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EN Our activities in 2021 Annual Activity Report of the European Court of Auditors 02 EUROPEAN COURT OF AUDITORS 12, rue Alcide De Gasperi 1615 Luxembourg LUXEMBOURG Tel.

+352 4398-1 Enquiries: eca.europa.eu/en/Pages/ContactForm.aspx Website: eca.europa.eu Twitter: @EUAuditors More information on the European Union is available on the internet (http://europa.eu).
Luxembourg: Publications Office of the European Union, 2022 ISBN 978-92-847-7493-7 Print PDF ISBN 978-92-847-7469-2 HTML ISBN 978-92-847-7433-3 ISSN 1684-0739 doi:10.2865/407 QJ-AA-22-001-EN-C ISSN 2315-3938 doi:10.2865/801091 QJ-AA-22-001-EN-N ISSN 2315-3938 doi:10.2865/407868 QJ-AA-22-001-EN-Q Our activities in 2021 Annual Activity Report of the European Court of Auditors Contents President’s foreword 2021 at a glance Our activities Work during COVID-19 Our new strategy for 2021-2025 Auditing the performance and regularity of EU actions Work programme Audit fieldwork Our reports Other communication products Conferences and webinars Innovation and digital audit Institutional relations Cooperation with other supreme audit institutions Our management Members Audit chambers and committees Measuring performance Our staff Staff allocation Recruitment Age profile Equal opportunities 3 6 8 9 33 34 37 39 44 48 48 51 53 61 61 61 62 62 4 Audit support Audit methodology Professional training Translation Information security Buildings Environmental management Our accountability Financial information Internal and external audit 65 65 65 68 68 69 71 72 72 74 5 European Court of Auditors Who we are o o o o o the European Union’s external auditor; established by the 1975 Treaty of Brussels, starting work in October 1977; a fully-fledged European Institution since 1993 under the Maastricht Treaty; headquartered in Luxembourg; a collegiate body of 27 Members, one from each EU Member State, appointed by the Council after consulting the European Parliament; o around 900 staff of all EU nationalities.
What we do o make sure that the EU keeps proper accounts, and correctly applies its financial rules, and that EU policies and programmes achieve their intended objectives and deliver value for money; o contribute to improving the EU’s financial management, and promote accountability and transparency; o warn of risks, provide assurance, indicate shortcomings and successes, and offer guidance to EU policymakers and legislators; o present our observations and recommendations to the European Parliament, the Council, national governments and parliaments, and the general public.
6 President’s foreword Dear reader, In 2021, the COVID-19 pandemic continued to weigh heavily on the European Union and its Member States.

In these difficult times, the EU is providing financial assistance on an unprecedented scale.

Apart from the traditional budgetary resources agreed as part of the 2021-2027 multiannual financial framework (MFF), the EU launched the ‘NextGenerationEU’ (NGEU) initiative, a recovery package of supplementary funds based on debt securities.
Against this backdrop, we adopted a new strategy in January for 2021-2025, under which we will focus on three strategic goals.

These will guide our efforts in auditing the EU’s finances over the coming years, making the necessary changes to our organisation and using our resources effectively and efficiently.

This activity report gives an overview of our work in 2021, which was the first implementation year for our new strategy.
In addition, it provides information on our management, staff, audit support and finances.

Despite the ongoing pandemic, we maintained business continuity throughout the year and continuously adapted to changing working conditions.

7 In 2021, we published all our annual reports within the official deadlines.

We also published 32 special reports and reviews, while keeping delays within reasonable limits.
The EU citizens, and our institutional stakeholders and partners at both EU and Member State level, can continue to count on us to provide them with independent, objective reports on key issues for the future of the EU, highlighting what works well, drawing attention to what does not and recommending changes.

We stand in solidarity with Ukraine.

We have strongly condemned the Russian invasion of Ukraine and organised humanitarian help for the victims of the Russian aggression.
These are dark times for Europe.

Now more than ever, the EU needs to show unity.

We hope you find the information in this year’s Activity Report useful.
Klaus-Heiner Lehne President 8 2021 at a glance 32 reports, of which two on COVID-19 related issues First year implementation of our 2021-2025 strategy Clean opinion on accounts and revenue Adverse opinion on expenditure 419 appearances at the European Parliament, the Council, national parliaments and Member State governments Start examining the ‘NextGenerationEU’ initiative Increased media coverage Estimated error rate: 2.7 % 67 000 online articles and social media posts Towards a diversity and inclusion policy 83 % of respondents find our reports useful 9 Our activities Work during COVID-19 Business continuity during the COVID-19 pandemic In 2021, we continued to work within the confines of COVID-related travel and public health restrictions.
Our ability to carry out on-the-spot audits was still significantly restricted.

We carried on transforming the way we work and adjusting to the new situation.

Our staff managed to continuously adapt to changing working conditions and quickly learned new tools.

It became clear that we could make rapid changes to our working methods when needed, while continuing to provide an effective public audit service in the EU.

We managed to deliver timely audit reports, opinions and reviews.
We reached meaningful conclusions and made relevant recommendations, sometimes having worked entirely virtually.

In the future, we will strive to successfully apply the experience of the past two years and enhance the added value and efficiency of our on-the-spot visits by combining them with virtual work.
10 Our new strategy for 2021-2025 For many years, we have used multiannual strategies to chart a long-term course for our audit work, promote organisational change for continuous improvement and remain at the forefront of development in public-sector auditing.

2021: first year of new strategy At the end of 2021, we completed the first year of our new strategy for 2021-2025.
Our strategic goals for this five-year period are to improve accountability, transparency and audit arrangements across all types of EU action; target our audits at the areas and topics where we can add most value; and provide strong audit assurance, in a challenging and changing environment.

To put our strategy into practice, we agreed on implementation measures for each goal and objective, assigned responsibilities, and set deadlines.
This year we have made good progress in several actions, notably: o o o o o reviewing our annual report and our approach to the underlying statement of assurance audit; drafting a strategic audit approach for the ‘NextGenerationEU’ (NGEU) initiative, including the Recovery and Resilience Facility (RRF); drawing up a fraud action plan; reviewing our work programming system; setting relevant performance indicators to monitor the implementation of our strategy; and o formulating a new communication strategy.
11 Auditing the performance and regularity of EU actions Performance, financial and compliance audits Our audits provide EU citizens and policymakers with independent, objective reports on key issues for the future of the EU, highlighting what works well and drawing attention to what does not.

Our performance audits address the effectiveness, efficiency and economy of EU policies and programmes.
They focus on topics reflecting the issues the EU is facing, such as: — — — — — the sustainable and environmentally-friendly use of natural resources; growth and inclusion; the challenges of migration and global development; the single market and the banking union; and ensuring that the European Union is accountable and efficient.

These audits aim to help the EU to better meet its policy objectives.
Our financial and compliance audits for the EU budget and the budgets of the European Development Funds (EDFs) include our Statement of Assurance on the reliability of the annual accounts and the legality and regularity of the underlying transactions.
We may also undertake selected compliance audits to examine the state of the EU’s budgetary accounting and financial management, or to assess whether the management and control systems for collecting and spending EU funds comply with the applicable EU and national rules.

Lastly, we are the external auditor for a number of EU agencies, decentralised bodies and Joint Undertakings, and the European Schools.

We carry out all our audits in line with internationally accepted public-sector auditing standards.
12 Work programme Our 2022+ work programme Our 2022+ work programme, published in December 2021, highlights our audit priorities for the coming years and gives details of the 79 special reports and reviews we intend to publish from 2022 onwards.

More than two thirds of the new 2022 audit tasks are strongly aligned with directions set in our strategy for 2021-2025, notably to target areas and topics where we can add most value.
Our four strategic areas are: the Union’s economic competitiveness; resilience to threats to the Union’s security, and respect for the European values of freedom, democracy and the rule of law; climate change, the environment and natural resources; and fiscal policies and public finances in the Union.
In addition, we plan to publish 16 reports on issues regarding the EU’s response to COVID-19, such as the procurement of vaccines, and a series of audits on the Recovery and Resilience Facility (‘NextGenerationEU’ (NGEU) initiative).

We prepare our audit work programme independently, but not in isolation.

We reach out to our institutional stakeholders and in particular the European Parliament.
Since 2015, when we first initiated this dialogue, the number of suggestions by parliamentary committees has risen steadily: from 37 suggestions in 2015 to 164 audit suggestions for the 2022+ work programme.

Almost two thirds of these suggestions are fully or partly taken up in ongoing or future work, and some have now been covered in our latest reports.

For the first time, we also received eight additional audit ideas submitted by ten Permanent Representations of Member States.
13 Audit fieldwork We do most of our audit work on our premises in Luxembourg.

Under normal circumstances, our auditors also make a large number of visits to the European Commission – our main auditee – and other EU institutions, as well as to agencies and bodies, national, regional and local authorities in the Member States, EU delegations in non-EU countries, and international organisations that handle EU funds.
We normally also visit recipients of EU funds on the spot, both within the EU and beyond its borders.

Through these checks, we follow the audit trail and obtain direct audit evidence from those involved in managing EU policies and programmes and collecting or paying out EU funds, as well as from the beneficiaries.

In 2021, we carried out most of these checks virtually.

We strive to adopt our selected audits within 13 months, in line with the target set in the EU’s Financial Regulation.
14 2021: COVID-19 restrictions still limiting on-the-spot checks Our audit teams generally comprise two or three auditors, while our audit visits range in length from a few days to a couple of weeks.

Our on-the-spot checks within the EU are generally coordinated in liaison with the supreme audit institutions (SAIs) of the Member States concerned.

For most of 2021, the travel restrictions and public health measures (border closures, quarantine rules, testing requirements, etc.)
continued to limit our ability to carry out audit fieldwork.

Therefore, compared to pre-COVID-19 years, our auditors spent significantly fewer days auditing on the ground.

They spent a total of 857 days in Member States and outside the EU compared with 1 190 days in 2020 and 3 605 days in 2019.

They also spent 299 days at EU institutions, decentralised agencies and bodies across the EU, Joint Undertakings, international organisations such as the United Nations and the OECD, and private audit firms.
The corresponding figures for 2020 and 2019 were 627 and 2 504 days, respectively.

At the same time, we compensated for the limited on-the-spot checks by making increased use of remote auditing and gathering evidence electronically.

We used videoconferencing tools and other information technology, such as secure data and document sharing, to interact with our auditees.
EU Member States EU institutions and international organisations Non-EU countries 827 1 047 299 627 3 160 2 504 30 143 445 Total 1 156 1 817 6 109 Breakdown 2019 to 2021 2021 2020 2019 15 Our reports Our audit reports, reviews and opinions are an essential element of the EU’s accountability chain.
They help the European Parliament and the Council to monitor and scrutinise the achievement of the EU’s policy objectives and to hold to account – those responsible for managing the EU budget, particularly in the context of the annual discharge procedure.

Special reports and reviews In 2021, we published 32 special reports and reviews addressing many of the challenges the EU is facing across the different areas of EU spending and policies.
These included climate action, environment, digitalisation, migration, capital markets union and the rule of law, to name but a few.

Two of the reports were COVID-19 related, one concerning the EU’s public health response and the other air passenger rights.

We also started to examine the ‘NextGenerationEU’ recovery initiative, in particular the Recovery and Resilience Facility.
In our special reports, we examine whether the objectives of selected EU policies and programmes have been met, whether results have been achieved effectively and efficiently, and whether EU action has added value – i.e.

whether it has delivered more than could be achieved with actions at national level alone.

In these reports, we also make recommendations, identifying ways to save money, work better, avoid waste or achieve expected policy objectives more effectively.
Our reviews aim to provide scene-setting descriptions and analysis, often from a crosscutting perspective and based on previous audit work or other publicly available information.

We may also use them to present our analysis of areas or issues we have not yet audited, or to establish facts about specific topics or problems.

In contrast to audits, they do not address evaluative questions or provide assurance.
The following pages provide insights into our work and examples of special reports from 2021 covering different policy areas.

16 Sustainable use of natural resources Special report 16/2021: Common Agricultural Policy and climate – Half of EU climate spending but farm emissions are not decreasing Food production is responsible for 26 % of global greenhouse gas emissions.

Agriculture, in particular the livestock sector, is responsible for most of these emissions.
Since 2013, climate action has been one of the main objectives of the Common Agricultural Policy – the CAP.

The Commission attributed over €100 billion – more than a quarter of the total CAP budget – to mitigating and adapting to climate change during the 2014-2020 period.

We assessed whether the CAP supported climate mitigation practices with the potential to reduce greenhouse gas emissions from agriculture.
We also examined whether the CAP incentivised the uptake of effective mitigation practices in the 2014-2020 period better than in 2007-2013.

We found that the €100 billion CAP funding on climate action in 2014-2020 had little impact on agricultural emissions, which have not changed significantly since 2010.

Most mitigation measures supported by the CAP have low potential for mitigating climate change.

The CAP rarely finances measures with high climate mitigation potential.
We recommended that the Commission take action to ensure that the CAP reduces emissions from agriculture; take steps to reduce emissions from cultivated drained organic soils; and report regularly on the CAP’s contribution to climate mitigation.

17 Investment for cohesion, growth and inclusion Special report 15/2021: Air passenger rights during the COVID-19 pandemic – Key rights not protected despite Commission efforts Over the last three decades, there has been a boom in travel in Europe.
The EU has developed a harmonised level of protection for passenger rights.

The COVID-19 crisis has had a major impact on many sectors of the economy, the travel and tourism sectors being amongst the first directly hit.

This resulted in numerous flight cancellations, followed by requests for reimbursement by passengers affected.

Airlines and package organisers faced serious liquidity problems, and Member States provided them with unprecedented levels of support.
We assessed how the COVID-19 crisis affected air passenger rights and whether the rights of access to information and the right to reimbursement for air passengers were safeguarded.

We also examined how Member States supported airlines with State aid and whether this aid was linked to the protection of passenger rights.
We found that the COVID-19 crisis highlighted the fact that air passengers were not fully informed about their rights, and that there was a risk that they would consequently lose money to which they were entitled.

We also found that the Commission’s temporary State aid framework facilitated the provision of unprecedented levels of State aid by Member States to airlines and package organisers, amounting to €34.7 billion.
While the Commission clarified that Member States could link the protection of passenger rights to State aid, this was not the case for aid to airlines.

Furthermore, we found that the Commission tried to protect the rights of air passengers but had limited enforcement powers.
We recommended that the Commission take action to ensure better protection of, and information on, air passenger rights; work with Member States to address ways of improving coordination between them and take further action to link State aid to airlines more closely to passenger reimbursement; take action to improve tools and legislation for safeguarding air passenger rights; and consider the relevance of the recommendations for other modes of transport.
18 External action, security and justice Special report 08/2021: Frontex’s support to external border management – not sufficiently effective to date The Schengen Convention created a single area allowing movement between signatory countries without internal border checks.

Surveillance and control of its external borders are essential for facilitating the free movement of people and goods within the area, while seeking to guarantee internal security and prevent potential threats at the borders.
In 2016, Frontex became the European Border and Coast Guard Agency and was empowered to facilitate European integrated border management at the EU’s external border, where Member States retain responsibility.

In 2019, its powers were further enhanced to move from a support and coordination role to an operational role.

This involved an exponential increase in resources, introducing a standing corps of 10 000 operational staff by 2027 with an average budget of €900 million per year.
We assessed whether Frontex carried out its primary activities effectively to contribute to implementing European integrated border management.

We also examined how prepared it was to fulfil its new expanded mandate.

We found that Frontex’s support for Member States/Schengen associated countries in fighting illegal immigration and cross-border crime was not sufficiently effective.
We also found that Frontex had not fully implemented its 2016 mandate and highlighted several risks related to Frontex’s 2019 mandate.
We recommended improving the information exchange framework and the European situational picture; updating and implementing the common integrated risk analysis model and securing access to other sources of information; developing the potential of the vulnerability assessment; improving Frontex’s operational response; and addressing the challenges posed by Frontex’s new mandate.
19 Regulation of markets and competitive economy Special report 13/2021: EU efforts to fight money laundering in the banking sector are fragmented and implementation is insufficient Money laundering is the practice of ‘legitimising’ the proceeds of crime by filtering them into the regular economy to disguise their illegal origin.

Within Europe, Europol estimates the value of suspicious transactions in the hundreds of billions of euros, at an equivalent of 1.3 % of the EU’s gross domestic product.
The EU adopted its first anti-money laundering directive in 1991 to counter threats to the internal market from money laundering, and, subsequently, to prevent terrorist financing.

It was most recently updated in 2018.

The anti-money laundering directive relies on implementation at national level for effect.
A number of EU bodies also play a part, such as the Commission (policy development, transposition monitoring), the European Banking Authority (analysis, investigation of breaches of Union law, standard setting) and the European Central Bank (prudential supervision of banks, including money laundering and terrorist financing risk).

We assessed whether EU action in the fight against money laundering in the banking sector was well implemented.
We found institutional fragmentation and poor co-ordination overall at EU level in terms of steps to prevent money laundering and terrorist financing, and action where risks were identified.

In practice, actions to counter money laundering and the financing of terrorism are still supervised at national level and the EU oversight framework is insufficient to ensure a level playing field.
We recommended in particular prioritising the risk of money laundering and terrorist financing more clearly; establishing a framework for reporting breaches of Union law; and issuing guidelines to facilitate standardised information exchanges between national and EU-level supervisors.

20 Financing and administering the Union Special report 10/2021: Gender mainstreaming in the EU budget – time to turn words into action Gender equality is one of the European Union’s fundamental values.
Gender mainstreaming is a means of achieving gender equality by actively promoting equality between women and men at all stages and in all areas of policy-making and implementation.

The Commission has committed to implementing gender mainstreaming, and the European Parliament and the Council have emphasised the need for the EU to deliver on its high-level gender-mainstreaming commitments.

