This presentation provides an overview of a recent IEEP study for the Temporary Commission on the EU budget of the Committee of the Regions. The study analyses the execution of the EU budgets from 2007 onwards and discusses relevant implications for local and regional authorities. Based on a thorough evaluation of European Court of Auditors reports the study finds that progress has been made but major areas of concern remain, including error rates in Cohesion Policy, withdrawal practice, and underpinning lacks in information and evaluation systems. The study also analyses the development of outstanding commitments and payments over time and appraises implications for local and regional authorities. Gaps in meeting current commitments will put greater pressure on annual budgets from 2014 onwards.

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@IEEP_eu
Execution of annual budgets 2007-2013:
recommendations for regional and local
authorities
Axel Volkery
Senior Fellow and Head Environmental Governance
5 September 2013
Committee of the Regions, Brussels

2. 2
File note was commissioned by COR to
1. Review recommendations of relevance to local and
regional authorities (LRAs) included in official EU reports
on implementation of EU budget in the period 2007-2013
2. Analyse development of pending claims and Reste à
Liquider (RAL) in the period 2007-2013 and their
implications for LRAs
Background

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• The following sources of information were utilised:
– Last five annual financial reports from European Court of Auditors
(ECA)
– Comments / requests from Parliament & Council as part of the
discharge process for the same period
– Response from Commission as part of the discharge process for
the same period
– Other relevant EU documents
• Note:
– ECA reports are factual documents
– Reports do seldom contain any statements or recommendations
addressing LRAs directly
Information sources

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Synopsis of ECA reports: key areas of concern
Error rates
• Budget implementation has been regularly found to be affected by
material level error of legality and regularity
• Cohesion Policy stands out: > 5per cent for Cohesion, between 2 and 5 per
cent for employment and social affairs
• Eligibility errors are the most frequent errors in ERDF, ESF, EMFF, but error
rate is decreasing
• Accuracy errors are most frequent errors under EARDF
• Cohesion Policy is also affected by public procurement errors
Withdrawal practice
• Eligibility errors should not result in new irregular expenditure being
declared
Commitments
• High level of outstanding commitments is repeatedly criticised

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Synopsis of ECA reports: root causes
Root causes
Lack of sufficiency and
transparency in information
and evaluation systems
Difficult to apply
eligibility rules
Lack of effective evaluation and
audit systems (particularly for
first level checks)
Incoherent requirements for
reporting and monitoring
Lack of effective
sanctioning systems

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Synopsis of ECA reports: key recommendations
Cohesion Policy
Simplify eligibility rules and
ensure strict compliance
Strengthening sanctions
(interruptions, suspensions)
Align reporting periods for
annual control reports
Better guidance and training
for managing and audit
authorities
Apply corrective mechanisms
on operational programmes
Improve feedback between
authorities
Improve
withdrawal
practice

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Synopsis of ECA reports: key recommendations
Rural
development
and EMFF
More rigorous administrative
and on-the-spot checks
Better control of beneficiaries
in terms of keeping obligations
Simplify rules and conditions Take a more systemic approach
towards addressing
weaknesses in EMFF

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Parliament
• Reiterates many of ECA’s conclusions – emphasizes differences in Member
State management and control systems
• Criticises lack of incentives for norm compliance, part. Cohesion Policy
• Reiterates need for simplification, uniform auditing standards and greater
cooperation between Commission and authorities
• Calls for greater supervisory role of Commission and strengthening of
sanctions
Parliament and Council responses
Council
• Urges national authorities to apply ex-ante controls more effectively
• Improve management and control systems, simplify rules and apply
correction mechanisms more rigorously
• Points to the relevance of supervision and action by European Commission

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Outstanding commitments 2012
Source: European Commission

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RAL as per main programme of funding
Source: European Commission
A much larger than thought proportion of 2013
payment appropriations will need to be used to
honour 2012 claims – already the additional EUR 11.2
bn claimed by the Commission were at risk of falling
short but Council approved only EUR 7.3 bn so far
-
Gap in meeting 2013 commitments remains present
after draft amending budget 06/2013, putting greater
pressure on annual budgets from 2014 onwards
RAL is projected to grow to EUR 250 bn by 2020

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• RAL normally increased towards ends of MFF periods, but RAL in 2013 is much
higher compared to RAL in 2006
• Underlines the need for greater flexibility, as discussed in budget negotiations
RAL over time

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• Main implications arise under funds under shared
management
– for example, support from Cohesion Policy amounts to – on average –
around 55 per cent of expenditure on environment or 25 per cent on
transport, energy, telecom.
Member State implications
• RAL differs between Member States (MS)
• MS with largest pending claims are Poland, Italy, Spain
• Ireland, Denmark, Cyprus and Luxembourg have lowest amount
• Differences in RAL often have a specific domestic connotation
• Change in economic context conditions, administrative
capacities, incoherence between programme planning and project
selection
• Quality and capacity of authorities seem to be much more relevant
influencing factors compared to other factors (level of decentralisation)

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Thank you!
Contact:
Axel Volkery
avolkery@ieep.eu
T. +32 2111090
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