EU Trend Report 2013

Conclusions

Little improvement in accountability for the use of EU funds and emergency support

There has been little improvement in the accountability rendered by EU member states for their use of the EU funding they received in 2012. The EU's new Financial Regulation still does not require the member states to report on their expenditure each year in the form of a member state declaration. It is therefore not transparent – except in the four member states that have voluntarily issued member state declarations since 2007 – whether European taxpayers' money is spent in accordance with the rules. This modest ambition to improve the member states' accountability for EU funds is a cause for concern. More than ever before, the financial crisis calls for sound financial management and reliable accounting information.

Moreover, independent audit and accountability had not been arranged for the emergency support in 2012. The good news is that a board of auditors has been appointed for the new permanent emergency fund, the ESM. It has been charged with auditing the regularity and effectiveness of support operations for weak EU member states. It must have sufficient human and financial resource, of course, to carry out this task but this had not been arranged when the board of auditors was established. This power to audit the ESM does not extend to other emergency funds, such as the first Greek Loan Facility and the temporary emergency fund, the EFSF. We think this is a missed opportunity. A total of up to €240 billion is not subject to public external audit.

No improvement in the regularity and insight into the effectiveness of EU funding

There has been no improvement in the regularity of the use of EU funding. According to data that became available in 2012, the error rate in expenditure was 3.9%. This error rate represents approximately €5 billion. The largest problems occur in the cohesion, agricultural and research policy fields. The European Commission made considerably more reservations in its annual reports for 2011. Furthermore, the financial value of the reservations was higher than in the past. The number of irregularities reported by the member states and the associated financial value, by contrast, were lower. The European Commission's new annual report on the effectiveness of EU policy does not yet improve insight into policy effectiveness. We think the scope of the report is too limited: it covers just two policy fields. We assessed the effectiveness of one EU policy field ourselves by looking at how the Netherlands uses the support it receives from the European Fisheries Fund. It cannot yet be said whether the goals of the Dutch fisheries programme will be achieved.

Little use made of simpler rules on structural funds programmes in the Netherlands

The European Parliament and the European Court of Auditors last year highlighted the need to simplify administrative rules for projects financed from the structural funds, such as the European Social Fund and the European Rural Development Fund. Complex rules increase the risk of error and non-achievement of policy goals, they argued. Our audit found that only limited use was made of the simpler rules for project administration.

Recommendations

We recommend that the government continue to work in Brussels on increasing transparency and improving public accountability for European funding. In concrete terms, the relevant ministers should: 

• insist on the preparation of compulsory annual member state declarations by all member states;
• insist that the ESM board of auditors has sufficient human and financial resources to carry out its tasks, and is given a mandate to audit funds provided under the Greek Loan Facility and the EFSF;
• insist that EU member states that receive support from the emergency funds prepare an annual member state declaration on the use of funds not only from the regular EU budget but also from the European emergency funds.

To improve transparency and accountability for EU funds spent in the Netherlands, we recommend that the relevant ministers:

• formulate the Netherlands' goals, measures and indicators for the European fisheries policy in specific and measurable terms so that it can be determined during and after implementation whether the goals have been or will be achieved;
• eliminate the financial risks of implementing European fisheries policy in the Netherlands as soon as possible;
• actively promote the use of existing opportunities to simplify the rules.

Response

The government's response to our report was predominantly positive but it will not adopt our recommendation to have the ESM board of auditors audit the first Greek Loan Facility. Nor does it accept our recommendation that member states receiving support from the emergency funds should prepare compulsory annual member state declarations.