Only half of misused agricultural funds recovered, auditors find

Only half of misused EU taxpayer money under the Common Agricultural Policy (CAP) direct payment scheme has been reimbursed, according to a report by the European Court of Auditors on Tuesday (7 May), which also called on the commission to speed up the recovery of diverted EU funds.

With so-called “irregular expenditure” on the rise, increasing from three to four percent of the EU budget between 2021 and 2022, the report found that though the commission is effective in tracking suspicious use of its funds, it is often too slow in launching repayment orders, hampering effective recovery.

Jorg Kristijan Petrovic, lead author of the report, emphasised the political importance of effective recovery: “The EU owes this to taxpayers, and any failure to recover money would be detrimental to EU citizens’ trust”, Petrovic said, adding that “no effort should be spared” to retrieve misspent EU money.

But the report also highlighted problems with recovering money — which is jointly managed by the commission and member states, primarily in the form of cohesion and agriculture spending, comprising 70 percent of the EU budget.

Whereas under the former, European finances are automatically protected (with member states required to directly reimburse the EU for misused cohesion funds), wrongful use of agriculture money must first be recovered by national authorities, which is then subsequently paid back into the EU budget. 

Consequently, the report indicates that though misuse of cohesion money is more common, agricultural subsidies suffer from a significantly lower recovery rate. Between 2007 and 2022, only 52 percent of misused funds from the European Agricultural Guarantee Fund, the EU’s direct payment scheme to farmers, has been recovered, with 39 percent still outstanding and another nine percent written off. 

Moreover, differences between member states are stark, with the Netherlands, Greece, Romania and Poland reporting recovery rates of under 30 percent, the latter only retrieving a paltry 17 percent of nearly €300m in misused farm funds. 

Lack incentives

These low recovery rates mean that member states face insufficient pressure to recover EU money, according to the report authors. “Without an incentive to recover there is the risk that the rate of recoveries in agriculture deteriorates”, the report writes, highlighting how previously, the “50/50 rule” made national governments liable for half of the outstanding debts after a deadline of four to eight years. However, this rule was dropped in the current version of the CAP.

In a statement replying to the report, the commission generally welcomed the report's recommendations, acknowledging the importance of speed for successful recovery. 

In respect to agriculture subsidies however, it argued that recovery rates were “not fully comparable” and that it was “challenging” to determine causes behind low reimbursement. 

Moreover, the commission rejected the reintroduction of the 50/50 rule as incompatible with the new CAP national plan system, which delegates more responsibility to member states.

Instead the commission said it would “see what incentives can be used to further prevent undue payments.”