the Budgetary Control committee has sent a fact-finding delegation to Budapest (15-17 May) to look into the ongoing issues with the protection of EU budget.
The European Parliament grants discharge on a recommendation from the Council. According to the Commission, the procedure therefore enables Parliament and the Council to exercise democratic control over the way taxpayers' money is being spent. This procedure does not seem to work as regards the Council.
The Parliament has refused to grant discharge to the Council each financial year since 2009 because the “Council refuses to cooperate with Parliament on ensuring a thorough, orderly and well-informed discharge procedure.”
The Commission declined to comment on the discharge for the Council budget. It told The Brussels Times that it “always has supported and encouraged both dialogue and cooperation between the two institutions, with a view to paving the way to a solution in full respect of the provisions of the Treaty and related secondary legislation.”
As regards the Parliament’s recommendations, the Commission will report in two stages. First, the Commission will adopt by end of June a follow-up report, where it will indicate actions taken/planned to follow-up in particular on the political priorities expressed in the discharge resolution. Later in the year, it will a provide more detailed replies to each recommendation.
ECA also declined to comment on the discharge debate beyond what it already has said in the control committee and the plenary. It confirmed that the Council, together with other EU institutions, is part of its annual audit assessment. “Our work continues to help the other EU institutions and the Member States to better manage and supervise the use of EU funds”.
The Brussels Times