The Commission describes progress towards achieving full gender equality as ‘slow’.
The European Parliament recognises that the pandemic has exacerbated existing structural gender inequalities, and has argued in favour of using gender mainstreaming and gender budgeting in the COVID-19 recovery response, as well as applying lessons learned about the detrimental effects of previous economic crises on gender equality.

We assessed whether gender mainstreaming had been applied in the EU budget to promote equality between women and men from 2014 onwards.
In particular, we examined whether the Commission’s framework for supporting gender mainstreaming was appropriate, whether the EU’s budget cycle took gender equality into account and whether gender equality had been incorporated into five selected EU funding programmes.

We found that the Commission had not yet lived up to its commitment to gender mainstreaming in the EU budget.
Its strategy for gender equality did not sufficiently promote the use of gender mainstreaming and its institutional framework did not yet fully support gender mainstreaming.

In addition, the EU’s budget cycle did not take adequate account of gender equality and the Commission paid little attention to the gender analysis of the policies and programmes we examined.
We recommended in particular strengthening the institutional framework for supporting gender mainstreaming; carrying out gender analyses of needs and impacts for EU funding programmes and instruments; using gender-related objectives and indicators to monitor progress; developing a system for tracking funds supporting gender equality and reporting annually on the results achieved in terms of gender equality.
21 Annual and specific annual reports Annual reports mainly present the results of our Statement of Assurance on the European Union budget and the budget of the European Development Funds (EDFs), but also cover aspects of performance and budgetary and financial management.

Specific annual reports present our annual audit work on the EU agencies and other Union bodies, Joint Undertakings, and the European Schools.
We also publish a report on contingent liabilities arising from the activities undertaken by the Single Resolution Board (SRB).

22 Annual report on the EU budget for the financial year 2020 Every year, we audit EU revenue and expenditure to examine whether the annual accounts are reliable and whether the income and expenditure transactions underlying the accounts comply with the financial rules at EU and Member State level.
In addition, we specifically assess each major area of the EU budget, based on the (sub-) headings of the multiannual financial framework (MFF).

We also analyse why and where errors have occurred, make recommendations for improvement, and examine whether and how our previous recommendations have been put into practice.
This extensive work forms the basis for our Statement of Assurance, which we are required to provide to the European Parliament and the Council in accordance with our mandate under the Treaty on the Functioning of the European Union (TFEU).

EU budget: clean opinion on accounts and revenue For the financial year 2020, we provided a ‘clean opinion’ on the accounts and on the EU’s revenue.
EU budget: adverse opinion on expenditure In 2020, EU spending was €173.3 billion, the equivalent of 1.1 % of the combined gross national incomes of the EU-27 and the United Kingdom.

Our auditors tested a sample of 728 payments made to beneficiaries across all spending areas, out of a total audit population worth around €148 billion.
This means we assessed various cases where EU money had been used to provide support for key infrastructure projects, SMEs, research organisations, farmers, students in EU Member States, and beneficiaries in non-EU countries.

For the financial year 2020, we issued an ‘adverse opinion’ on the EU’s expenditure.

23 Estimated error 2.7 % (2020 expenditure) For the financial year 2020, we estimated the level of error for expenditure as a whole to be between 1.8 % and 3.6 %.
The mid-point of this range, known as the ‘most likely error’, is 2.7 %, the same as for the financial year 2019.

3.1 % 2.4 % 2.6 % 2.7 % 2.7 % Upper error limit Estimated level of error Lower error limit Materiality level: 2 % 5 % 4 % 3 % 2 % 1 % 0 % 2016 2017 2018 2019 2020 Note: We use standard statistical techniques to estimate the level of error.
We are 95 % confident that the level of error for the population lies in the range between the lower and upper error limits (for more details, see Chapter 1, Annex 1.1 to the 2020 annual report).

24 Again, more than 50 % of audit population affected by material error For the financial year 2020, high-risk expenditure accounted for 59 % of our audit population, compared with 53 % last year.

The estimated level of error for high-risk expenditure was 4.0 %, compared with 4.9 % for the financial year 2019.
EU spending is characterised by two types of expenditure involving distinct patterns of risk: o o Low-risk, entitlement payments: Based on beneficiaries meeting certain (less complex) conditions, these include student and research fellowships (under ‘Competitiveness’), direct aid for farmers (‘Natural resources’) and salaries and pensions for EU staff (‘Administration’).

High-risk, cost reimbursements: The EU reimburses eligible costs for eligible activities (involving more complex rules).
These include research projects (under ‘Competitiveness’), investment in regional and rural development (‘Cohesion’ and ‘Natural resources’) and development aid projects (‘Global Europe’).

25 Most error-prone MFF headings ‘Competitiveness for growth and jobs’ and ‘Economic, social and territorial cohesion’ For the financial year 2020, ‘Competitiveness for growth and jobs’ was the most error-prone MFF sub-heading, followed by ‘Economic, social and territorial cohesion’.
5.0 4.8 4.4 3.0 3.5 3.9 4.2 2.0 Economic, social and territorial cohesion 4.2 4.1 Competitiveness for growth and jobs 2016 2017 2018 2019 2020 2.5 2.4 2.4 1.9 2.0 Natural resources Note: The estimated level of error is based on quantifiable errors we identified through our work, notably by testing a sample of transactions.

We use standard statistical techniques to select this sample and estimate the level of error (see Chapter 1, Annex 1.1 to the 2020 annual report).
26 Cases of suspected fraud reported to OLAF and EPPO As the EU’s external auditor, we do not have a mandate to investigate cases of suspected fraud.

Therefore, our audits are not specifically designed to detect fraud.

Nevertheless, our auditors regularly identify cases where we suspect that fraudulent activity may have taken place.

We reported 15 cases of suspected fraud to OLAF following identification in the course of our audit work in 2021.

We reported six such cases in 2020.


Our annual report on the EU budget provides additional information on the nature of these suspected fraud cases and on the subsequent financial recoveries recommended by OLAF.

In June 2021, we also started collaborating with the European Public Prosecutor’s Office (EPPO) in line with the administrative arrangement signed on 3 September 2021.

We reported two cases to the EPPO that we had identified in the course of our audit work in 2021.
Annual report on performance Annual report on performance: a two-year pilot project We split our annual report into two separate parts as a two-year pilot project, which started with the annual report for the financial year 2019.

The second part of the annual report covers the performance of spending programmes under the EU budget.
We examined whether and how the Commission and the co-legislators used the lessons learnt from previous multiannual financial framework (MFF) periods to improve the design and performance of spending programmes for the 2021-2027 period.

We also examined the results achieved by EU programmes under the 2014-2020 MFF.

Our purpose was to establish how much relevant performance information was available and, based on that information, to assess how well EU spending programmes actually performed.
In this context, we reviewed the Annual Management and Performance Report (AMPR), which is the Commission’s main high-level performance report on the EU budget.

We also followed up the audit recommendations we made in special reports published in 2017.
27 Annual report on the European Development Funds for the financial year 2020 EDFs: clean opinion on accounts and revenue; adverse opinion on expenditure The European Development Funds (EDFs), launched in 1959, were the EU’s main instruments for providing development cooperation aid.

They aim to overcome poverty and promote sustainable development and the integration of African, Caribbean and Pacific countries (ACP) and overseas countries and territories (OCTs) into the world economy.
They are funded by the EU Member States and managed outside the EU budget by the European Commission and the European Investment Bank (EIB).

They will continue to be implemented and reported on separately until their closure.

For the 2021-2027 multiannual financial framework, development cooperation aid to the ACP countries and OCTs is funded by the EU budget.
As in previous years, we issued a ‘clean opinion’ both on the EDF accounts and on revenue but an ‘adverse opinion’ on EDF expenditure for the financial year 2020.

Our estimated level of error for expenditure is 3.8 % (3.5 % for the financial year 2019).

28 Specific annual reports on EU agencies The EU agencies are distinct legal entities set up to carry out specific technical, scientific or managerial tasks that help the EU institutions to design and implement policies.

In total, there are 43 agencies.
Denmark EEA Sweden ECDC Lithuania EIGE Latvia BEREC Office Finland ECHA Estonia eu-LISA Germany EASA, EIOPA Netherlands EMA, Eurojust, Europol Ireland Eurofound Belgium EACEA, EASME, ERCEA, INEA, REA, SRB, HaDEA Luxembourg CdT, Chafea, EPPO, ESA France CPVO, EBA, ERA, ESMA Portugal EMCDDA, EMSA Poland Frontex Czech Republic GSA Austria FRA Slovakia ELA Hungary CEPOL, EIT Romania - Bulgaria - Cyprus - Spain EFCA, EUIPO, EU-OSHA Italy EFSA, ETF Slovenia ACER Malta EASO Croatia - Greece Cedefop, ENISA Note: ELA and EPPO were not audited in 2020 as they were not yet financially autonomous.
The map also includes the newest agency HaDEA (European Health and Digital Executive Agency), established on 1 April 2021.

At the same time, the Chafea ceased to exist, and INEA and EASME were renamed CINEA (European Climate, Infrastructure and Environment Executive Agency) and EISME (European Innovation Council and SME Executive Agency), respectively.

In addition, GSA was renamed EUSPA (European Union Agency for the Space Programme) on 12 May 2021.
29 Clean opinion on all but three EU agencies for the financial year 2020 In the financial year 2020, the total budget of all agencies under our mandate (excluding the SRB) was €3.7 billion, equivalent to 2.2 % of the 2020 EU general budget.

The corresponding figures for the financial year 2019 were €3.3 billion and 2.2 %.

Overall, our audit of the agencies confirmed the positive results reported in previous years.

We issued ‘clean opinions’ on the 41 agencies’ accounts and on the revenues.
We signed off the payments underlying all the agencies’ accounts, except for the Agency for the Cooperation of Energy Regulators (ACER), the Agency for the Operational Management of Large-Scale IT Systems in the Area of Freedom, Security and Justice (eu-LISA), and the Agency for Cybersecurity (ENISA).

For these three agencies, we issued qualified opinions, mainly due to irregularities in procurement procedures and to gaps in the delegation procedure for authorising budgetary operations.
30 Specific annual report on Joint Undertakings for the financial year 2020 Joint Undertakings (JUs) are the EU’s public-private partnerships with industry, research groups and Member States, and play an important role in supporting market-driven projects in strategic areas of research and innovation, and thus in implementing EU research policy.
Eight of the nine JUs implement specific research and innovation actions under the Horizon 2020 programme in the areas of transport, energy, health, bio-based industries, electronic components and systems, and digital research.

The ninth JU, ‘Fusion for Energy’, is funded by Euratom and is responsible for providing Europe’s contribution to the International Thermonuclear Experimental Reactor (ITER).
Clean opinion on all Joint Undertakings for the financial year 2020 In the financial year 2020, we issued ‘clean opinions’ on the accounts, revenue and payments for all JUs.

However, as in previous years, our audit opinion on the 2020 annual accounts of the ‘Fusion for Energy’ (F4E) JU was accompanied by an ‘emphasis of matter’, mainly to draw attention to the risk of further cost increases and delays in implementation of the ITER project.
31 Specific annual reports on European schools and contingent liabilities of the Single Resolution Board We issued our yearly report on the review of the consolidated annual accounts of the 13 European schools for the financial year 2020.

While our review did not reveal material errors in the accounts, we were still unable to confirm that the Schools’ financial management was fully compliant with their Financial Regulation and Staff Regulations.
We also report annually on the contingent liabilities of the Single Resolution Board (SRB), the Council and the Commission, arising from the performance of their tasks under the Single Resolution Mechanism Regulation.

In our report on the financial year 2020, we conclude that the SRB and the Commission made a fair effort to disclose contingent liabilities where they had reason to do so.
Marking the start of the European Parliament’s discharge procedure The publication of our annual reports also marks the start of the discharge procedure, during which the European Parliament decides – upon a recommendation from the Council – whether the Commission and other bodies have managed the EU budget satisfactorily.

If they have, it grants them discharge.


In October 2021, we started presenting our 2020 annual reports to the European Parliament’s Committee on Budgetary Control and to the Council’s Budget Committee.

Subsequently, we also presented them to the European Parliament in its plenary session and to the Economic and Financial Affairs Council.

Furthermore, over the course of 2021, we presented our annual reports to the national parliaments and governments of 20 Member States.
32 Opinions Examining the Commission’s proposals for the Brexit Adjustment Reserve and making own resources available As the EU’s independent external auditor, we contribute to improving financial management by issuing opinions on the Commission’s proposals for new or revised legislation.

Where these legislative proposals entail a significant financial impact, EU law requires us to be consulted.

Other institutions can also ask us to issue opinions on other specific issues.
All our opinions are submitted to the European Parliament and the Council.

In 2021, we published two such opinions.

The first one concerns a legislative proposal establishing the Brexit Adjustment Reserve.

The second one relates to amendments of existing rules aimed at enhancing predictability for Member States and clarifying procedures for dispute resolution when making own resources available.
33 Other communication products Audit previews Our audit previews provide information on ongoing (performance) audit tasks.

They are based on the preparatory work undertaken and are intended as a source of information for those interested in the policy and/or programme being audited.

In 2021, we issued six audit previews (14 in 2020).
Journal Each edition of the ECA Journal features articles on a specific theme, mostly from an audit perspective, from contributors working within and outside the EU institutions.

In 2021, we issued three editions, addressing 'Strategy development in a rapidly changing world', 'The new CAP creating new horizons' and 'Disasters and crisis management'.

34 Conferences and webinars In 2021, we also (co-)organised a number of conferences and webinars.
Most of these events were still organised remotely and were open to interested parties.

Below are five examples.

Portuguese Tribunal de Contas and ECA joint conference on EU issues During the Portuguese Presidency of the EU, the Portuguese Tribunal de Contas and the ECA organised a conference on ‘European funds – management control and accountability’, in Lisbon on 21 and 22 June 2021.

It was the first such in-person meeting since the start of the COVID-19 pandemic in early 2020.
Delegations of the two supreme audit institutions met with high-level representatives of Portugal and discussed the following topics: priorities and challenges underlying the multiannual financial framework and the Recovery and Resilience Plan; European funding and the climate transition; digital future; sustainability of public finances; and management and control of European Funds.
Financial governance in the EU On 9 July 2021, the ECA hosted a virtual high– level conference on financial governance in the EU.

Its aim was to foster discussion about the resilience of the EU financial sector, and its readiness to face the next crisis and to support the economic recovery.
Mr Valdis Dombrovskis, the Executive Vice- President of the Commission, opened the conference, which was attended by distinguished speakers and panellists from the EU and international institutions, Member States, financial sector and academia.
35 The COVID-19 pandemic and its effects on the future of Europe On 6 October 2021, the ECA organised a hybrid workshop to reflect on the Conference on the Future of Europe with Federica Mogherini, Rector of the College of Europe and former High Representative of the EU for Foreign Affairs and Vice-President of the European Commission.

She highlighted several aspects of the pandemic, which she felt would shape discussions on the future of Europe.
ECA staff were invited to express their ideas about Europe’s future from their perspective not only as auditors, but also as EU citizens.

Developing capital markets in the Baltics On 1 October 2021, the 8th International Financial Markets Conference titled ‘Developing Capital Markets in the Baltics’ took place in Vilnius.

The conference built upon the recommendations and conclusions set in Special report 25/2020: Capital Markets Union – Slow start towards an ambitious goal.
Many high-level speakers, including Ms Ingrida Šimonytė, Prime Minister of the Republic of Lithuania and Werner Hoyer, President of the European Investment Bank, gathered to debate how best to develop a single market for capital – providing citizens, businesses and governments with effective investment and financing opportunities.
36 COP Climate Conference At the 2021 UN Climate Change Conference in Glasgow – the COP26 summit – the ECA co-hosted two side events: the ECA contributed through a discussion organised with EUROSAI on external auditors’ contributions to translating climate ambition into delivery, and co-hosted, together with the European Investment Bank (EIB), an event on directing finance towards climate change adaptation.
ECA Member Eva Lindström presented the results of ECA’s audit on sustainable finance and EIB Vice-President Ambroise Fayolle presented the EIB’s new Adaptation Plan.

37 Innovation and digital audit The ECA stepped up its efforts to make the best use of modern technology and new techniques in audit to deliver more and better information for the accountability process.

The Court also made increased use of technology and data in audit a key priority in its 2021-2025 strategy.
Development plan for increased use of data and technology in audit In July 2021, the Court adopted its development plan for increased use of data and technology in audit.

The plan sets goals and objectives for the next five years to make better use of technology in support of ECA audit objectives.

DATA: a new team in service of audit Following the adoption of this plan, the ECA created a new team, D.A.T.A.

(Data and Technology for Audit).


DATA is a centralised team of experts – mainly data scientists and IT auditors – that supports the audit teams and is responsible for implementing the development plan across the Court.

Over the course of 2021, we built the team through both external and internal recruitment, notably by including data scientists from ECALab, the ECA’s innovation lab.

This is the next step in expanding on previous ECALab pilots and services.
38 Innovation and Emerging technologies While our focus has shifted towards delivering tangible solutions to our auditors on a larger scale, the need for research and innovation remains significant.

Through ECALab and the DATA team, we have continued to explore technologies such as text mining, process mining and artificial intelligence.
For example, we established a Robotic Process Automation (RPA) service to provide centralised and automated audit evidence collection, improving the speed and reliability of downloading supporting documents.

RPA was used in 17 audit tasks.

We have been actively involved in the Emerging technology group of the Interinstitutional Committee for Digital Transformation, working on introducing technologies such as artificial intelligence, augmented reality or blockchain in EU institutions.
We decided in September 2021, to focus on working with EU institutions and bodies to develop an approach to leveraging distributed ledger technologies to serve our specific needs.

ECALab also continued to foster international knowledge sharing through TiNA, a network launched by the ECA that brings together professionals from Member State SAIs to share and collaborate on ‘Technology and innovation for audit’.
39 Institutional relations We work closely with the European Parliament, the Council, national parliaments and Member State governments, as the impact of our work depends largely on the use they make of our audit findings and recommendations.

