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International Internet Magazine. Baltic States news & analytics Wednesday, 17.10.2018, 04:58

Spending EU taxpayers´ money must bring better results

Ville Itälä, Member The European Court of Auditors, Baltic Rim Economies, Issue 4, 20.12.2017.Print version
Three years ago the European Court of Auditors (ECA) – EU’s independent external audit body – warned that the culture of “use it or lose it” has to stop. The rationale behind the statement was that the focus on the use of EU taxpayers’ money had been for many years on absorption, not on results. Later, we have repeated the message by saying that “wholly new approach” is needed.

In other words, the EU must invest its money better. In the aftermath of the Brexit vote as the Citizens’ trust to EU was very low, we highlighted that there should be reform which must be built on solid financial foundations. In our view, four elements were of particular importance.

 

First, the EU must keep good accounts. People cannot even begin to trust the Union if they do not believe that their money is properly looked after and accounted. Secondly, the EU must make sure its financial rules are correctly applied. Thirdly, EU spending must bring value-for-money; and fourthly the spending has to be open and transparent. Each of these elements still requires significant efforts. Some improvements surely have taken place but the glass is still - at best - only half full. In our annual report 2016, we concluded that about half of EU spending was below the 2% threshold for material level of error. As a result, we issued a qualified opinion on 2016 payments, rather than an adverse one. This was our first qualified opinion since we began to provide an annual statement of assurance in 1994. In addition, we could give a clean opinion on the 2016 EU accounts’ reliability, as has been the case every year since 2007. But despite improvements, the overall level of error for EU spending in 2016 was still at 3.1%, clearly above the material threshold of 2 %.

 

When presenting the annual report 2016 our President Klaus Heiner Lehne stated that “This year’s qualified opinion reflects an important improvement in EU finances … Going forward, we will take greater account of internal controls at the European Commission and in the Member States, so we can better promote accountability and further improve the management of EU finances. We will also increase our focus on performance to ensure EU citizens get value for their money.” So, in the years to come our work will put greater emphasis on verifying the audit results reported by the Commission, our main auditee. In addition, we will continue to devote more resources to performance related issues, to be published together with the annual report or in separate special reports. EU´s annual budget has been framed, and since 2014 regulated, by so called multiannual financial framework. The seven year framework, essentially expenditure ceilings, sets out how much and in which policy areas EU can spend taxpayers´ money. Commission´s proposal for the next framework is planned to be published in May 2018.

 

Our annual report 2016 (published in September 2017) was thus the last one before the next round of intense and long discussions will kick off. As said before, even if there have been improvements in the management of EU budget, there is still plenty of opportunities to make the future EU budgets much more results-oriented and concentrate more on projects bringing real European added value. It is of course important for our citizens to know that public funds are being spent lawfully. But even more importantly, people want to know what they got for their money. Did it make sense to build a particular road or airport in a particular place? Were jobs and growth actually delivered? Was this programme or project really worth funding from the EU budget instead of national budget? Aiming at better value for money includes all the EU policies, not least the cohesion policy. Therein, the first question is, should the wealthier member states still implement their development projects with EU co-financing? Some people have also asked whether the traditional grant type financing is the most appropriate taking into account ownership of the projects? Or in the world of ultra-low interest rates, should the focus be more on loans and guarantee type of support? And finally, should the allocation of EU funds under cohesion policy be made more conditional on performance? These questions – made by some prominent experts – will certainly pop up in the discussions on the future financial framework.

 

As I mentioned in the beginning, the absorption of EU funds, especially in the area of cohesion policy, has been the main driver in the philosophy of the member states, and the Commission. The national envelopes, handed over to each member state for the 7 year period, have been ring-fenced and the only threat of losing even small part of them has been the inability to use them in 2 or 3 years. There are signs that some member states have had genuine problems to find useful projects to be financed from their envelopes. One sign is that the total payments the EU is committed to making from future budgets (outstanding commitments) were higher than ever in 2016, at €238.8 billion. The European Court of Auditors will continue to act as the guardians of the EU’s finances and of our citizens’ financial interests. We will continue to be an independent voice, highlighting things that work well and shining a light on uncomfortable truths when things are not working. And in a world of widespread misinformation and manipulation of data, the European Court of Auditors will continue to provide EU citizens with reliable and unbiased information. 






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