EU faces audit backlash as budget errors threaten stability
According to a report published by the European Court of Auditors (ECA), EU controllers are concerned about irregular expenditures by the European Union, including from the recovery mechanism, and warn that this could threaten the Community's budget.
The auditors reported that the estimated error rate in EU budget expenditures in 2023 amounted to as much as 5.6%, whereas the allowable rate is 2%. The biggest irregularities were noted in cohesion expenditures, where errors accounted for 9.3%, and in the post-COVID-19 recovery mechanism.
"Significant irregularities"
The report noted that 2023 was the recovery fund's third year of operation, under which 23 grants were disbursed to 17 member states. However, the audit found that about one-third of these payments did not comply with regulations, and six had significant irregularities. In some cases, milestones, the conditions that countries had to meet to receive funds, were poorly designed, while expenditures were poorly estimated in others.
The Court warned as early as September that, for example, expenditures on climate actions under the fund could have been overstated by as much as 30 billion pounds. Some projects were supposedly overestimated, and, for instance, those implemented as ecological did not meet the criteria.
Moreover, as noted by the ECA, member states are under time pressure to spend both cohesion policy funds and recovery funds promptly, which could mean that the percentage of irregular EU expenditures could increase even further.
EU debt is growing
The audit showed that the EU debt for 2023 reached a record-high level of 410 billion pounds, representing an increase of 32% compared to the previous year. This means the EU's debt is twice as high as in 2021. In addition, the total value of EU commitments, which could turn into debt if not cancelled, reached 485 billion pounds by the end of 2023.
As indicated by the auditors, the EU budget is still burdened by high inflation and assistance to Ukraine; this assistance more than doubled just last year.
Considering all this, the auditors issued a negative opinion on EU expenditures for 2023 and warned of the financial risks facing the Community budget, mainly due to record debt, spending errors, and the war in Ukraine.