European Parliament In March 2021, the Conference of Committee Chairs (CCC) invited the ECA President for an exchange of views on our 2021-2025 strategy and 2021+ and 2022+ work programmes.
ECA Members and audit teams are regularly invited to meetings of the EP committees and bodies, particularly the Budgetary Control Committee (CONT), to present the results of our work.

For most of 2021, the EP continued to organise its plenary and committee meetings in hybrid form.

Despite the pandemic-related restrictions, the ECA made 147 appearances before the EP, the highest ever annual number.

Overall, in 2021, our Members presented 19 special reports and four reviews to CONT.
The ECA’s reporting Members also participated in 13 CONT hearings on the 2020 discharge and five hearings on the 2019 discharge.

In addition, the Members gave 46 presentations on special reports, reviews, and opinions to 17 other EP committees.

Some of these meetings took place jointly when several committees were interested in the same report.
40 Council of the European Union As a rule, the Council’s preparatory bodies deal with all our special reports soon after publication, but not necessarily all reviews and opinions.

In 2021, we presented 28 special reports and one opinion to two Council committees (Economic and Financial Committee and Financial Services Committee) and 18 Council working parties.
In 2021, ECA President Klaus-Heiner Lehne and other ECA Members also participated in six meetings with Permanent Representatives to the European Union.

Furthermore, the Budget Committee of the Council invited the relevant ECA management to present our 2021-2025 strategy, 2021+ and 2022+ work programmes, digital strategy for auditing the agencies, and draft budget for 2022.
Council Presidency Portugal: January – June 2021 Slovenia: July – December 2021 Most of the meetings of the Council of the EU were held remotely.

Nevertheless, ECA Members participated in some physical meetings, for example: o o In April 2021, ECA Member João Figueiredo presented the ECA’s key messages related to our work concerning the environment at an informal Council meeting of EU environment ministers in Lisbon.
In November 2021, ECA President Klaus-Heiner Lehne and ECA Member Tony Murphy met with the Slovenian Minister of Finance in his capacity as ECOFIN President, before the presentation of the 2020 annual report to the EU finance ministers.

41 National parliaments and Member State governments Meetings with national parliaments In 2021, despite the restrictions imposed by the ongoing pandemic, we presented our work at 97 meetings with national parliaments in 21 Member States.
These meetings mainly took place in person (80 physical and 17 virtual meetings).

Meetings with Member State governments Our Members and management presented our work at 107 meetings with Member State governments and government bodies in 20 Member States in 2021.

These meetings mainly took place in person (81 physical and 26 virtual meetings).
42 National parliaments Member State governments Sweden Finland Netherlands Belgium Ireland Luxembourg France Italy Spain Portugal Austria Estonia Latvia Poland Germany Lithuania Czech Republic Slovakia Bulgaria Greece Malta Cyprus Croatia Slovenia 43 European Commission Exchanging views with our auditees at the highest level ECA Members and Commissioners have regular bilateral contact over planned and ongoing audit tasks.
For years, it has also been a well-established practice for our Members to hold an annual meeting with their counterparts at the European Commission.

In 2021, however, due to the ongoing COVID-19 pandemic, they agreed to postpone this yearly meeting.
44 Cooperation with other supreme audit institutions Contact Committee of the EU supreme audit institutions Our cooperation with the supreme audit institutions (SAIs) of the 27 Member States mainly takes place within the framework of the Contact Committee of the EU Supreme Audit Institutions.

This forum facilitates dialogue and exchange between the SAIs of EU Member States and the European Court of Auditors.
In 2021, we initiated – together with the SAIs of Belgium and Germany – a cooperation activity on the implementation of ‘NextGenerationEU’, notably on auditing the implementation of the Recovery and Resilience Facility and the National Recovery and Resilience plans at EU and national level.

Our initiative was very well received, as auditors and audit managers of 18 EU SAIs made use of the possibility to regularly meet and discuss pertinent issues and audit approaches.
Annual meeting postponed Under normal circumstances, the Contact Committee meets annually.

However, due to COVID-19, the annual meeting scheduled to take place in October 2020 was postponed to 2022.

The ECA organised an interim online meeting, which was held in November 2021.

45 Audit Compendium on the response to COVID-19 issued in July 2021 In July 2021, on behalf of the Contact Committee, we published, an Audit Compendium on the challenges related to the COVID-19 pandemic.
The report provides information on the impact of and response to the pandemic at national and supranational level, and gives an overview of the pertinent audit work carried out and published in 2020 by the EU SAIs.

This was the fourth edition of the Audit Compendium, which has become an annual publication of the Contact Committee.
46 Network on Technology and Innovation for Audit The knowledge-sharing and collaboration platform with other EU SAIs on Technology and Innovation for Audit (TINA), which we launched in November 2020, now has 498 registered users from 26 EU SAIs, the Commission and the ECA.

The network has organized 12 live online events on subjects such as robotic process automation, process mining, blockchain and cybersecurity, with an average of 60 participants per session.
SAIs of EU candidate and potential candidate countries We also support the SAIs of EU candidate and potential candidate countries (Albania, Bosnia and Herzegovina, Kosovo*, Montenegro, North Macedonia, Serbia and Turkey).

In 2021, we supported SIGMA (Support for Improvement in Governance and Management), a joint initiative of the OECD and the European Union, in the organisation of workshops on the audit of public expenditure related to COVID-19.
* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo Declaration of Independence.

47 INTOSAI In 2021, we continued our active involvement in the activities of the International Organisation of Supreme Audit Institutions (INTOSAI).

As Vice-Chair of the Professional Standards Committee (PSC), we provided input to the INTOSAI Task Force on Strategic Planning and actively collaborated with the other Goal Chairs.
In November 2021, we attended the virtual INTOSAI governing board meeting.

We also participated in the PSC subcommittees and the activities and projects of other INTOSAI working bodies, notably on environmental auditing, Big Data, financial modernisation and regulatory reform, as well as evaluation of public policies and programmes.

We also participated in the task force on INTOSAI Auditor Professionalisation and the INTOSAI Development Initiative.
EUROSAI We were also actively involved in the activities of the European Organisation of Supreme Audit Institutions (EUROSAI), the European regional group of INTOSAI, in particular its working groups on environmental auditing, information technologies, the audit of funds allocated to disasters and catastrophes, and the task force on audit and ethics.
In 2021, we pursued the work of the project group on ‘Preparing for future risks and climate crisis: Time for audit to take a long-term view?’ (co-led with the UK National Audit Office) in the context of the ‘Forward thinking and emerging issues’ portfolio.

We also actively contributed to the project group on auditing the response to COVID-19.

Together with EUROSAI, we organised a side event at COP26 on ‘Translating climate action into delivery’.
48 Our management Members The ECA operates as a collegiate body of Members, one from each Member State.

After consulting the European Parliament, the Council appoints each Member once their respective national governments have nominated them.

We have no role in the process of nominating or appointing our Members.

Our Members serve a renewable term of six years.

They perform their duties in complete independence and in the general interest of the EU.
Upon taking office, they give a solemn undertaking to that effect before the European Court of Justice.

In 2021, the Council appointed a new Polish Member, Marek Opioła, to complete the mandate of former Member Janusz Wojciechowski from 1 February 2021.

Mr Wojciechowski was appointed EU Commissioner for Agriculture in 2019.

Our Portuguese Member, João Figueiredo, sadly passed away on 29 June 2021.

The nomination procedure to complete his mandate was still ongoing at the end of 2021.
The College met on 20 occasions in 2021.

Due to the pandemic, most of these meetings took place in hybrid mode, with some Members participating from the Court and others attending remotely.

The attendance rate at these meetings was 97 %.

Members also participated in chamber and committee meetings (see also Audit chambers and committees).
49 2021 ECA Seminar: discussing the NGEU, communication strategy and 2022+ work programme Once a year, our Members, the Secretary-General and the directors go on a two-day seminar to discuss important issues relating to the ECA’s long-term strategy, work and organisation.
During this year’s ECA Seminar, the Members discussed the following key topics: o o o o o o o the future of the Statement of Assurance; the ‘NextGenerationEU’ instrument; the future of the performance report; lessons learned from the coronavirus crisis; the ECA’s involvement in the Conference on the Future of Europe; the ECA’s communication strategy; and the 2022+ work programme.
President The President is in charge of the institution’s strategy, planning and performance management, communication and media relations, institutional liaison, legal matters and internal audit.

The President also represents the ECA in its external relations.

Our Members elect one of their number as President for a renewable period of three years.
The elected person then assumes the role of first among equals (primus inter pares), chairs the Court’s meetings and ensures that the Court’s decisions are implemented.

Klaus-Heiner Lehne was elected President in September 2016 and re-elected in September 2019.
50 President Klaus-Heiner LEHNE Chamber I Sustainable use of natural resources Chamber II Investment for cohesion, growth and inclusion Chamber III External action, security and justice Chamber IV Regulation of markets and competitive economy Chamber V Financing and administering the Union Member for Audit Quality Control (Dean) Samo JEREB (Dean) Iliana IVANOVA (Dean) Bettina JAKOBSEN (Dean) Mihails KOZLOVS (Dean) Tony MURPHY Jan GREGOR João FIGUEIREDO († 29 June 2021) Lazaros S. LAZAROU Baudilio TOMÉ MUGURUZA Alex BRENNINKMEIJER († 14 April 2022) Ladislav BALKO Nikolaos MILIONIS Pietro RUSSO Leo BRINCAT Rimantas ŠADŽIUS Jan GREGOR Eva LINDSTRÖM Annemie TURTELBOOM Juhan PARTS Ildikó GÁLL-PELCZ François-Roger CAZALA Viorel ȘTEFAN Helga BERGER Hannu TAKKULA Ivana MALETIĆ Marek OPIOŁA Joëlle ELVINGER Note: As at February 2022.
51 Audit chambers and committees Members are assigned to one of five audit chambers, where most of our audit reports, reviews and opinions are adopted.

Audit chambers allocate their tasks among their Members.

Each Member is accountable to the chamber, and to the Court, for their own audit tasks.

Professional auditors working for the audit chamber directorates carry out the audit work.

The Members for each audit chamber elect a Dean for a renewable period of two years.
As of December 2021, the Deans of our five audit chambers were Samo Jereb, Iliana Ivanova, Bettina Jakobsen, Mihails Kozlovs and Tony Murphy.

The Audit Quality Control Committee (AQCC) deals with the ECA’s audit policies, standards and methodology, audit support and development, and audit quality control.

It is composed of one Member from each audit chamber and chaired by Jan Gregor.
The Administrative Committee (AC) and, where appropriate, the College of Members, both of which are chaired by the President, take decisions on broader strategic and administrative issues.

The Administrative Committee is made up of the President, the Deans of the chambers, the chair of the AQCC, and the Member for Institutional Relations (as of December 2021, Rimantas Šadžius).

In 2021, there were 95 chamber, 12 AC and nine AQCC meetings.
Due to the pandemic, most of these meetings took place in hybrid mode.

The attendance rate at these meetings was 98 %, 96 % and 96 %, respectively.

Other committees include the Ethics Committee (chaired by Joëlle Elvinger), the Internal Audit Committee (chaired by Ivana Maletić), and the Foresight Advisory Panel (as of December 2021 chaired by Helga Berger).

52 Our senior management comprises the Secretary-General and directors.
In total, there are 10 directorates, with five attached to audit chambers, one to the AQCC, one to the Presidency and three to the Secretariat-General.

On 1 January 2021, Zacharias Kolias took up his duties as ECA Secretary-General for a term of six years.

Peter WELCH Director Chamber I Martin WEBER Director Chamber II Bertrand ALBUGUES Director Chamber III Ioanna METAXOPOULOU Director Chamber IV Mariusz POMIENSKI Director Chamber V Note: As at February 2022.
Gerhard ROSS Director Presidency Geoffrey SIMPSON Director Audit Quality Control Committee Pilar CALVO FUENTES Director Language and Editorial Directorate Veronica ARDELEAN Director Human Resources, Finance and General Services Magdalena CORDERO VALDAVIDA Director Information, Workplace and Innovation Zacharias KOLIAS Secretary-General 53 Measuring performance We apply a set of key performance indicators (KPIs) to inform our management about progress made towards achieving our strategic goals, support decision-making, and provide our institutional stakeholders with information on our performance.
We updated the KPIs to support our 2021-2025 strategy.
The following set of five KPIs provides a broad overview of how we are performing as an organisation as regards the dissemination, impact and perception of our work: o number of reports published (compared to plan); o media presence; o o impact and perception of our work (stakeholder feedback); our appearances before other institutions, national parliaments and Member State governments, and international activities; o implementation of ECA recommendations.
32 reports published in 2021, despite COVID-19 restrictions In 2021, despite the difficult circumstances due to COVID-19, we published 32 reports, the same number as in 2020.

These comprised 27 special reports and five reviews.

However, this is eight fewer than the 40 reports planned in the 2021+ work programme, as some of the audits were delayed during the year.

Number of reports published 2019 36 2020 32 2021 32 Overall, in 2021, we issued 55 publications.
54 publications55 7 ANNUAL REPORTS 2 OPINIONS EU budget (+ summary) EU budget – performance (+ summary) European Development Funds EU agencies (41 + summary) Joint Undertakings (+ summary) European schools Contingent Liabilities SRB, Commission and Council Brexit Adjustment Reserve Making Available Regulation of own resources 27 SPECIAL REPORTS Single Resolution Mechanism resolution planning EU humanitarian aid for education Exchanging tax information in the EU Customs controls Infrastructure for charging electric vehicles Closure of 2007-2013 financial instruments EU space programmes Galileo and Copernicus Frontex’s support to external border management Disinformation affecting the EU Gender mainstreaming in the EU budget Exceptional support for EU milk producers The polluter pays principle Anti money laundering Interreg cooperation Air passenger rights during COVID-19 Common Agricultural Policy and climate EU readmission cooperation with third countries Post-programme surveillance Europol and migrant smuggling Sustainable water use in agriculture EU forests funding for biodiversity and climate change Sustainable finance Reducing grand corruption in Ukraine Performance-based financing in Cohesion policy ESF support to combat long-term unemployment Regularity of spending in EU Cohesion policy EU Support to tourism 5 REVIEWS 6 AUDIT PREVIEWS 8 OTHER EU’s initial public health response to COVID-19 EU actions to address low digital skills Third countries contributions EU actions and challenges on electronic waste Transport Flagships international benchmarking Rule of law in the Western Balkans Horizon 2020 widening Single market for investment funds Air passenger rights during COVID-19 Reliable European statistics Resilience of the EU institutions during COVID-19 ECA's 2021-2025 strategy 2021+ work programme Activity report 2020 2022+ work programme Journal (3) Audit compendium on the response to COVID-19 55 Media presence 2021: increase in media coverage In 2021, we recorded some 67 000 online articles and social media posts related to our audit reports, other publications or the ECA in general.
This represents a significant increase in coverage compared to previous years (2020: 32 000; 2019: 51 000).

Annual reports Special reports Other publications & ECA general online social media Media coverage can vary substantially depending on the subject and the complexity of a report.
External factors, such as an important event or policy development, may also influence media interest in our publications.

Moreover, during emergencies, such as the COVID-19 pandemic, media attention is particularly focused on crisis-relevant material.

56 Since the COVID-19 lockdown, we have promoted our publications virtually, which has enabled us to increase contacts with journalists.

This has positively impacted our media coverage.


Compared to previous years, interest in our audit reports rose significantly.

This was also the case for other publications and the ECA in general, achieving media coverage close to pre-COVID levels.

Interaction with press In 2021, we issued 49 press releases in 23 EU languages, as well as information notes, media advisories and (ready-to-use) audio-statements in certain languages.
We also drew up position papers for publication in influential newspapers and gave a number of interviews with major media outlets throughout Europe, covering radio, TV and the written press.

In addition, we held 26 online press briefings, including country press briefings for the annual report.

Altogether, our briefings attracted 527 journalists, most representing major national media outlets in EU Member States.
One million visits to ECA website In 2021, we once again achieved over one million visits to our website, with around 546 000 unique visitors.

Social media activity slowed down Social media channels allow us to interact directly with citizens.

In 2021, against the backdrop of the COVID-19 crisis, we continued to reduce our social media activity; overall, we posted 718 times about the ECA and its work on our social media channels (2020: 1 007 posts).
In 2021, we continued to refer to ECA Journal articles in our social media posts.

Thus, 28 % of our posts reproduced articles previously published in an ECA Journal (2020: 32 %).

2021: number of followers on social media continued to rise By the end of 2021, our three social media accounts (Twitter, LinkedIn, Facebook) had attracted around 39 000 followers, up from 35 000 in 2020.
13 555 18 707 6 863 11 859 16 732 6 559 10 029 13 377 6 105 57 2021 2020 2019 58 Impact and perception of our work 83 % of respondents to our surveys find our reports useful for their work We assess the likely impact and usefulness of our work, as perceived by the readers of our reports at the European Parliament, Council, Commission, EU agencies, Member States´ permanent representations, Member States’ agencies and SAIs, NGOs, academia, the media and other parties.
Since 2018, we have carried out anonymised electronic surveys to ask our readers to provide qualitative feedback on selected reports and make general suggestions for our work.

In 2021, 83 % of almost 500 respondents considered our reports useful for their work, and 79 % felt that they had an impact.

This is similar to last year’s result (2020: 84 % and 75 %, respectively).
Usefulness of reports Likely impact of reports Very high High Medium Low Very low 83 % consider our reports useful for their work 79 % felt that they had an impact 59 Our appearances before other institutions, national parliaments, and Member State governments, and international activities Significant increase in appearances Overall, in 2021, we presented the results of our work on 419 occasions before European Parliament committees, Council preparatory bodies, national parliaments, and Member State governments.
Furthermore, we participated in 154 international activities.

These included the activities of international public audit organisations, in particular INTOSAI and EUROSAI, as well as bilateral events with other SAIs, conferences, meetings, and activities targeting a wider audience.

