EU budget errors on the rise, watchdog says

He noted that EU pay-outs to member states need to be linked to performance on clear objectives which are spelt out before project launch.

“We need to change the script. The script we have today is too complex, is too much focussed on allocating funds and spending money. It is input driven,” he said.

The complex rules and input-heavy system are contributing to an increase number of errors compared to previous year, he added.

“The causes of the problem lie in the fact that eligibility conditions are not respected, procurement rules are not followed, area declarations for farmers are not corresponding to reality, this is systematic,” Caldeira said.

The court's findings are detailed in a 290-page non-binding report on the EU budget for the 2012 financial year, out Tuesday (5 November).

The EU budget was €138.6 billion last year.

The European Commission and member states jointly managed around 80 percent.

But the error rate for spending went from 3.9 percent in 2011 to 4.8 percent in 2012.

Rural development, environment, fisheries and health are the most consistently error-prone spending areas. In 2012 it was 7.9 percent in 2012, a slight increase from 7.7 percent in 2011.

The greatest jump of error rate was found in employment and social affairs, which went from 2.2 percent in 2011 to 3.2 percent in 2012.

Error is not fraud

Caldeira was quick to point out that errors do not indicate fraud but rather inefficiencies.

The rate, he said, is an estimate of the money that should not have been paid out of the EU budget due to the improper application of public purchasing rules created by member states and the European Parliament.

Most failures involved lack of respect for public procurement rules.

Minor errors include forgetting to put up an EU-funded sign next to a project site.

Other, more serous errors, involved money wrongly spent to help companies hire people seeking work, or, awarding a construction highway project directly to a company, without allowing other potential bidders the chance to make better offers.

The funds were used for their intended purposes, says the court, even though the conditions for their use were not fully respected.

Authorities in a majority of the member states are in a position to correct the errors, but have little incentive to do so because it involves withdrawing and reintroducing the EU funding claim.

“This is the case for rural development, for cohesion, for all the areas of shared management where member state authorities are involved,” he said.

In other cases, the bad claims are not a drain on the EU budget but are instead offset by the national when discovered.

“In many instances, the tax payers of member states are those who are paying because the final beneficiaries of those irregular payments are not asked to pay back. It is the national budget that is paying back,” he said.

Time to change

Caldeira underlined that the EU is not paying enough attention on results, a message he says he has repeatedly delivered since 2008.

He said the next budget cycle, the upcoming European elections in May, and the selection of new European commissioners in October, is an opportunity to create a new management culture.

“The conclusion is that the European Union pays too many claims that are not eligible, that means that we are paying funds to beneficiaries into many instances or projects that are not entitled to receive them,” he noted.