European Court of Auditors flags concerns over ‘pervasive’ errors in EU funding

Mistakes are "pervasive" in the allocation of European Union cash to projects across the bloc, the European Court of Auditors has warned following a review of spending in 2019.

The finding comes as the auditors warn for the need for tighter controls to prevent fraud and error as the EU prepares to pump some €750 billion in quick stimulus cash into Europe’s economies to counteract the damage of the coronavirus pandemic.

"Managing the EU's finances in a sound and effective manner will therefore become even more important," said Tony Murphy, Ireland's member of the European Court of Auditors. "We can't just send this money out there and hope for the best. We have to be careful of the increased risk of error and of fraud."

The review found that payments given through entitlements and direct payments – such as the Common Agricultural Policy subsidies that underpin Irish farming and that account for the bulk of EU spending here – had a low rate of error.

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However, payments made as reimbursements had a much higher rate. In the area of competitiveness, such as funding to start-ups and small and medium-sized enterprises, there was an error rate of 4 per cent.

In cohesion funding, which is designed to even out economic disparities between member states and often pays for infrastructure, the estimated error rate was 4.4 per cent. A substantial proportion of the funding assessed was considered at high risk for error, leading the auditors to consider the rate of error to be “pervasive”.

The high rate was discovered on transactions that had already been audited by national authorities, but the errors had not been weeded out, raising questions about the effectiveness of national controls on mistakes and fraud in the allocation of EU funding when it came to cohesion funding, the body said.

“We have issues with the quality of the work of the audit authorities. These are the people checking the work on the ground,” Mr Murphy said.

“If we come along later and we’re finding a 4.4 per cent error rate in transactions that have already been audited, it’s not a good indication,” he said. “Despite continuous efforts to improve the situation, some of these are structural issues that won’t change overnight.”

Last year was the third year in which Ireland has been a net contributor to the EU budget rather than a recipient, a reversal caused by economic growth and the country's increased gross national income. Ireland contributed €230 million more than it received back from the EU in 2019, a fall from €541 million in 2018, a figure that does not take into account the value of beneficial trade and access from being in the single market. The UK was a net payer into the bloc, and its exit is expected to increase contributions from net payers to make up for the shortfall in the future.