In 2021, we updated our KPI concerning our appearances to include Member State governments and international activities.
European Parliament National parliaments International activities Council of the EU Member State governments 111 90 63 52 57 47 147 154 107 97 68 2019 2020 2021 Overall, we significantly increased our interaction with our European and international stakeholders, reaching levels exceeding those before the COVID-19 pandemic.
60 Implementation of ECA recommendations Nearly all our 2017 recommendations implemented We measure the implementation of our recommendations on the basis of the follow-up carried out by our auditors.

For 2021, we analysed the recommendations made in our 2017 reports.

The analysis showed that 94 % of the 35 recommendations made in our 2017 annual report and 89 % of the 161 recommendations in our 2017 special reports had been implemented either in full, or in some or most respects.
Special reports recommendations 70 % 10 % 9 % 11 % 89 % Annual report recommendations 23 % 94 % 37 % had been implemented either in full, in most respects or in some respects 34 % 6 % Fully implemented Implemented in some respects Implemented in most respects Not implemented 61 Our staff Staff allocation At the end of 2021, as in previous years, there were 853 permanent and temporary posts at the ECA.

527 of these posts were in audit chambers, including 104 posts in Members’ offices.
Presidency Translation Administration Audit 55 132 139 527 853 total posts In addition, we had 92 contract staff and 25 seconded national experts working for us at year- end (2020: 83 and 15 respectively).

Recruitment Our recruitment policy follows the general principles and employment conditions of the EU institutions, and our staff have a broad range of academic and professional backgrounds.
In 2021, we recruited 80 new employees (2020: 62 employees), comprising 16 officials, 21 temporary staff, 30 contract staff and 13 seconded national experts.

Our ASPIRE programme for auditors is designed to ease the professional integration of newcomers, allowing them to acquire on-the-job experience in different audit tasks as well as taking part in targeted training activities during their first three years.
We also provided 56 internships (2020: 44) for university graduates, lasting three to five months.

In 2021, our trainees worked from their country of origin for the March and May sessions, and in a similar hybrid mode to other ECA staff for the October session, combining on-site and remote work.

62 Age profile Three quarters (76 %) of our staff in active service at the end of 2021 were aged 40 to 59, which is similar to 2020.
3 % 15 % 43 % 33 % 6 % 20-29 30-39 40-49 50-59 60+ Age profile Almost three quarters (73 %) of our directors and principal managers are aged 50 or over (2020: 80 %).

This will lead to a management renewal over the next five to 10 years as they retire.

Equal opportunities Overall, we employ equal proportions of women and men in our workforce.
Auditors and administrators Assistants and secretaries Management 53 % 47 % 33 % 67 % 64 % 36 % Male Female 61 294 587 total posts 63 6 4 Principal Managers 50 Male Female Directors 10 8 5 4 4 4 4 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 Germany 1 2 1 1 1 1 1 1 1 Belgium Spain France Poland Italy United Kingdom Greece Portugal Czech Republic Ireland Austria Romania Denmark Estonia Croatia Slovakia Bulgaria Luxembourg Hungary Netherlands Finland 32 18 64 We are committed to offering equal career opportunities for our staff at all levels of the organisation.
We employ equal proportions of women and men, and more than a third (36 %) of our directors and principal managers were female in 2021 (35 % in 2020).

The proportion of female principal managers in audit at the ECA reached 37.5 % (29 % in 2020), which is close to the 2027 target of 40 %.

With our new multiannual policy and action plan for 2021-2025, we moved from an equal opportunities policy to a broader Diversity and Inclusion approach in 2021.
Similarly, we remain committed to geographical balance in our management.

65 Audit support Audit methodology AWARE In 2021, we made our internal digital platform AWARE (Accessible Web-based Audit Resource) available on our website.

This provides a single point of access for the public to our audit methodology and guidance.

Professional training Consolidation of online learning As anticipated, online learning was the norm in 2021.
Based on the experience acquired in the previous year, we were able to organise a record number of learning activities (616) on various topics ranging from audit to data protection.

On a few occasions, the public health situation allowed for hybrid or classroom training.

The high number of online activities, together with the lack of restrictions on participant numbers, had a positive impact on training indicators, which increased significantly compared to 2020.
66 2021: professional training target exceeded Once again, we exceeded the professional training target of five days of non-language training per year for auditors, in line with the International Federation of Accountants’ recommendations, and two days for non-audit staff.

Our auditors attended an average of 8.5 training days (5.4 in 2020), while non-audit staff attended 4.2 training days on average (3.1 in 2020).
2019 2020 2021 8.5 4.2 Auditors Non-auditors ≥ 5 TARGET training days ≥ 2 Tailor-made auditor training Our priority is to support the ECA’s audit activity by offering relevant and timely training.

We therefore continued to organise tailor-made courses on various topics.

These included the circular economy, free movement during the COVID-19 crisis, good budgetary governance, coal regions in transition, public procurement, the new 2021-2027 MFF, the Recovery and Resilience Facility, and the EU Customs Code.
We stepped up our training activities in the field of fraud, ethics and integrity, organising several courses and presentations on related topics.

We invited trainers and speakers from OLAF, EPPO, Eurojust and Transparency International to share their knowledge and experience with our staff.

67 Thematic programmes As in 2020, the 2021 Training Day became a Virtual Training Week.

We took the opportunity to move beyond physical frontiers by inviting speakers from outside Europe.
The Audit Fair featured (in order of appearance) the SAIs of Australia, South Africa, Brazil, Japan and Canada.

Other very interesting presentations were given on topics including the environment, communication and data analysis.

October 2021 was the ninth European Cybersecurity Month (ECSM), an initiative promoting online security and raising awareness of cybersecurity among EU citizens.

The ECA had the honour of co-hosting the opening event with the European Commission.
We prepared a packed month-long programme bringing together key cybersecurity experts from the EU institutions and their peers in Luxembourg.

In November 2021, we organised the first ‘Clear Language Days’ at the ECA.

Built around the Clear Language Awards, a ceremony celebrating and rewarding the best ECA special reports, the thematic week was an opportunity to reflect on clear writing and the challenges we face when addressing the public.
Training and awareness raising for the new hybrid environment In 2021, we continued our training programme for career counsellors, mentors, internal facilitators and confidential contact persons.

To support our staff in the new hybrid environment and help increase resilience, we organised several presentations and workshops on topics such as COVID-19, loneliness and bullying at work, harassment during lockdown, mindfulness, and the importance of disconnecting when teleworking.
68 Translation In 2021, we translated and revised over 227 000 pages (2020: 235 000), including 29 800 pages of outsourced work.

Our translators also participated in our audit activities, offering linguistic support during audit visits, online meetings and report writing.

In addition, they were involved in communication work, giving language advice and improving quality by tailoring messages to the target audience, for example through cultural adaptation.
We recruited and trained an Irish language team with a view to achieving a similar output to other language groups from 2022.

Information security 2021: another busy year for cybersecurity As ECA staff stayed fully connected to their devices due to the COVID-19 pandemic, cybersecurity remained particularly relevant in 2021.

We were faced with recurrent cyberattacks and data breaches, but installed new applications to provide more robust protection for our institution.
Following last year’s adoption of our new information classification policy, we prepared guidelines on the classification of ECA information, including guidance on granting access to this information via an internal sharing platform.

We also adopted Decision 41-2021 on the security rules for protecting EU classified information.
We invited representatives of the European Commission for an assessment visit to our enhanced administrative area to get approval for the ECA’s processing of ‘EU-Restricted’ information.

The main results for this period were: o o The first two simulated phishing campaigns at the Court to measure users’ cyber-awareness.

EU Sign being adopted as the official electronic signature solution for the ECA.

EU Sign is an electronic signature service provided by the European Commission.
o Installing a new tool to protect sensitive directories and files.

The year 2021 was challenging as regards vulnerability management, due to the large number of threats that required prompt action by the IT teams to remediate critical software flaws.

69 Buildings We currently own three buildings (‘K1’, ‘K2’ and ‘K3’), which operate as a single, integrated technical entity.

We also rent office space for our disaster recovery centre in Luxembourg.
Due to the ongoing COVID-19 crisis, almost all our staff worked from home in 2021 and external visits were restricted as much as possible.

Most ECA staff were vaccinated once vaccines became available.

This, coupled with a decrease in the number of new COVID-19 infections during the summer, enabled the ECA to require staff to work on the premises regularly during the autumn.
In line with other EU institutions, starting from 13 September 2021, the ECA introduced a mandatory minimum of two office days per week (monthly average).

Following the appearance of the Omicron variant, this was reduced to one day per week.

At the same time, we implemented all necessary health and safety measures so that staff present on the premises could work under the best possible conditions pending a return to normal.

In 2021, the Court’s meeting rooms were adapted to allow hybrid meetings.
K1 The K1 building, which opened in 1988, contains offices for up to 310 staff and meeting rooms.

The basement levels contain the car parks, technical facilities, storage areas, the library and the main archive room, while the top floor is used entirely for technical facilities.

K1 was modernised in 2008 to render it compliant with national health, safety and environmental requirements.

Wherever possible, the technology in K1 was adapted to make it compatible with that used in K2 and K3.
70 K2 The K2 building opened in 2003.

The basement levels contain the car parks, technical facilities, storage, and fitness centre.

The top floor is used entirely for technical facilities.

The remaining floors are used for offices for up to 241 staff, meeting rooms, a conference room with interpreting booths, videoconferencing rooms, a cafeteria and basic kitchen areas.
The K2 building is currently being renovated to optimise the organisation of its workspaces and to upgrade some technical installations.

After being put on hold at the beginning of the COVID-19 crisis, the works started in November 2020 and should be completed by the end of 2022.

As agreed by the European Parliament and the Council in March 2014, we are covering the cost of this upgrade using the remaining budget from the K3 construction project, which was completed a few years ago.
K3 The K3 building opened in 2012.

The basement levels contain car parks, technical facilities and storage, unloading bays, waste-storage facilities, the print shop, kitchens and archives.

The ground floor consists of the canteen, cafeteria and training rooms.

There are also offices for 503 staff, meeting rooms and an IT room.

The sixth floor comprises reception rooms, a kitchen and technical facilities.
The K3 building has a rating of ‘very good’ according to BREEAM, the leading method worldwide for evaluating and certifying the sustainability of buildings.

K1 K2 K3 The ECA’s premises on the Kirchberg plateau in Luxembourg.

71 Environmental management As an EU institution, we have a duty to apply the principle of sound environmental management in all our activities.

We are therefore committed to continuously reducing our environmental impact.
Every year, we monitor and analyse the greenhouse gas emissions generated by our activities The ECA is proud of its Eco-Management and Audit Scheme (EMAS) certification.

We successfully operate an EMAS compliant environmental management system and we fully comply with the ISO 14001:2015 certification requirements.
Since March 2020, the pandemic has had an undeniably positive effect on our environmental indicators, as follows: o o o CO2 emissions from work-related travel and commuting have fallen drastically; indicators directly linked to the presence of staff on site, such as paper and water consumption and waste production, have fallen sharply due to mass teleworking; and energy consumption also fell, albeit to a lesser extent, during periods of lockdown and reduced occupancy when staff mostly teleworked from home.
Our total greenhouse gas output in 2020 was 6 144 tonnes of carbon dioxide equivalent (tCO2e), a reduction of 43 % since 2014, the year in which we started measuring our CO2 emissions.

Sustainability reporting The Court will present in a specific report the efforts made towards sustainability in 2021.

72 Our accountability Financial information Our institution is financed by the EU budget under the administrative expenditure heading.

In 2021, our budget amounted to around €153.7 million.
Our budget represents around 1.5 % of the EU’s total administrative spending (less than 0.1 % of total EU spending).
Implementation of the 2021 budget Final appropriations Commitments % use (commitment/ appropriations) Payments (thousand euros) 10 654 10 138 95 % 10 111 114 511 112 601 98 % 112 601 7 835 1 529 2 660 7 152 383 2 519 91 % 25 % 95 % 6 861 266 2 144 FINANCIAL YEAR 2021 Title 1: People working with the institution 10 – Members of the institution 12 – Officials and temporary staff 14 – Other staff and external services 162 – Missions 161 + 163 + 165 – Other expenditure relating to persons working for the institution Subtotal Title 1 137 189 132 793 97 % 131 983 Title 2: Buildings, movable property, equipment and miscellaneous operating expenditure 20 – Immovable property 210 – IT&T 212 + 214 + 216 – Movable property and associated costs 23 – Current administrative expenditure 25 – Meetings, conferences 27 – Information and publishing Subtotal Title 2 Total Court of Auditors 4 306 9 141 880 385 496 1 325 4 306 9 141 837 324 90 1 074 16 533 153 722 15 772 148 565 100 % 100 % 95 % 84 % 18 % 81 % 95 % 97 % 2 282 4 484 470 296 69 739 8 340 140 323 73 2022 budget The 2022 budget represents an increase of 5.48 % on the 2021 figure.
FINANCIAL YEAR 2021 2022 2021 Title 1: People working with the institution 10 – Members of the institution 12 – Officials and temporary staff 14 – Other staff and external services 162 – Missions 161 + 163 + 165 – Other expenditure relating to persons working for the institution 11 715 120 838 8 444 2 452 2 732 (thousand euros) 10 704 114 120 7 861 2 988 2 613 Subtotal Title 1 146 181 138 286 Title 2: Buildings, movable property, equipment and miscellaneous operating expenditure 20 – Immovable property 210 – IT&T 212 + 214 + 216 – Movable property and associated costs 23 – Current administrative expenditure 25 – Meetings, conferences 27 – Information and publishing Subtotal Title 2 Total Court of Auditors Note: Figures reported relate to the initial budget.
3 778 8 228 944 574 675 1 761 15 960 162 141 3 358 8 171 901 565 696 1 745 15 436 153 722 74 Internal and external audit Internal audit Our Internal Audit Service (IAS) advises the institution on how to manage risks.

It provides independent, objective assurance and consulting services designed to add value to and improve our institution’s operations.

The IAS reports to the Internal Audit Committee, which is composed of three ECA Members and an external expert.
The Committee regularly monitors the progress of the various tasks set out in the IAS’s annual work programme, and ensures its independence.

In 2021, the IAS continued to review the ECA’s risk management policy and issued reports for three tasks: ‘Equal Opportunities’, ‘Fraud management’ and ‘Business continuity and staff protection measures under the COVID-19 crisis’.
The IAS also finalised the main audit work for two other tasks, ‘IT Governance’ and ‘The recruitment process’, for which reports will be issued in 2022.

Overall, the work of the IAS did not reveal any shortcomings that, by their nature or magnitude, would call into question the overall reliability of the internal control systems put in place by the authorising officer by delegation to ensure the legality and regularity of our financial operations in 2021.
External audit Our annual accounts are audited by an independent external auditor.

This is important, as it shows we apply the same principles of transparency and accountability to ourselves as we do to our auditees.

Our external auditor – PricewaterhouseCoopers Sàrl – published its report on our accounts for the financial year 2020 on 6 May 2021.
75 Our external auditor’s opinions – financial year 2020 Regarding our financial statements: ‘In our opinion, the accompanying financial statements give a true and fair view of the financial position of European Court of Auditors – ECA (the ‘Company’) as at 31 December 2020, and of the results of its operations, its cash flows and the changes in net assets for the year then ended in accordance with Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012, (OJ L 193, 30.07.2018, p. 1).’ Regarding our use of resources and control procedures: ‘Based on our work described in this report, nothing has come to our attention that causes us to believe that in all material respects and based on the criteria described above: o o the resources assigned to the ECA have not been used for their intended purposes; the control procedures in place do not provide the necessary guarantees to ensure the compliance of financial operations with the applicable rules and regulations.’ COPYRIGHT © European Union, 2022.
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Q J - A A - 2 2 - 0 0 1 - E N - N ISBN 978-92-847-7469-2 EN EN 2021 EU audit in brief Introducing the 2021 annual reports of the European Court of Auditors EUROPEAN COURT OF AUDITORS 12, rue Alcide De Gasperi 1615 Luxembourg LUXEMBOURG Tel.
+352 4398-1 Enquiries: eca.europa.eu/en/Pages/ContactForm.aspx Website: eca.europa.eu Twitter: @EUAuditors More information on the European Union is available on the internet (http://europa.eu).
Luxembourg: Publications Office of the European Union, 2022 Print PDF HTML ISBN 978-92-847-8460-8 doi:10.2865/88090 QJ-07-22-618-EN-C doi:10.2865/631971 QJ-07-22-618-EN-N ISBN 978-92-847-8503-2 doi:10.2865/93782 QJ-07-22-618-EN-Q ISBN 978-92-847-8509-4 Printed in Luxembourg EN 2021 EU audit in brief Introducing the 2021 annual reports of the European Court of Auditors Contents President’s foreword Overall results Key findings What we audited What were the 2021 figures?

Where does the money come from?


What is the money spent on?

What did we cover?
What we found Our statement of assurance The EU accounts present a true and fair view We issue a clean opinion on revenue We issue an adverse opinion on EU budget spending We issued a clean opinion on the first payment under the RRF A closer look at our results Budgetary and financial management Revenue Single market, innovation and digital Cohesion, resilience and values Natural resources Migration and border management Security and defence Neighbourhood and the world European public administration Recovery and Resilience Facility European Development Funds Background information The European Court of Auditors and its work President’s foreword Our annual report on the 2021 financial year is the first one in the new programming period for 2021-2027.
In 2021, the COVID-19 pandemic continued to weigh heavily on the European Union and its Member States.

We, as the European Union’s external auditor, have done everything we can to continue providing an effective public audit service in the EU despite the ongoing operational issues arising from the COVID-19 crisis.

As in previous years, we conclude that the EU accounts present a true and fair view of the EU’s financial position.
We give a clean opinion on the reliability of the 2021 accounts of the European Union.

The revenue for 2021 was legal and regular, and free from material error.

Apart from the traditional budgetary resources agreed as part of the 2021-2027 multiannual financial framework (MFF), the EU launched the ‘NextGenerationEU’ (NGEU) initiative, a recovery package of supplementary funds based on debt securities.

