The Recovery and Resilience Facility (RRF), also known as the EU’s recovery fund, has weaknesses in its monitoring system that make it insufficient for measuring overall performance, according to a new audit report published by the European Court of Auditors (ECA) last week.
The RRF was set up in response to the COVID-19 pandemic. Worth €723 billion – up to €338 billion in non-repayable grants and €385 billion in loans - the fund aims at financing member states’ reforms and investments in the recovery. These fall under six policy pillars, including green transition and digital transformation.
Unlike most other EU programmes, the Commission disburses the funding as countries achieve milestones and targets rather than on the basis of actual costs. This is also the root of the disagreement between the ECA and the Commission. What the auditors describe as a design flaw, the Commission defends as a well-designed system, based on the RRF regulation to facilitate a rapid recovery.
“The EU recovery fund provides member states with more money than ever, but citizens need to know whether its fundamental goals are met and how the money is spent,” said Ivana Maletić, the Croatian ECA member in charge of the report. “We are in a paradoxical situation where for the EU’s largest fund that is claimed to be performance-based, we can measure progress but not performance itself.”
In a special audit in March 2023, ECA was even more blunt in its critique. “Citizens will only trust new ways of EU funding if they can be sure that their money is being spent properly,” said ECA President Tony Murphy. “Currently, there is a gap in terms of the assurance the Commission can provide for the EU’s main pandemic recovery fund and a lack of accountability at EU level.”
“We consider that there is still an accountability gap,” Ivana Maletić told The Brussels Times. “The control system provides only limited verified information at EU level that RRF-funded investment projects comply with EU and national rules. The lack of such verified information impacts the assurance the Commission can provide and results in an EU-level accountability gap.”
This assessment is based on detailed findings in the new audit report. The auditors covered the period from the RRF’s inception until December 2022. They analysed milestones and targets in the plans of five member states (Greece, France, Italy, Portugal and Romania) and the common indicators across all member states that had reported data by June 2022.
To assess the selected member states’ data collection processes in practice, they carried out an on-site review of a sample of those targets which had already been achieved or were close to being achieved They traced the data from the initial collection in the member states to the uploading of data and evidence in the national IT-systems.
Different approaches to performance
The RRF’s performance-monitoring structure is based on two main building blocks: milestones and targets for tracking member states’ progress on reforms and investments; and 14 predefined common indicators for monitoring success in achieving the RRF’s objectives. However, the auditors found that these two monitoring elements are insufficient for assessing the RRF’s overall performance.
The auditors noted that the basic concept of ‘performance’ is not defined in the regulation. The verification mechanism and monitoring steps in the operational arrangements should not be considered when assessing the satisfactory fulfilment of milestones and targets, according to the Commission’s own methodology guidance.
ECA defines performance as a measure of how well an EU-funded action, project or programme has met its objectives and provides value for money. The Commission made it easy for the member states and advised them to set input indicators for the milestones and targets in their recovery plans. It also advised them to avoid setting milestones or targets which were beyond their control.
This means that the milestones and indicators chosen by the member states and approved by the Commission only assess the achievement of a specific measure and generally will not provide sufficient information on its contribution to the RRF’s general objective - promoting the EU’s economic, social and territorial cohesion
Differences between member states
ECA examined 740 measures in the selected countries. It found that for around 5 % of measures the last milestone or target does not indicate the completion of that measure. It will therefore not be possible to assess whether those measures have been successfully completed based on their final milestones or targets alone.
The proportion of such measures varies across the sampled member states, ranging from only 1 % in Greece to 16 % in France. Moreover, around 2 % of the measures in the sample will not be fully completed by the deadline of 31 August 2026 set in the RRF Regulation. This will limit the Commission’s ability to measure their contribution to the RRF’s objectives.
