The number of errors in the disbursement of EU funds is increasing, indicating growing risks for the European budget. In its annual report, the European Court of Auditors (ECA) this Thursday, for the third year in a row, gives an adverse opinion on last year’s EU expenditure. It is also worrying, according to the ECA, that the criteria for payments from the large-scale corona recovery fund are not clearly defined enough to be able to test them properly. More suspected fraud The share of errors in spending from the EU budget rose to 3 percent in 2021, from 2.7 percent a year earlier. “That is really worrying,” says Stef Blok, ex-minister for the VVD and a Dutch member of the European Court of Auditors since this spring. “It’s public money and this error rate is substantial.” If the Court of Auditors finds an error, this does not automatically constitute fraud or waste: it simply means that pre-formulated rules for payment have not been (fully) followed. However, auditors did find a higher number of cases of suspected fraud this year: fifteen compared to six a year earlier. The suspicions have been passed on to the European anti-fraud office OLAF and the newly established European Public Prosecutor’s Office. Although the number of fraud cases is small, the ECA is concerned that a growing share of the EU budget consists of ‘high-risk expenditure’: expenditure that is accounted for ex-post and that is linked to complex conditions. This concerns, for example, the development of disadvantaged European regions, development aid or large research projects. “The risk of fraud is increasing,” says ECA President Tony Murphy. Clear criteria Unlike, for example, agricultural funds or scholarships, which have clear rules that a beneficiary must comply with before payment, risky expenditure is accounted for afterwards. In 2014, the share of this type of expenditure was still 47 percent, compared to 63 percent of the EU budget last year. “Ultimately, it is a political decision as to what kind of European programs are created,” says Blok. “But our commitment will always be: use clear criteria, make them easily verifiable and make it clear to the public, the press and to us how expenses are tested.” According to the ECA, this clarity is lacking in the new corona recovery fund, from which hundreds of billions of subsidies will flow to member states. The disbursements from that fund have only recently started, and in 2021 the Court was only able to test one payment, of 11.5 billion to Spain. Although no irregularities were found with that payment, the inspector is concerned that the criteria for payment are difficult to test. With expenditure from the normal EU budget, it can be checked whether receipts and invoices are correct and whether certain financing conditions have been met. However, prior to a payout from the recovery fund, a Member State must come up with a ‘milestone’: generally introducing certain legislation or implementing a reform. According to the Court of Auditors, the Commission does not make sufficiently clear how it assesses the achievement of such a milestone. “We’ve been waiting for a clear methodology from the Commission for some time,” Murphy said. “For this year we expect 17 payouts from the recovery fund that we want to test, so time is running out.” Blok also calls it “very urgent” that clear criteria will be drawn up quickly.