The Recovery and Resilience Facility (RRF) accounts for about 90 % of NGEU funding.
We provide two separate opinions on the legality and regularity of expenditure for 2021: one on the traditional EU budget and one on the RRF.

For 2021, our estimate of the level of error in EU budget expenditure is 3.0 % (2020: 2.7 %).

In 2021, RRF expenditure covered the single payment made to a Member State (Spain).

We consider that one of the 52 milestones included in the Spanish payment request was not fulfilled.

In our view, the related error is not material.


We based our assessment on the condition for payments, i.e.

that the milestones and targets had been satisfactorily fulfilled.

Compliance with EU and national rules are not part of the regularity assessment.

Concerning the significant areas of EU budget spending for which we provide a specific assessment, the level of error is material for ‘Single market, innovation and digital’ and ‘Cohesion, resilience and values’.
For ‘Natural resources’, based on the results of our testing of transactions and other evidence produced by the control system, we find the level of error to be close to materiality.

Our results also indicate that the level of error was not material for direct payments, representing 68 % of spending under this MFF heading, and that it was, taken as a whole, material for the spending areas we had identified as higher risk (rural development, market measures, fisheries, the environment and climate action).
The level of error is below materiality in ‘European public administration’.

5 For several years, we have audited the EU revenue and spending by differentiating between those budget areas where we consider the risks to legality and regularity high, and those where we consider them low.
Due to the way the EU budget is composed and evolves over time, the proportion of high-risk expenditure in the audited population further increased compared to the previous years and represents around 63 % of our 2021 audit population (2020: 59 %).

We estimate the level of error in this type of expenditure at 4.7 % (2020: 4.0 %).

Against this background, we issue an adverse opinion on expenditure.
The estimated level of error for low-risk expenditure, which accounted for the remaining around 37 % (2020: 41 %) of our audit population, was below our materiality threshold of 2 %.

Contingent liabilities involving a risk to the EU budget increased by €146.0 billion (111 %) in 2021, from €131.9 billion to €277.9 billion.
This was mainly due to €91.0 billion issued in bonds to finance NGEU in 2021, and an increase of €50.2 billion in the amount of European instrument for temporary support to mitigate unemployment risks in an emergency (SURE) loans made to Member States.

Russia’s war of aggression against Ukraine has also contributed to this increase through guarantees that the EU has given to cover loans to non-EU countries.
Against this backdrop, managing the EU’s finances in a sound and effective manner is more important than ever.

This entails an increased responsibility for both the Commission and the Member States, but also for us at the European Court of Auditors.

Klaus-Heiner LEHNE President of the European Court of Auditors 6 Overall results Key findings Summary of the 2021 statement of assurance We issue a clean opinion on the reliability of the 2021 accounts of the European Union.
We also issue a clean opinion on the legality and regularity of revenue for 2021.

We provide two separate opinions on the legality and regularity of expenditure for 2021: — our opinion on the legality and regularity of EU budget expenditure is adverse; — our opinion on the legality and regularity of expenditure under the Recovery and Resilience Facility is clean.

o We conclude that the EU accounts present a true and fair view of the EU’s financial position.
o o o o The revenue for 2021 was legal and regular, and free from material error.

We provide more information on the basis for our opinion on revenue in ‘Our statement of assurance’.

The Recovery and Resilience Facility (RRF) is the centrepiece of the NextGenerationEU (NGEU).

It is a temporary instrument, which follows a different delivery model than EU budget expenditure under the multiannual financial framework (MFF) headings.
Unlike EU budget expenditure, which is based on the reimbursement of costs and/or compliance with conditions, under the RRF, Member States are paid for achieving predefined milestones or targets.

For 2021, we therefore provide separate opinions for EU budget expenditure and RRF expenditure.

Overall, the estimated level of error in EU budget expenditure was material at 3.0 % (2020: 2.7 %).
In our risk assessment, we identify as high-risk the EU expenditure where beneficiaries often have to follow complex rules, when they submit claims for costs they have incurred.

The proportion of high-risk expenditure in our audit population further increased and was substantial at 63.2 % (2020: 59 %).

This year, we estimate the level of error to be 4.7 % (2020: 4.0 %) in this part of our audit population.
As in the previous two years, this error is material and pervasive and we are issuing an adverse opinion on EU budget expenditure.

7 o In 2021, RRF expenditure covered the single payment made to a Member State (Spain).

We consider that one of the 52 milestones included in the Spanish payment request was not satisfactorily fulfilled.

In our view, the related error is not material.

We provide more information on the basis for our opinion on RRF expenditure in ‘Our statement of assurance’.
o We reported to the European Anti-Fraud Office (OLAF) 15 cases (2020: six cases) of suspected fraud that we had identified in 2021, from which OLAF has already opened five investigations.

We reported one of these cases in parallel to the European Public Prosecutor’s Office (EPPO), along with an additional case that we had identified in 2021. o o o o o The Commission summarises key information on its internal control and financial management in the Annual Management and Performance Report (AMPR).
Limitations in the Commission’s and Member States’ ex post checks in MFF headings ‘Single market, innovation and digital’, ‘Cohesion, resilience and values’ and ‘Neighbourhood and the world’ affect the risk at payment disclosed in the AMPR and hence the robustness of the Commission’s risk assessment.
The reporting in the AMPR on financial corrections and recoveries has improved compared to last year, but the presentation of ‘corrections for past payments’ (€5.6 billion) could lead to misunderstanding, as preventive measures included in this amount, do not relate to past payments or accepted expenditure.

Furthermore, Member States’ preventive measures cannot be attributed directly to the Commission.
The Commission in the AMPR does not disclose details of the letter sent to Hungary under the ‘general regime of conditionality’ and how it may affect the regularity of the expenditure concerned.

Outstanding commitments at the end of 2021 totalled €341.6 billion; €251.7 billion related to the EU budget and €89.9 billion to NGEU.
The EU budget’s outstanding commitments decreased significantly from a historical high of €303.2 billion at the end of 2020, mainly due to delays in the implementation of shared-management funds under the 2021-2027 MFF.

The total exposure of the EU budget to contingent liabilities increased by €146.0 billion (111 %) in 2021, from €131.9 billion to €277.9 billion.
This was mainly due to €91.0 billion issued in bonds to finance NGEU in 2021, and an increase of €50.2 billion in the amount of European instrument for temporary support to mitigate unemployment risks in an emergency (SURE) loans made to Member States.

Russia’s war of aggression against Ukraine has also contributed to this increase through guarantees that the EU has given to cover loans to non-EU countries.
The full text of our 2021 annual reports on the EU budget and on the activities funded by the 8th, 9th, 10th and 11th European Development Funds can be found on our website (eca.europa.eu).

8 What we audited What were the 2021 figures?

The European Parliament and the Council adopt an annual EU budget, within the framework of a longer-term budget agreed for a period of several years (known as the ‘multiannual financial framework’ or MFF).
In 2021, EU budget spending totalled €181.5 billion, the equivalent of 2.4 % of the EU Member States’ total general government spending and 1.3 % of their gross national income.

In May 2020, the Council of the European Union adopted NGEU, a temporary instrument that was set up in response to the socio-economic impact of the COVID-19 pandemic and is financed through issuing bonds.

The RRF accounts for about 90 % of NGEU funding.


In 2021, spending on non-repayable RRF support (grants) amounted to €46.5 billion.

Taking into account RRF spending, payments from the EU in 2021 totalled €228.0 billion.

Where does the money come from?

Total revenue for 2021 was €239.6 billion.

The largest share of the EU budget is financed by amounts that Member States contribute in proportion to their gross national income (€115.8 billion).
Other sources include customs duties (€19.0 billion), a contribution based on value-added tax collected by Member States (€17.9 billion), a contribution based on non-recycled plastic packaging waste, introduced in 2021 (€5.9 billion), and other revenue (€5.7 billion).
Additional revenue amounted to €75.3 billion in 2021, including €55.5 billion of external assigned revenue for budget guarantees, borrowing and lending operations (NGEU) and €19.8 billion of contributions and refunds arising from EU agreements and programmes.

9 What is the money spent on?


The EU budget is spent in a wide range of areas, such as: o o o o o o o o fostering the economic development of structurally weaker regions; promoting innovation and research; transport infrastructure projects; training for unemployed people; farming and promoting biodiversity; fighting climate change; border management; aid for neighbouring and developing countries.

About three quarters of the budget is spent under what is known as 'shared management'.
Under this budget implementation method, the Member States distribute funds, select projects and manage the EU’s expenditure, while the Commission remains ultimately responsible.

This is the case of, for example, ‘Natural resources and environment’ and ‘Cohesion, resilience and values’.

RRF spending shall finance investments and reforms in policy areas of EU-wide relevance, structured into six pillars (see Figure 1).
Figure 1 – The six pillars Green transition Digital transformation Smart, sustainable and inclusive growth Social and territorial cohesion Health, and economic, social and institutional resilience Policies for the next generation, children and the youth Source: European Court of Auditors.

The Member States set out these reforms and investment in advance in their national recovery and resilience plans, and the Commission pays them for achieving related milestones and targets.

10 What did we cover?


Every year, we audit EU revenue and expenditure, examining whether the annual accounts are reliable and whether the underlying income and expenditure transactions comply with EU and national rules.
We examine expenditure at the point when final recipients of EU funds have undertaken activities or incurred costs or, in the case of RRF expenditure, at the point when Member States request payment for achieving their predefined milestones or targets, and at the point when the Commission has accepted it.

In practice, this means that our audit population of transactions covers interim and final payments.

We did not examine advances paid in 2021 unless they were also cleared during the year.
Our audit population for 2021 totalled €154.3 billion.

We had separate audit populations for EU budget spending (€142.8 billion) and RRF spending (€11.5 billion) to support our respective opinions (see Figure 2).
Figure 2 – Audit population 2021 EU budget €142.8 billion Recovery and Resilience Fund (RRF) €11.5 billion (billion euros) Cohesion, resilience and values 47.9 (33.5 %) Natural resources and environment 56.6 (39.7 %) €142.8 billion €11.5 billion Special instruments 0.1 (0.1 %) Security and defence 0.6 (0.4 %) Single market, innovation and digital 14.3 (10.0 %) European public administration 10.7 (7.5 %) Migration and border management 2.6 (1.8 %) Neighbourhood and the world 10.0 (7.0 %) Source: European Court of Auditors.
This year, ‘Natural resources and environment’ made up the largest share of our audit population for EU budget spending (39.7 %), followed by ‘Cohesion, resilience and values’ (33.5 %) and ‘Single market, innovation and digital’ (10.0 %).

The RRF audit population included the single payment (€11.5 billion) made to a Member State (Spain) in 2021.

11 COVID-19 travel restrictions continued to prevent us, in most cases, from carrying out on-the-spot checks.
We therefore carried out most of our work through desk reviews and by interviewing auditees remotely.

While not carrying out on-the-spot checks may increase the detection risk, the evidence that we obtained from our auditees enabled us to complete and conclude on our work.

For more information on our audit approach, see Background information.
What we found Our statement of assurance In accordance with Article 287 of the Treaty on the Functioning of the European Union (TFEU), we provide a statement of assurance to the European Parliament and the Council of the European Union covering the reliability of the EU’s consolidated accounts and the legality and regularity of transactions.

This is the central element of our annual report.


The RRF is a temporary instrument delivered and financed in a way that is fundamentally different to EU budget expenditure.

Whereas beneficiaries of EU budget spending are paid for having undertaken certain activities or reimbursed for costs incurred, under the RRF Member States are paid for the satisfactory achievement of predefined milestones or targets.
We therefore provide two separate opinions on the legality and regularity of expenditure: one for EU budget spending and another for RRF spending.

Because RRF payments are based on the satisfactory achievement of predefined milestones or targets, we examined whether the Commission had gathered sufficient and appropriate evidence to assess this condition.

Compliance with other EU and national rules does not form part of this assessment.
For the traditional own resources component of revenue, customs duties are at risk of either not being declared or being declared incorrectly to the national customs authorities by importers.

The actual import duties collected will therefore fall short of the amount that should theoretically be collected.

This difference is known as the “customs gap”.

These evaded amounts are not captured in Member States’ TOR accounting systems and do not fall within the scope of our audit opinion on revenue.
12 The EU accounts present a true and fair view The 2021 EU accounts present fairly, in all material respects, the EU’s financial results and its assets and liabilities at the end of the year, in accordance with international public sector accounting standards.

We can therefore give a clean opinion on the reliability of the accounts, as we have done every year since 2007.
The EU balance sheet includes a liability for pension and other employee benefits that further increased, amounting to €122.5 billion at the end of 2021 (2020: €116 billion).

The further increase in this estimate is mainly due to a decrease in the nominal discount rate.

On 1 February 2020, the United Kingdom (UK) ceased to be an EU Member State.
At balance sheet date, the EU accounts showed a net receivable due from the UK of €41.8 billion (2020: €47.5 billion) based on mutual obligations defined in the withdrawal agreement.

This decrease is mainly due to payments received from the UK during 2021 in line with the terms of the withdrawal agreement.
The impact of Russia’s invasion on loans and grants in respect of Ukraine in the EU accounts have been assessed, and are appropriately accounted for and disclosed in accordance with the requirements of the accounting rules.

We issue a clean opinion on revenue We conclude that revenue is free from material error.

We issue an adverse opinion on EU budget spending We define error as an amount of money that should not have been paid out of the EU budget.
Errors occur when money is not used in accordance with the relevant EU legislation and hence not as the Council and European Parliament intended when adopting that legislation, or when it is not used in accordance with specific national rules.

For EU budget spending, we estimate the level of error to be between 2.2 % and 3.8 %.

The mid-point of this range, previously known as the ‘most likely error’, has increased compared to last year, from 2.7 % to 3.0 % (see Figure 3).
13 Figure 3 – Estimated level of error for EU budget spending (2017-2021) 95 % confidence interval Upper error limit ECA Estimated level of error Lower error limit 3.4 % 3.4 % 3.6 % 3.6 % 3.8 % 2.6 % 2.7 % 2.7 % 3.0 % 1.8 % 1.8 % 1.8 % 2.2 % Materiality 2.0 % 2.4 % 1.4 % 6 % 4 % 2 % 0 % 2017 2018 2019 2020 2021 Audit population (billion euros) 100.2 47 % 53 % 120.6 51 % 49 % 126.1 53 % 47 % 147.8 142.8 59 % 41 % 63 % High-risk 37 %​ Low-risk Source: European Court of Auditors.
14 More than half of our audit population is again affected by material error In 2021, we found once again that the way expenditure was disbursed had an impact on the risk of error.

We distinguish in this context between cost-reimbursement and entitlement payments (see Box below).

What are cost-reimbursement and entitlement payments?
EU budget spending is characterised by two types of expenditure involving distinct patterns of risk: — Cost reimbursements, where the EU reimburses eligible costs for eligible activities (involving complex rules): these include research projects (under ‘Single market, digital and innovation’), investment in regional and rural development (‘Cohesion, resilience and values’ and ‘Natural resources and environment’) and development aid projects (‘Neighbourhood and the world’).
We consider this type of expenditure to be high-risk.

— Entitlement payments, which are based on beneficiaries meeting certain (less complex) conditions: these include student and research fellowships (under ‘Single market, digital and innovation’), direct aid for farmers (‘Natural resources and environment’) and salaries and pensions for EU staff (‘European public administration’).

We consider this type of expenditure to be low-risk.
The most common errors we found in high-risk expenditure in the main MFF headings were: o o o ineligible costs and projects, infringements of internal market rules (in particular non-compliance with state aid rules), absence of essential supporting documents, and non-compliance with public procurement rules in ‘Cohesion, resilience and values’; ineligible beneficiaries, projects or expenditure, administrative errors and failure to meet agri-environmental commitments are the most common errors found in the rural development, market measures, environment, climate action and fisheries spending areas, which together make up around 33 % of total spending in ‘Natural resources and environment’; ineligible direct personnel and direct other costs are the main sources of error in research expenditure (Horizon 2020 and the Seventh Framework Programme under ‘Single, market, innovation and digital’).
Serious non-compliance with public procurement rules and ineligible other direct costs are the most common errors found in other programmes and activities (mainly the Connecting Europe Facility); o expenditure not incurred, ineligible costs, absence of supporting documents and public procurement in ‘Neighbourhood and the world’.

15 In 2021, high-risk expenditure further increased compared to the previous years, making up almost two thirds of our audit population at 63.2 % (2020: 59 %).
The estimated level of error for high-risk expenditure was 4.7 % (2020: 4.0 %).

Low-risk expenditure accounted for the remaining 36.8 % of our audit population (2019: 41 %) and mainly included entitlement payments.

The estimated level of error in this part of the population was below our materiality threshold of 2 % (see Figure 4).
Figure 4 – Error rates reflect the level of risk High-risk expenditure €90.1 billion 63.2 % of our audit population Estimated level of error 4.7 % Low-risk expenditure €52.7 billion 36.8 % of our audit population Free from material error Source: European Court of Auditors.

Materiality level 2 % Figure 5 compares our estimated levels of error in the various spending areas between 2017 and 2021.
Further information on results is provided in the A closer look at our results section and in the relevant chapters of our 2021 annual report.
16 Figure 5 – Our estimated levels of error for selected EU budget spending areas (2017-2021) 5.0 % 4.4 % 3.5 % 3.6 % 3.0 % Cohesion, resilience and values 2017 2018 2019 2020 2021 2.4 % 2.4 % 1.9 % 2.0 % 1.8 %* Natural resources and environment *In 2021 we find the level of error to be close to the materiality threshold 4.4 % 3.9 % 4.2 % 2.0 % 4.2 % Single market, innovation and digital Source: European Court of Auditors.
We issued a clean opinion on the first payment under the RRF In 2021, for the first time, our work covered the legality and regularity of RRF expenditure.

Our audit population comprised the only 2021 disbursement, a payment to Spain, and the clearing of the related pre-financing.

The Spanish request for payment included 52 milestones, which Spain considered to have been achieved.