ECA also noted differing practices among audit authorities regarding the timing of their checks on the fulfilment of milestones and targets. In France, Greece, Portugal and Romania, checks on the reliability and accuracy of the data on milestones and targets were performed before those milestones and targets were included in a payment request.
In Italy, however, such checks were performed ex post, i.e., after the country had submitted its payment request and after the Commission had already finished assessing fulfilment of milestones and targets.
On the positive side, in terms of data reported on milestones and targets, the Commission and member states have mostly adequate systems for ensuring quality. However, also there the auditors found shortcomings, and stressed that risks to data reliability remain, especially as regards those who ultimately receive funding.
ECA is also critical against the Commission’s online scoreboard for the RRF, which although user-friendly, is misleading in the way it presents the fund’s progress under the six pillars. As the Commission does not collect data on money spent in the member states, its reporting on the RRF is based on estimates using ‘unit values’.
Currently milestones and targets in general focus on outputs rather than results. Is it not up to the evaluations on national level to measure the results and impacts of the measures?
“The RRF Regulation includes an obligation for the Commission to carry out evaluations of the RRF,” ECA member Maletić replied. “In its mid-term evaluation coming next year, the Commission should in particular assess to which extent the objectives of the RRF have been achieved, the efficiency of the use of the resources and the European added value.”
“However, if the current performance monitoring system does not envisage the collection of all the relevant information, including on results and actual costs, it will be challenging for the Commission to provide such an assessment. Evaluations at national level could complement the Commission's evaluation but are not required as such under the RRF Regulation.“
In its audit of the 2022 EU budget, ECA found an increase in the error rate in high-risk spending which is similar to spending in the RRF. Did you assess how much RRF spending would have to be recovered?
“As this is an audit on the design of the RRF, the assessment of any potential recovery would go beyond its scope”.
Did you rely on the supreme audit institution (SAI) in the member states when auditing the RRF performance system?
“We carry out our audits in complete independence and according to our own methodology/international auditing standards. But we are of course in contact with national authorities and some examples are mentioned in the report.”
Considering the design flaws in the RRF performance system, why didn't ECA recommend amendments to the regulation?
“Given that the RRF is already half way through, any regulatory changes at this stage may pose challenges for further implementation, that should end by 31 August 2026. Having that in mind, instead we made two recommendations to the Commission aimed at addressing these design flaws when setting up future programmes based on financing not linked to costs.”
Disagreement on recommendations
The auditors call on the Commission to improve its reporting on the RRF, for example by collecting and reporting data on actual expenditure, and to devise a fully-fledged performance monitoring system for future non-cost-based funding instruments. In its reply, the Commission sticks to its position based on the RRF regulation and accepted only some of ECA’s recommendations.
As regards the first recommendation to ensure a comprehensive performance monitoring and evaluation framework when designing instruments based on financing not linked to costs, the Commission replied that it goes beyond the RRF. It was willing to take it account in future legislative proposals but could not prejudge their content.
The Commission welcomed the few positive findings in the report but disagreed on ECA’s overall conclusion on the RRF performance framework. According to the Commission, The RRF framework lays out a “robust and comprehensive framework to monitor performance”.
“The RRF is a performance-based instrument, which is being implemented on the ground through 2,000 reforms and investments. Progress on these reforms and investments is being measured through over 6,000 tailored milestones and targets, the satisfactory fulfilment of which is the precondition for funds to be disbursed.”
The Commission itself also has reporting duties, it says. “It fulfils them through an array of actions and tools, including the Recovery and Resilience Scoreboard, which provides timely information on the overall performance of the RRF, a review report published in July 2022, and the annual reports on the implementation of the RRF.”
As regards the Scoreboard, the Commission accepted the recommendation to improve the presentation of data displayed on it. The Commission is not planning to audit the underlying data reported, as this is not required by the regulation, but will carry out a mid-term evaluation and an ex-post evaluation of the implementation of the RRF, by February 2024 and December 2028 respectively.
M. Apelblat
The Brussels Times