The amount in the Council Implementing Decision (CID) determined to be payable to Spain was €11.5 billion.
We based our assessment on the condition for payment, i.e.

that the milestones and targets as defined in the CID had been satisfactorily fulfilled.

The overall audit evidence we obtained through our work indicates that one of the 52 milestones associated with the first disbursement to Spain was not achieved.

The Commission has not yet defined a method for quantifying the impact of not achieving a milestone or target.

Our own view is that the error is not material.


Other weaknesses found in the Commission’s work when assessing the milestones concern the insufficiently robust criteria for the additional control milestone and insufficient documentation of the Commission’s work, though this does not affect the assessment of whether a particular milestone has been achieved.
17 Comparing our error level estimates with those of the Commission The Annual Management and Performance Report (AMPR), for which the college of Commissioners has responsibility, summarises key information from the annual activity reports (AARs) on internal control and financial management.

It includes the risk at payment, which is the Commission’s estimate of the amount that has been paid without being in accordance with the applicable rules.
Overall, the Commission’s estimate of the risk at payment for 2021 is 1.9 %.

This is below our materiality threshold (2.0 %) and our estimated level of error (3.0 %) for EU budget expenditure.

Like our estimated level of error, the Commission’s estimate does not include RRF expenditure, for which it discloses the control results separately based on a qualitative assessment.
In addition, the AAR of each Commission directorate-general (DG) includes a declaration in which the director-general provides assurance that the report presents financial information properly and that the transactions under their responsibility are legal and regular.
For this purpose, all DGs provided estimates of the risk at payment in their spending, except for the RRF, for which the Commission assesses the control results based on a combination of the results from Member States’ and its own audits and controls.

For each MFF heading where we provide a specific assessment, we have compared the Commission’s risk at payment for 2021 with our estimated level of error.
The comparison shows that the Commission’s risk at payment is lower than our estimated level of error for ‘Single market, innovation and digital’ and ‘Cohesion, resilience and values’.

For ‘Natural resources’, the Commission’s estimate of the risk at payment (1.8 %) is consistent with our estimate.

In the AMPR, the Commission presents its overall risk assessment for 2021 annual expenditure in order to identify and focus action on high-risk areas.
The Commission estimates risk to be low for 55 % of expenditure, medium for 23 % and high for 22 %.

However, our work revealed limitations in the Commission’s ex post work, which, taken together, affect the robustness of the Commission’s risk assessment.

We also followed up on our observation from last year that the way the Commission reports actual financial corrections and recoveries in its AMPR is complex and not always clear.
We found that the Commission’s revision of its reporting has brought improvements.

However, we also consider, that the presentation of ‘corrections for past payments’ (€5 620 million) and the associated percentage of relevant expenditure (3.3 %) is inadequate and prone to misunderstanding.

It includes preventive measures, which do not relate to past payments or accepted expenditure.

Furthermore, Member States’ preventive measures cannot be attributed directly to the Commission.
We note that the Commission, in its AMPR, reports that it sent a first notification to Hungary in April 2022 under the ‘general regime of conditionality’.

This triggered the procedure that may lead to the imposition of measures against a Member State for breaches of the principles of the rule of law.

However, the AMPR does not disclose details of the notification or how it may affect the regularity of the expenditure concerned.
18 We reported cases of suspected fraud to OLAF and the EPPO We have been working together with OLAF for many years and with the EPPO since it started operations in June 2021.

We reported to OLAF 15 cases (2020: six cases) of suspected fraud that we had identified in the course of our audit work in 2021, from which OLAF has already opened five investigations.
We reported one of these cases in parallel to the EPPO, along with an additional case that we had identified in the course of our audit work in 2021.

In March 2022, we decided to start forwarding cases of suspected fraud to both OLAF and the EPPO simultaneously, where appropriate.

Want to know more?

Full information on the main findings can be found in Chapters 1 and 10 of our 2021 annual report.

The full text of our annual report can be found on our website (eca.europa.eu).
19 A closer look at our results Budgetary and financial management Implementation and use of the budget in 2021 Budget implementation was low for commitments but high for payments The MFF regulation sets maximum amounts for each of the seven years of the MFF.

These ceilings apply to new EU financial obligations (commitment appropriations) and to payments that can be made from the EU budget (payment appropriations).

See Figure 6.
See Figure 6.

Figure 6 – Budget implementation in 2021 Commitments initial budget used amending budgets (billion euros) Payments initial budget amending budgets MFF ceiling used 113.4 Commitments Payments 164.3 166.1 163.6 2.6 163.5 2.0 166.1 0 50 100 150 Source: European Court of Auditors.

20 During 2021, a total of €113.4 billion was committed: only 68 % of the total amount available (€166.8 billion).

This rate is exceptionally low, even lower than in 2014, the first year of the previous MFF (77 %).
In 2021, delays in the adoption of the sectoral regulations slowed down the launch of new programmes, particularly for the eight shared management funds under the Common Provisions Regulation.

Only 2 % of the available amount of commitment appropriations for these eight shared management funds was used.

In 2021, the MFF ceiling for payment appropriations was €166.1 billion, and the amount available for payments in the final budget was €168.0 billion.
Actual payments totalled €163.6 billion (97 %) of available payment appropriations.

Taking into account additional payments of €62.6 billion from assigned revenue (mainly RRF grants) and €1.8 billion of carry-overs from 2020, payments in 2021 totalled €228.0 billion.

The absorption rate of 2014-2020 European Structural and Investment Funds increased During 2021, the Member States continued to absorb European Structural and Investment Funds (ESIF) from the 2014-2020 MFF period.
At the end of 2021, total cumulative payments for the 2014-2020 ESIF operational programmes amounted to €331.1 billion, from a total of €492 billion (67 %).

The remaining €160.9 billion should be paid out, and the remainder de-committed by the closure of the programmes before the end of 2025, except for the EAFRD, for which closure will take place in 2027.

This amount makes up most of the EU budget’s €251.7 billion of outstanding commitments at the end of 2021.
As Figure 7 shows, the Member States’ cumulative absorption of ESIF funding varies significantly.
21 Figure 7 – 2014-2020 ESIF absorption levels (excluding NGEU resources) Million euros remaining to be absorbed Percentage remaining to be absorbed Croatia Slovakia Malta Denmark Romania Bulgaria Netherlands Belgium Spain Italy Germany Multi-country France Total EU Sweden United Kingdom Latvia Austria Slovenia Greece Hungary Czech Republic Poland Lithuania Luxembourg Portugal Estonia Cyprus Finland Ireland Source: European Court of Auditors.
54 % 57 % 57 % 58 % 59 % 60 % 61 % 61 % 62 % 62 % 62 % 63 % 66 % 67 % 68 % 68 % 68 % 70 % 71 % 73 % 73 % 73 % 74 % 74 % 74 % 75 % 76 % 76 % 79 % 81 % 46 % 43 % 43 % 42 % 41 % 40 % 39 % 39 % 38 % 38 % 38 % 37 % 34 % 33 % 32 % 32 % 32 % 30 % 29 % 27 % 27 % 27 % 26 % 26 % 26 % 25 % 24 % 24 % 21 % 19 % ​ 22 Implementation of NGEU began in 2021 The temporary NGEU instrument started in June 2021 with the entry into force of the new Own Resources Decision authorising the related borrowing.
By the end of 2021, commitments of NGEU funds reached €143.5 billion.

Pre-financing and payments were more than €53.6 billion.

See Figure 8 for more information.

Figure 8 – NGEU Implementation RRF grants (billion euros) 0 100 200 300 400 338.0 Recovery and Resilience Facility (RRF) grants (incl.
Technical Support Instrument) 98.0 46.4 NGEU top-up of EU programmes 0 10 20 30 31.5 24.0 19.2 15.4 European Regional Development Fund (ERDF) 4.9 European Social Fund (ESF) Just Transition Fund 2.1 0.0 0.0 European Agricultural Fund for Rural Development (EAFRD) 2.4 0.1 10.9 8.1 Invest EU Fund Horizon Europe Union Civil Protection Mechanism (RescEU) 6.1 5.4 1.7 0.2 1.8 0.0 2.1 0.1 0.0 Total amount of commitment appropriations 2021-2023 Commitments made in 2021 Payments made in 2021 Source: European Court of Auditors.
23 Outstanding commitments from the EU budget and NGEU reached a record amount of €341.6 billion Outstanding commitments at the end of 2021 totalled €341.6 billion; €251.7 billion related to the EU budget and €89.9 billion to NGEU.

The EU budget’s outstanding commitments decreased significantly from a historic high of €303.2 billion at the end of 2020, mainly due to delays to the start of the implementation of shared-management funds under the 2021-2027 MFF.
However, together with outstanding NGEU commitments, total outstanding commitments reached a record amount.

Figure 9 shows total outstanding commitments from both the EU budget and NGEU at the end of 2021, broken down by year of origin.
Figure 9 – Outstanding commitments as at the end of 2021 by year of origin (billion euros) 150 100 50 0 89.9 Outstanding commitments from the NGEU 82.8 54.9 60.8 Outstanding commitments from the EU budget 11.9 14.2 27.2 2016 and before 2017 2018 2019 2020 2021 Source: European Court of Auditors.

The Commission forecasts that outstanding commitments from the EU budget will reach €317 billion in 2027, €14 billion higher than the €303.2 billion at the end of 2020.
This small increase is mainly due to the smaller gap between commitment and payment appropriations in the 2021-2027 MFF.

24 Management costs for financial instruments vary We also looked at the paid management costs at Member State level in proportion to the total payments including national co-financing to the financial instruments.

We found that management costs amounted to 3.6 % of total payments to the financial instruments under the 2014-2020 MFF.
However, this is an average; the actual figure varies greatly between Member States.

In Sweden, for example, management costs accounted for more than 10 % of total payments to financial instruments.

In Austria and Belgium, on the other hand, financial instruments did not account for any management costs (see Figure 10).
Figure 10 – Management costs in relation to total payments to financial instruments under the 2014-2020 MFF as at the end of 2020 0 % 2 % 4 % 6 % 8 % 10 % 12 % Sweden Germany Netherlands Estonia Latvia United Kingdom Malta Slovakia Romania Spain France Finland Bulgaria Poland Average Hungary Lithuania Portugal Slovenia Cyprus Czech Republic Croatia Italy Greece Austria Belgium Source: European Court of Auditors.
25 Main risks and challenges for the EU budget in the coming years The total exposure of the EU budget increased in 2021, mainly due to the introduction of NGEU The EU budget’s total exposure to contingent liabilities increased from €131.9 billion in 2020 to €277.9 billion in 2021.

The two main reasons for this substantial rise were the introduction of NGEU and the increase in the amount of loans provided under the SURE (see Figure 11).
Figure 11 – Total exposure of the EU budget as at the end of 2021, broken down by category 91.0 NextGenerationEU (NGEU) Total 277.9 228.8 Covered by: the EU budget the Common Provisioning Fund (billion euros) 89.7 SURE loans 47.3 European Financial Stabilisation Mechanism loans 49.1 0.8 Others * 20.4 European Fund for Strategic Investments guarantee 20.3 EIB loans – External Lending Mandate 7.5 Macro-Financial Assistance loans 1.0 Others ** (*) EIB loans – Member States €0.6 billion, Balance of Payments loans €0.2 billion, Euratom loans – Member States €0.1 billion, difference from the total is due to rounding.
(**) European Fund for Sustainable Development (EFSD) guarantee €0.5 billion, Euratom loans – non-member countries €0.3 billion and NDICI-European Fund for Sustainable Development Plus (EFSD+) €0.2 billion.

Source: European Court of Auditors.

26 Russia’s war of aggression against Ukraine increases risks to the EU budget The EU is mobilising its budget and adding additional flexibility to react to Russia’s war of aggression against Ukraine.
This will increase the EU’s budgetary needs and lead to a higher risk of contingent liabilities to the EU budget being triggered.

At the end of 2021, Ukraine had outstanding loans with a nominal value of €4.7 billion under the Macro-Financial Assistance and Euratom programmes.

In addition, the European Investment Bank (EIB) has granted loans to the value of €2.1 billion to Ukraine, loans which are supported by EU guarantees.
What we recommend We recommend that the Commission: o o inform the budgetary authority about the factors contributing to the evolution of outstanding commitments, and take appropriate action with a view to gradually reducing outstanding commitments in the long term; should closely monitor the increasing risk of contingent liabilities to the EU budget being triggered in connection with Russia’s war of aggression against Ukraine, and take action as necessary to ensure that risk mitigation tools maintain sufficient capacity.
Want to know more?

Full information on the main findings on budgetary and financial management can be found in Chapter 2 of our 2021 annual report.

27 Revenue €239.6 billion What we audited Our audit covered the revenue side of the EU budget, which finances the EU’s expenditure.

We examined certain key control systems for managing own resources, and a sample of revenue transactions.
GNI-based contributions from Member States accounted for 48.2 % of the EU’s revenue in 2021, while the own resource based on value added tax (VAT) accounted for 7.5 %.

These contributions are calculated using macroeconomic statistics and estimates provided by Member States.

Traditional own resources (TOR), consisting of customs duties on imports collected by Member States’ administrations on the EU’s behalf, provided a further 7.9 % of EU revenue.
The non-recycled plastic packaging waste-based own resource provides 2.5 % of EU revenue.

It was introduced in 2021 and is calculated by applying a uniform rate to the weight of unrecycled plastic packaging waste generated in each Member State.

External assigned revenue, which mostly relates to amounts borrowed to provide Member States with non-repayable financial support in the context of NGEU, accounts for 23.2 % of EU revenue.

There are also other sources of EU revenue.


The most significant of these are contributions and refunds connected with EU agreements and programmes (8.3 % of EU revenue), such as revenue relating to the conformity clearance of the EAGF and EAFRD, and non-EU countries’ contributions to EU programmes and activities.

What we found Amount subject to audit Affected by material error?
€239.6 billion No – free from material error in 2021 and 2020 Preventive and corrective measures The revenue-related systems we examined were generally effective.

However, the key internal TOR controls we assessed in certain Member States and the management of VAT reservations and TOR open points at the Commission were partially effective due to persistent weaknesses.
We also found that the implementation of several actions in the Commission’s Customs Action Plan that contribute to reducing the customs gap had been delayed.

This weakness does not affect our audit opinion on revenue, as they do not concern the transactions underlying the accounts but rather the risk that TOR are incomplete.

28 Persistent weaknesses remain in the national control systems for compiling TOR statements.
In the particular case of Italy, we have already questioned the reliability of the Italian TOR statements since 2011, mainly due to delays in updating the accounts of customs duties not yet collected with information on debt recoveries.

We also observed that the number of VAT reservations and TOR open points has decreased, but weaknesses in their management remain.
In the case of VAT reservations, this was due to the Commission not applying a common approach in setting deadlines for Member States to calculate and make the resulting financial corrections to their VAT-based own resources.

Concerning TOR open points, the Commission had updated its procedure for processing TOR inspection results.
However, it did not include a system for ranking Member States` shortcomings in order of priority, nor did it set deadlines for their follow-up actions based on Member States` replies.

In addition, we noted delays in Commission actions to improve TOR risk management and reduce the customs gap.

Our review of the Commission’s implementation of the Customs Action Plan revealed insufficient progress on a number of actions.
The Commission work on lifting GNI reservations was affected by delays from the Member States concerned.

These delays related to delivering the GNI inventories to the Commission under the new 2020-2024 GNI verification cycle and to addressing the GNI transaction-specific reservations set as part of the previous 2016-2019 verification cycle.
For the sixth year in a row, the Commission’s DG BUDG, in its annual activity report, has maintained the reservation that the TOR amounts transferred to the EU budget are inaccurate owing to undervaluation of textiles and shoes imported from China over the period from 2011 to 2017.

The reservation was first set in 2016, when TOR losses attributable to the United Kingdom (UK) were quantified at €2.1 billion, and then extended to other Member States in 2018, without quantification.
A further €2.1 billion of interest was also booked in the 2021 consolidated accounts of the European Union.

On 8 March 2022, the Court of Justice of the European Union (CJEU) concluded that the UK had failed to fulfil its obligations under EU law in respect of own resources.

The CJEU approved the Commission’s method of quantifying of TOR losses based on statistical data.

However, it partly rejected the Commission’s calculation and provided guidance on recalculating it.
The Commission has started analysing the CJEU judgement and its impact on its calculations.

29 What we recommend We recommend that the Commission: o o o take the necessary action (including infringement proceedings where appropriate) to ensure that Italy solves its long-outstanding weaknesses in TOR accounting.
The action should aim to address the persistent discrepancies affecting the reliability of the country’s statements of duties collected and not yet collected; review its procedures for managing VAT reservations, in order to set more harmonised and stricter deadlines for national authorities and make its follow-up and lifting of reservations more efficient; improve the assessment of financial risks for TOR by implementing the relevant measures of its Customs Action Plan in a timely manner.
Want to know more?

Full information on our audit of EU revenue can be found in Chapter 3 of our 2021 annual report.

30 Single market, innovation and digital Total: €18.5 billion What we audited The programmes financed under MFF heading 1 ‘Single Market, Innovation and Digital’ are diverse and aim to finance EU investments that contribute to research and innovation, the development of trans-European transport networks, communications, energy, digital transformation and the single market, and space policy.
The principal programme for research and innovation remains Horizon 2020.

The MFF heading also encompasses large infrastructure projects under the Connecting Europe Facility and space programmes (Galileo, EGNOS and Copernicus).

It also includes the InvestEU fund, which aims to mobilise public and private investment through an EU budget guarantee that backs the investment of implementing partners.

For 2021, expenditure of €14.3 billion was subject to audit in this area.
Most of this expenditure was managed directly by the Commission.

The Commission provides advances to public or private beneficiaries upon signature of a grant agreement and, as their funded projects progress, reimburses part of the total costs they report, deducting those advances.

The space programmes are generally managed indirectly based on delegation agreements signed between the Commission and dedicated implementing bodies (such as the European Space Agency).
The InvestEU financial instruments are implemented mainly by the EIB or the European Investment Fund, which in turn use financial intermediaries.

What we found Amount subject to audit Affected by material error?

Estimated most likely level of error €14.3 billion Yes 4.4 % (2020: 3.9 %) Overall, we estimate that the level of error in ‘Single market, Innovation and Digital’ is material.

In 2021, 55 (42 %) of the 130 transactions we examined were affected by errors.
Horizon 2020 and FP7 spending remains high risk and is a main source of errors that we detect.

We found quantifiable errors relating to ineligible costs in 29 of the 87 research and innovation transactions in the sample.

This represents 45 % of our estimated level of error for this heading in 2021.

In the case of other programmes and activities, we detected quantifiable errors in nine of the 43 transactions in the sample.
These included cases of irregularity in the procurement procedure, works claimed and reimbursed twice, reimbursement of costs not provided for in the framework contract as well as financing of an ineligible asset.

31 The rules for declaring personnel costs under Horizon 2020 remain complex, despite simplification efforts, and their calculation remains a major source of error in the cost claims.

Of the 29 transactions affected by quantifiable errors in our sample of research transactions, 26, i.e.
more than 89 %, relate to ineligible personnel costs being declared and reimbursed.

Example: Ineligible costs due to missing time records Our review of the personnel costs declared by an SME revealed that there were no time records or other alternative evidence to support a large number of the hours charged to the project by two staff members.
Moreover, based on the analysis of the timesheets provided for the rest of the staff that we examined, we found that one staff member had declared 225 hours for the project, but no hours had been recorded in the time-sheets and in the case of two other staff members, hours had been claimed when they had been on annual leave.

A total of 1 277 hours (50 %) out of the 2 550 hours that we examined, were ineligible.
Auditors contracted by the beneficiaries at the end of a project provide certificates on financial statements, which are intended to help the Commission check whether costs declared in the financial statements are eligible.

We have repeatedly reported weaknesses in these certificates.

This year, we found that 7 of the 12 cases of detectable quantifiable errors had not been discovered by either the auditors providing the certificates, or the Commission.
Review of IT systems for research grants In 2021, we reviewed the eGrants suite, the Commission’s corporate business solution for managing grants and experts.

It integrates the systems used for the entire process i.e.

from work programme and call preparation, through to grant workflow management.

Based on our limited review, we found the systems being well integrated in the IT environment.
However, in accordance with the current legal basis, there is no link between beneficiaries’ accounting systems and the reporting system.

The Commission has the general financial data on projects required by its control framework and any accounting information for additional controls or audits on request.

This means that it is not possible to carry out large-scale automatic controls.
Commission’s reporting on regularity With regard to Horizon 2020, DG Research and Innovation (RTD) reported an expected representative error rate of 2.3 % and a residual error rate, taking into account corrective action, of 1.7 %, for all DGs and other EU bodies managing EU research spending.

The underlying ex post audits are carried out by DG RTD’s Common Audit Service (CAS) or by external contractors on its behalf.
As 2021 was the first year of implementation of the Horizon Europe, only a very limited number of payments had been executed (only pre-financing in DG RTD).

Hence, DG RTD did not report a detected error rate for Horizon Europe in 2021.
32 What we recommend We recommend that the Commission: o o o o o strongly encourages the use of the Personnel Costs Wizard (made available in the participant portal), especially by certain categories of beneficiaries that are more prone to committing errors, such as SMEs and new entrants (for both for Horizon 2020 and Horizon Europe grants); issues guidance to beneficiaries on the specific differences, focusing on the eligibility aspects under Horizon Europe, compared to the Horizon 2020 and similar programmes; in the case of Horizon 2020, improves the existing ex ante controls in order to identify and eliminate potential ineligible adjustments made to the personnel costs submitted by the beneficiaries following recalculation of the hourly rates; further improves the guidance addressed to the independent auditors beneficiaries contract to deliver the certificates on financial statements in order to reduce the large number of weaknesses we identified in our audits of these certificates; for the next research programme, explores, in line with evolving business needs, the feasibility of extending the functionalities in eGrants for risk assessment and automatic checks, e.g.
by exploiting other available data sources to make available, in digital format, additional key data supporting the confirmation of compliance.

Want to know more?

Full information on our audit of EU expenditure on ‘Single market, innovation and digital’ can be found in Chapter 4 of our 2021 annual report.
33 Cohesion, resilience and values Total: €80.1 billion What we audited Spending under this heading focuses on reducing development disparities between the different Member States and regions of the EU (subheading 2a) and actions to support and protect EU values, making the EU more resilient to present and future challenges (subheading 2b).
Funding takes place for subheading 2a (economic, social and territorial cohesion) through the European Regional Development Fund (ERDF), the Cohesion Fund (CF), the European Social Fund (ESF) and the Connecting Europe Facility (CEF).

For subheading 2b (resilience and values) funding is provided through programmes like Erasmus+, a number of smaller schemes and specific instruments created in response to the COVID-19 pandemic.
The cohesion policy funds (the ERDF, the CF and the ESF) account for the bulk of expenditure, where Commission and Member States share the management of the funds.

The EU co-finances multiannual operational programmes (OPs), from which funding goes to projects.

At the Commission, the Directorate-General for Regional and Urban Policy (DG REGIO) is responsible for implementing the ERDF and the CF, and the Directorate-General for Employment, Social Affairs and Inclusion (DG EMPL) is responsible for the ESF.
EU funding for programmes not under shared management is either managed directly by the Commission DGs or indirectly with the support of partner organisations or other authorities.

We audit expenditure once the Commission has accepted it.

For the 2021 annual report, we audited expenditure of €47.9 billion in this area for the 2021 annual report, including €44 billion expenditure under subheading 2a and €3.9 billion under subheading 2b (2020: €48.4 billion in total).
In line with our approach, this amount included €40.8 billion worth of expenditure from previous years under subheading 2a that the Commission had accepted or cleared in 2021.

What we found Amount subject to audit Affected by material error?

Estimated most likely level of error €47.9 billion Yes 3.6 % (2020: 3.5 %) Overall, we estimate that the level of error for MFF heading 2 is material.

In 2021, we tested 243 transactions.

We identified and quantified 30 errors, all relating to subheading 2a.
Taking account of the 56 errors previously found by audit authorities and corrections applied by Member State programme authorities (worth a total of €458 million for both programming periods combined), we estimate the level of error to be 3.6 %.

The estimated level of error for subheading 2a alone is 4.1 %.
34 Ineligible projects and costs, infringements of internal market rules (in particular non-compliance with state aid rules) and the absence of essential supporting documents contributed most to our estimated level of error.

The main contribution to the estimated level of error comes from weak decision-making by managing authorities, for example when approving ineligible projects or unlawful state aid.

We have also observed that audit authorities report relatively low levels of this type of error.
The number and impact of the errors detected demonstrate that the controls currently in place do not yet sufficiently offset the high inherent risk of error in this area.

This particularly concerns managing authorities and intermediate bodies whose verifications are still partly ineffective for preventing or detecting irregularities in the expenditure declared by beneficiaries.
Example: No verification of participant status In France, the status of participants not being in employment, education or training in two Youth Employment Initiative (YEI) projects was checked solely against self-declarations.

In one of the ESF programmes concerned, the beneficiary could not provide any independent evidence that participants were ‘not in employment, training or education’ (NEET).
We requested additional checks from the Commission and national authorities to establish the participants’ status.

This showed that nine out of the 37 participants were actually in employment, making them ineligible for EU support.

In Spain, we found that three of the four operations in our sample for the YEI were ineligible for EU funding.

National YEI legislation and the OP covering these operations require NEETs to be registered with the national Youth Guarantee system.
This registration gives NEETs access to a number of assisting measures, but also serves to verify their compliance with the NEET requirements.

In three of the audited operations, NEETs were registered retroactively in the national system.

This retroactive registration made it impossible to validate their eligibility as not being in education or training.

Most importantly, it means that NEETs are deprived of all the additional benefits available under those two schemes.
Simplified cost options Simplified cost options (SCOs) have the potential to reduce both beneficiaries’ administrative workload and errors.

This year, we found errors relating to the use of SCOs in four transactions in one Member State.

In Ireland, we found that the amounts reimbursed by the Member State to beneficiaries and the amounts reimbursed by the Commission to the Member State were based on different forms of support.
While the beneficiary was reimbursed based on actual costs, EU funding was based on SCOs.

This approach was also not in line with the regulatory requirements for SCOs.

35 Specific procurement weaknesses affecting direct management transactions In April 2020, the Commission activated the Emergency Support Instrument (ESI) and issued a communication explaining the options available in public procurement for dealing with issues relating to the COVID-19 crisis.
Seven of the 18 transactions in our sample for sub-heading 2b concerned payments made under the ESI in 2021.

In connection with these transactions, we found that the Commission did not verify adequately whether the financial terms of its advance purchase agreements with manufacturers of COVID-19 vaccine doses had been respected for payments to the contractors.
We also found weaknesses in the procurement of services and supplies under the ESI but we did not quantify these errors, since in every case we examined the extraordinary nature of the pandemic supported direct contracting.

Assessment of audit authorities’ work Audit authorities are the ‘second line of defence’ in the framework for assurance and control of spending.

They verify, on a sample basis, the regularity of expenditure declared by managing authorities to the Commission.
Through this work, they shall ensure that residual error rates remain below the materiality threshold of 2 %.

This year we assessed the work of 23 out of 116 audit authorities, in 19 Member States and the UK.

While our work is not intended to conclude on the correctness of audit authorities’ residual error rates as such, we found errors not detected by them.
Our work on this year’s sample shows that the residual error rate was above 2 % in 12 of the 31 assurance packages (corresponding to 39 % of the expenditure sampled), also taking account of the additional errors detected following the Commission’s verifications.

Since 2017, we have examined an annual sample of assurance packages.
During that time we have covered 69 assurance packages in 24 Member States and the UK at least once, corresponding each year to between 34 % and 62 % of the expenditure certified in annual accounts.

Taking account of the Commission’s adjustments and our own audit findings, 37 of these packages (54 %) have had residual rates above 2 % in at least one year.

The 37 packages have consistently accounted for at least 39 % of the expenditure in our sample.
This illustrates the extent to which audit authorities incorrectly report that residual error rates are below the 2 % materiality threshold.

Reporting by DG REGIO and DG EMPL on the regularity of Cohesion spending Annual activity reports are the Commission DGs’ main tools for reporting whether they have reasonable assurance that Member States control procedures ensure the regularity of expenditure.

The annual activity reports also provide an error rate as a key performance indicator on regularity.
DG REGIO reported a key performance indicator of 1.9 % and a ‘maximum rate’ of 2.5 %.

The DG EMPL rates were 1.7 % for the key performance indicator and 2.4 % for maximum risk.

The Commission used these error rates in the 2021 AMPR to provide regularity information.

It reported a combined risk at payment of between 1.8 % and 2.5 % for MFF subheading 2a, on cohesion, and 1.7 % and 2.3 % for MFF heading 2 as a whole.
36 In 2021, we published a special report in which we provided details on the relevance, reliability and consistency of the annual level of error reported in AARs and the AMPR for cohesion expenditure.

The report supported the conclusions reached in our annual report over the past four years.
We found that the Commission provides a minimum estimate for the level of error that is not final (at OP level, in AARs and in the AMPR) and that the desk reviews are of a limited value in confirming the validity of the residual total error rates reported by audit authorities.

In response to our recommendations, the Commission has revised its methodology for calculating its maximum risks.
In particular, it now applies a ‘top-up’ to unaudited OPs, based on error rates reported by the same audit authority for other OPs, or a flat rate if the audit authority has not yet been audited.

However, the Commission does not make these adjustments in the case of OPs audited in earlier accounting years, for which it continues to rely on its desk reviews of (which have inherent limitations compared to compliance audits).
Furthermore, the level of top-up may not be sufficient to account for errors that the Commission has not detected through its compliance audits.

Rule of law procedure In April 2022 the Commission sent Hungary a written notification concerning alleged breaches of the rule of law.

To do this, the Commission must have reasonable grounds to consider that these breaches affect or seriously risk affecting the sound financial management of the EU budget or the EU’s financial interests.
In their 2021 AARs, neither DG EMPL nor DG REGIO made any reference to this ongoing procedure or how it may affect the assurance that the Commission can obtain from Hungary’s control and assurance system.
What we recommend We recommend that the Commission: o o o o reiterate to managing authorities the requirements attached to reimbursing beneficiaries using a methodology that differs from the simplified cost options (SCOs) used for calculating payments to Member States from the EU budget, taking particular account of the situation detected this year in an Irish ESF operational programme; ensure that, when operational programmes are based on existing national schemes, the operation implemented contribute effectively to programme objectives, taking particular account of the situation detected this year in relation to NEET participants in Spanish ESF/YEI operational programmes; reiterate to programme authorities that they must confirm the NEET status of participants before submitting expenditure declarations for ESF/YEI programmes from the 2014-2020 period.
These eligibility checks should be made on the basis of reliable and verified sources, taking particular account of the situation detected this year in French and Irish ESF/YEI OPs; verify that COVID-19 vaccine manufacturers comply with the terms of advance purchase agreements, in particular as regards production cost estimates, the use of upfront financing and, where applicable, no-profit clauses, and take corrective action as necessary; 37 o o reiterate to audit authorities that the legal framework requires them to keep an audit trail, with which the Commission can verify that their sampling procedures are independent, objective and without bias; provide information in its annual activity reports about ongoing rule of law procedures against Member States and how these may affect the assurance that the Commission can obtain about regularity of expenditure from the assurance and control systems of the countries concerned.
Want to know more?

Full information on our audit of EU expenditure on ‘Cohesion, resilience and values’ can be found in Chapter 5 of our 2021 annual report.

38 Natural resources Total: €56.8 billion What we audited This spending area covers the common agricultural policy (CAP), the common fisheries policy, and part of EU spending on the environment and climate action.

The CAP accounts for 97 % of spending on ‘Natural resources’.
Its three general objectives set in EU legislation are: o o viable food production, with a focus on agricultural income, agricultural productivity and price stability; the sustainable management of natural resources and climate action, with a focus on greenhouse gas emissions, biodiversity, soil and water; and o balanced territorial development.
CAP spending under the European Agricultural Guarantee Fund (EAGF) falls into two broad categories: o o direct payments to farmers, which are fully funded by the EU budget; and agricultural market measures, also fully funded by the EU budget, with the exception of certain measures co-financed by the Member States, including promotion measures.

In addition, the CAP supports rural development strategies and projects through the European Agricultural Fund for Rural Development (EAFRD).
This MFF heading also covers EU spending on the maritime and fisheries policy, and part of the EU spending on the environment and climate action covering EMFF and LIFE programmes.

For 2021, expenditure of €56.6 billion was subject to audit in this MFF heading.

The Commission shares the management of the CAP with the Member States.

39 What we found Amount subject to audit Affected by material error?
Estimated most likely level of error €56.6 billion Close to materiality 1.8 % (2020: 2.0 %) Based on the errors we have quantified and other evidence produced by the control system, we find the level of error for ‘Natural resources’ to be close to materiality.

As in previous years, for direct payments which are mainly based on the area of agricultural land declared by farmers and represent 67 % of spending under ‘Natural resources’, our results indicate that the level of error was not material.
For the remaining areas (rural development, market measures, fisheries, the environment and climate action), representing 33 % of spending under this MFF heading our results, taken as a whole, indicate a material level of error.

Direct payments to farmers: an effective control system The main management tool for direct payments is the Integrated Administration and Control System (IACS), which incorporates the Land Parcel Identification System (LPIS).
The IACS has helped to bring down the level of error in direct payments, with the LPIS making a particularly significant contribution.

In the 84 direct payment transactions tested, we found only three minor quantifiable errors, which resulted from farmers overstating the eligible area of agricultural land.

Checks by monitoring Since 2018, Member State paying agencies may perform ‘checks by monitoring’.
This approach uses automated processes based on the EU Copernicus programme’s Sentinel satellite data to check compliance with certain CAP rules.

Where all eligibility criteria of a given payment scheme can be evaluated from space, it enables paying agencies to monitor the whole population of aid recipients remotely.

Checks by monitoring can be used to warn farmers of potential non-compliance with the payment scheme rules at any time during the growing season.
This provides farmers with more opportunities to rectify their claims before they are finalised.

Through our work, we examined the implementation of checks by monitoring in Spain and Italy.

Spain has been implementing such checks for direct payments since 2019.

Some regions have extended these checks to an increasing number of rural development measures.

In Italy, the checks covered only direct payments, but Italy intends to extend the checks to some rural development measures.
The Commission has committed itself to providing support to the Member States in developing checks by monitoring.

At the end of 2021, the area of the main direct aid schemes (basic payments and single area payments) subject to checks by monitoring was 13.1 %.

40 Rural development, market measures, fisheries, environment and climate action: higher risk of error Compared to direct payments, these spending areas are subject to complex eligibility conditions, which increases the risk of error.
Of the 104 rural development transactions we tested, 90 were unaffected by error.

Out of 13 cases where we found and quantified errors, six of them had an impact exceeding 20 %.

We detected one compliance issue without financial impact.

Example of non-compliance with agri-environment-climate eligibility condition In Poland, a farmer received aid under rural development measure M10 ‘Agri-environment-climate’.
The farmer declared three parcels of land under the measure and had to respect several commitments: — mow the declared areas once between 15 June and 30 September; — on two of the parcels, leave 15-20 % of the area unmown; and — collect or put into bales the mown biomass within two weeks of mowing.

We found that most of the data recorded in the beneficiary’s farm register did not reflect the actual agricultural activity.
Using evidence from Sentinel satellite images, we were able to establish that: — one parcel was not mown at all; — one of the parcels which should have been left partly unmown was completely mown; and — on two parcels, the mowing date was different than that recorded by the farmer, which led us to conclude that the mown biomass was collected or put into bales more than two weeks after mowing.
Taking into account the penalties laid down in the national rules, these non-compliances led to an error of 57 % for the audited payment.

Agricultural market measures form a number of diverse schemes that are subject to a variety of eligibility conditions.

We tested 14 transactions and found four cases where paying agencies had reimbursed ineligible costs.

All four errors were below 20 %.


The selection criteria and eligibility requirements for projects in fisheries, the environment and climate action also vary.

Among the four transactions under direct management we examined, we found no error.

For another six transactions, which are under shared management, we found three quantified errors, including one above 20 %, resulting from the incorrect calculation of eligible costs.
41 Coherence checks We examined for the financial year 2021, the quality and coherence of Member States control statistics and payment data reported to the Commission.

Overall, we found that the selected paying agencies’ systems reliably calculated the aid payments, correctly taking into account adjustments resulting from the control data.
Measure M21 The main purpose of measure M21 (‘Exceptional temporary support to farmers and SMEs particularly affected by the COVID-19 crisis’) was to address liquidity problems for farmers and small and medium-sized businesses affected by the COVID-19 pandemic.

We examined the implementation of the measure in four Member States.

We identified a limited number of cases where beneficiaries who did not meet the criteria for support received funds.
This that could have been prevented by the paying agencies, if they had used the IACS system instead of using Excel sheets.

Reporting by Directorate-General for Agriculture and Rural Development (DG AGRI) on regularity of CAP spending Each paying agency director provides DG AGRI with an annual management declaration on the effectiveness of their agency’s management and control systems, and the legality and regularity of their expenditure.
In addition the Member States report annually on their administrative and on-the-spot checks (‘control statistics’).

Since 2015, in order to provide additional assurance, certification bodies have been required to give an annual opinion for each paying agency on the legality and regularity of the expenditure for which the Member States have requested reimbursement.
DG AGRI uses the error rates reported in the control statistics, making adjustments based on the results of the certification bodies’ audits and of its own audits of paying agencies’ systems and spending, to calculate a figure for ‘risk at payment’.

It estimated the risk at payment to be around 1.8 % for CAP spending as a whole in 2021.

DG AGRI estimated a risk at payment (adjusted error rate) of around 1.4 % for direct payments, 2.9 % for rural development and 2.1 % for market measures.
42 What we recommend We recommend that the Commission: o o based on the experience of the use of ‘checks by monitoring’, facilitate the sharing best practices in Member States’ use of new technologies for performing their checks of CAP payments, in order to support the Member States in their implementation of the Area Monitoring System from 2023; perform audits, and ensure monitoring and evaluation, to confirm that measure M21 funding properly targeted eligible beneficiaries suffering liquidity problems which put at risk the continuity of their farming or business activities.
Want to know more?

Full information on our audit of EU expenditure on ‘Natural resources’ can be found in Chapter 6 of our 2021 annual report.

43 Migration and border management Security and defence Total: €3.2 billion What we audited This spending area comprises various policies related to migration and border management (MFF heading 4) as well as security and defence (MFF heading 5).
We report on these headings in a common chapter, since they were mainly budgeted for and recorded under a single heading, MFF3 ‘Security and citizenship’, in the previous MFF period.

For heading 4 ‘Migration and border management’, most spending concerned the completion of projects and schemes from the previous programming period (2014-2020) under the Asylum, Migration and Integration Fund (AMIF) and the Internal Security Fund – Borders and Visa instrument (ISF-BV).
These two funds aim to contribute to the effective management of migration flows and bring about a common EU approach to asylum and migration (AMIF) and to ensuring a high-level of security in the EU while facilitating legitimate travel, through a uniform and high level of control of the external borders and the effective processing of Schengen visas (ISF-BV).

Their management was largely shared between the Commission’s Directorate-General for Migration and Home Affairs (DG HOME) and the Member States.
Another significant spending area for heading 4 is the funding for three decentralised agencies (the European Union Agency for Asylum – EUAA, the European Border and Coast Guard Agency – Frontex, the European Union Agency for the Operational Management of Large-Scale IT Systems in the Area of Freedom, Security and Justice – eu-LISA) that are active in the implementation of key EU priorities in the areas of migration and border management.
We report separately on spending by EU agencies in our specific annual reports and in an annual summary entitled 'Audit of EU agencies in brief'.

For 2021, our audit population for MFF heading 4 was at €2.6 billion.
For MFF heading 5 ‘Security and defence’, the ‘security’ component includes completion of funding from the Internal Security Fund – Police instrument (ISF-P) for 2014-2020, funding for nuclear decommissioning (EU financial support for the decommissioning of nuclear installations in Bulgaria, Lithuania and Slovakia), and funding for three EU decentralised agencies in the area of security (the European Monitoring Centre for Drugs and Drug Addiction – EMCDDA, the European Union Agency for Law Enforcement Cooperation – Europol, the European Union Agency for Law Enforcement Training – CEPOL).
The ‘defence’ component includes the European Defence Fund, which supports collaborative defence projects at all stages of research and development.

In 2021, our audit population for MFF heading 5 was at €0.6 billion.

44 What we found In 2021, we examined a sample of 28 transactions.

This sample, while contributing to the overall statement of assurance, is not representative of the spending under MFF headings 4 and 5.

We therefore cannot provide an estimate of the error rate for these MFF headings.
Of the 28 transactions we examined, nine (32 %) were affected by errors.

We have quantified six errors which had an impact on the amounts charged to the EU budget.

We also found six cases of non-compliance with legal and financial provisions, but with no financial impact on the EU budget.

Example: Acquisition of ineligible vehicle types We audited an ISF-Police project under shared management with Bulgaria.
The project was implemented by a ministerial department and consisted of the purchase of 18 new off-road vehicles.

We randomly selected a sample of ten vehicles purchased during the project for detailed checks.

We found that only five of these vehicles met the definition of off-road vehicles in Directive 2007/46/EC.

We therefore considered 50 % of the project costs to be ineligible expenditure.
Furthermore, the register of vehicle use was not sufficiently detailed to demonstrate that the vehicles purchased were being used solely in connection with the project.

Our review of the work done by three audit authorities showed that they had developed and implemented detailed procedures of sufficient quality to report on their work in the annual control report that they provide to the Commission.

However, we found shortcomings in their audit work and reporting.
Annual activity reports and other governance arrangements We reviewed the annual activity report of DG HOME and found no information that might contradict our findings.

As our checks on 25 transactions concern only a small proportion of the transactions under DG HOME’s responsibility, we are unable to verify the DG’s declaration of assurance against the results of our audit work.
45 What we recommend We recommend that the Commission: o provide further guidance to the beneficiaries of Union action and emergency assistance, and the Member State authorities responsible for implementing DG HOME funding, on adhering to: (a) the rules for collecting appropriate supporting documentation that can be produced in the event of checks or audits; and (b) the obligation to comply with the national rules on public procurement when purchasing goods or services; o carry out better targeted ex ante checks on the eligibility of expenditure, especially in the case of emergency assistance, with a specific focus on the potential risks related to: (a) the type of expenditure (e.g.
procurement); (b) the type of beneficiary (e.g.

beneficiaries with little or no experience of EU funding).

In doing this, the Commission should take into consideration the fact that using audit certificates to support beneficiaries’ payment claims has limitations.

Want to know more?

Full information on our audit of EU expenditure for ‘Migration and border management/Security and defence’ can be found in Chapter 7 of our 2021 annual report.
46 Neighbourhood and the world Total: €10.9 billion What we audited This spending area covers expenditure on all external action funded by the EU budget (with the exception of the European Development Funds).
The policies aim to: uphold and promote EU values, principles and fundamental interests worldwide, and help promote multilateralism and stronger partnerships with non-EU countries to support beneficiary countries in adopting and implementing the reforms required to align with EU values with a view to membership, thereby contributing to their stability, security and prosperity.
Payments are disbursed using several instruments and delivery methods such as works/supply/service contracts, grants, special loans, loan guarantees and financial assistance, budget support and other targeted forms of budgetary aid in more than 150 countries.

For 2021, the expenditure subject to audit in this area was €10 billion.
What we found We reviewed a sample of 67 transactions, which while contributing to our overall statement of assurance, is not representative of the spending under this MFF heading.

We are therefore unable to provide an estimate of the error rate for this MFF heading.

Of the 67 transactions we examined, 32 (48 %) were affected by errors.

Despite the limited sample size, our audit results confirm that the risk of error in this MFF heading is high.
We have quantified 24 errors which had an impact on the amounts charged to the EU budget.

The most common categories of error were expenditure not incurred, ineligible costs, absence of supporting documents and public procurement errors.
47 Example: Part of expenditure not incurred DG NEAR We audited expenditure claimed under a contribution agreement by an international organisation dedicated to gender equality and empowering women for an action aimed at challenging gender stereotypes in the Eastern Partnership countries.

According to the contribution agreement, the action’s total estimated cost is €7.9 million, with an EU contribution of up to €7 million.
For the first 12 months of the three-year implementation period, the beneficiary reported €2.2 million of incurred expenditure, which the Commission accepted.

We examined the supporting documents and found that the eligible expenditure amounted to only €1.2 million.

The international organisation had wrongly reported €977 434 as incurred expenditure.

Although it had committed this amount, it had not yet actually spent it.

The Commission had therefore incorrectly cleared 44 % of the audited amount.
Transactions related to budget support and projects implemented by international organisations under the ‘notional approach’ (where contributions from the Commission to multi-donor projects are pooled with those from other donors and not earmarked to specific, identifiable items of expenditure) were less prone to error.

In 2021, we detected one error in each of these spending areas.

As in previous years, some international organisations provided only limited access to documents (e.g.
in read-only format), meaning we could not make copies of them.

These issues hindered the planning and execution of our audit and led to delays in our work.

Although the Commission has stepped up its communication with the international organisations, we continue to have difficulties obtaining the requested documentation.
DG NEAR’s RER study In 2021, the Directorate-General for Neighbourhood and Enlargement Negotiations (DG NEAR) had its seventh residual error rate (RER) study carried out by an external contractor on its behalf.

The purpose of this study is to estimate the rate of those errors not detected by all DG NEAR management checks to prevent, detect and correct such errors across its entire area of responsibility, in order to conclude on the effectiveness of those checks.
It does not constitute an assurance engagement or an audit.

As in previous years, they estimated an overall RER for DG NEAR that was below the 2 % materiality threshold set by the Commission (2021: 1.05 %; 2020: 1.36 %).

Our previous years’ annual accounts have already described limitations in the studies that may contribute to the RER’s underestimation.
48 The population for the 2021 RER exercise excluded ‘old contracts’ closed during the reference period with a total value of €389 million and DG NEAR thematic grant contracts amounting to €50 million.

At €439 million, the above two types of excluded contracts together account for around 20 % of DG NEAR’s portfolio of closed contacts of €2.27 billion.
This is a substantial share to permanently exclude from any RER review, especially considering that the final RER sampling population for the ‘global (DG derived) error rate’ is worth about €1.7 billion, and might result in errors remaining undetected.

The exclusion of these contracts represents a limitation not disclosed by DG˚NEAR in its 2021 annual activity report.
Annual activity reports and other governance arrangements Based on the low estimated residual error rate, the Director-General of DG ECHO declared the DG’s financial exposure to be below the materiality threshold of 2 %.

As only a small proportion of our checks concern transactions under DG ECHO’s responsibility, we are unable to verify this statement based on the results of our work.
The COVID-19 pandemic and political crises have put the delivery of humanitarian aid at risk, as they have restricted or prevented access to people affected by humanitarian crisis.

This risk concerns not only humanitarian needs assessments, but also the delivery of aid itself as well as related controls.
49 What we recommend We recommend that the Commission: o o o take appropriate measures aimed at ensuring that any commitments or advance payments claimed as incurred costs by beneficiaries in their financial reports are deducted before carrying out payments or clearings; strengthen controls when drafting financing agreements for budget support operations in order to set clear conditions in financing agreements regarding the transfer of funds to the treasury account in the beneficiary country’s central bank and the applicable exchange rate; these should be consistent with the budget support guidelines; disclose the type and value of contracts excluded from the population of the RER study in the 2022 annual activity report and future annual activity reports.
Want to know more?

Full information on our audit of EU expenditure for ‘Neighbourhood and the world’ can be found in Chapter 8 of our 2021 annual report.
50 European public administration Total: €10.7 billion What we audited Our audit covered the administrative expenditure of the EU institutions and bodies: the European Parliament (EP), the Council of the European Union, the European Commission, the Court of Justice of the European Union (CJEU), the European Court of Auditors (ECA), the European External Action Service (EEAS), the European Economic and Social Committee (EESC), the European Committee of the Regions(CoR), the European Ombudsman and the European Data Protection Supervisor (EDPS).
In 2021, the institutions and bodies spent a total of €10.7 billion on administration.

This amount comprised spending on human resources and pensions (about 68 % of the total), buildings, equipment, energy, communications and information technology.

An external auditor examines our own financial statements.

Each year, we publish the resulting audit opinion and report in the Official Journal of the European Union and on our website.

What we found Amount subject to audit Affected by material error?
€10.7 billion No – Free from material error in 2021 and 2020 In 2021, we examined selected supervisory and control systems of the European External Action Service.

We also examined 60 transactions.

As in previous years, we estimate the level of error to be below the materiality threshold.

We did not identify any specific issues concerning the Council of the European Union, the CJEU, the EESC, the CoR, the European Ombudsman and the EDPS.
Our external auditor did not report any specific issue based on its work.

51 European Parliament We detected two quantifiable errors in payments made by the European Parliament.

One concerned a minor over-payment for IT services caused by the incorrect application of contract terms.

The other was related to a payment made by the European Parliament to a European political group.

The European Parliament’s internal procurement rules are inconsistent with the Financial Regulation as they limit competition.
We found that the political group did not fully follow these internal rules, as it did not seek enough tenders and did not adequately document the criteria it used to award the contract.

In addition, we examined a payment of €74.9 million related to the purchase of a building in Brussels.
We noted it was 30 % more expensive per square metre than another building considered by the Parliament and that the award criteria significantly reduced the importance of price as a basis for the purchase decision, making it unlikely that any other offer could have been accepted.

European Commission We found one quantifiable error in payments made by the Commission, concerning a minor incorrect deduction from pension payments.
Additionally, we noted that the Commission had temporarily suspended certain verification checks on pension entitlements due to the COVID-19 pandemic.

European External Action Service We found two quantifiable errors in payments made by the EEAS.

One concerned the absence of an underlying contract for services acquired by an EU Delegation.

The other related to allowances paid to a staff member who had not declared recent changes in their personal situation.
In addition, we examined procurement and local recruitment procedures organised by EU Delegations.

While the EEAS made improvements to the procurement process, we still detected some weaknesses.

For half of the procurement procedures we examined, we found some deficiencies in how the EU Delegations applied public procurement rules.

We also found some weaknesses in all of the recruitment procedures for local agents we examined.
These may have hindered the transparency of the recruitment process, the identification of the best candidates and equal treatment.

52 What we recommend We recommend that: o o o The European Parliament’s administration should revise its guidelines on the application by the political groups of the rules on public procurement, and it should propose a revision of these rules to the Parliament’s Bureau to better align them with the Financial Regulation.
It should better monitor the application of these rules; The EEAS should take appropriate measures to ensure the application of procurement rules by EU Delegations such as enhancing training, improving guidelines and templates; The EEAS should enhance training and guidance on the EU Delegations’ recruitment procedures for local agents to ensure compliance with the principles of transparency and equal treatment.
It should also strengthen its oversight that the EU Delegations document the relevant steps of the recruitment process.

Want to know more?

Full information on our audit of EU expenditure for ‘European public administration’ can be found in Chapter 9 of our 2021 annual report.

53 Recovery and Resilience Facility Total: €46.4 billion What we audited In 2021, for the first time our work also covered the single payment made to Spain from the RRF.
The facility is the main component of the NGEU package, which is aimed at supporting recovery from the impact of the COVID-19 pandemic.

The RRF is a temporary instrument delivered and financed in a way that is fundamentally different to budget spending under the MFFs.

Unlike EU budget expenditure, which is based on the reimbursement of costs and/or compliance with conditions, under the RRF, Member States are paid for achieving predefined milestones or targets.
Our audit population comprised the only 2021 disbursement, a payment to Spain, and the clearing of the related pre-financing.

The Spanish request for payment (dated 11 November 2021) included 52 milestones, which Spain reported as achieved.

The amount paid to Spain was €11.5 billion.


The Commission adopted its positive preliminary assessment on 3 December 2021 and, after receiving the positive opinion of the Council’s Economic and Financial Committee, authorised the disbursement in its implementing decision of 22 December 2021.

It paid €10 billion to Spain on 27 December 2021, simultaneously clearing pre-financing of €1.5 billion.

The results of our work form the basis for our 2021 opinion on the regularity of RRF expenditure.
What we found Amount subject to audit Affected by material error?

€11.5 billion No Our audit covered the regularity of the RRF payment made to Spain.

We based our assessment on the condition for payment, i.e.

that the milestones and targets as defined in the Council Implementing Decision (CID) had been satisfactorily fulfilled.
To do this, we examined whether the Commission had gathered sufficient and appropriate evidence to support its assessment of satisfactory fulfilment of the 52 milestones included in the Spanish payment request.

Compliance with other EU and national rules does not form part of this assessment.

The overall audit evidence we obtained through our work indicates that one of the 52 milestones associated to the first disbursement to Spain was not satisfactorily fulfilled.
The Commission has not yet defined a method for quantifying the impact of not achieving a milestone or target.

Our own view is that the error is not material.
54 Milestone 395 ‘Modifications of corporate income tax in 2021’ Description of milestone 395 (reform C28.R8) in Annex to CID (p. 244): ‘Entry into force of the modifications introduced by the Budget Law for 2021 and the development regulations related to Corporate Income Tax to increase corporate tax revenue.’ Description of reform 8 (C28.R8) – Short-term adoption tax measures in corporate tax – Annex to the CID (p. 241): ‘The reform shall amend the Corporate Tax Act in order to increase the contribution of this tax to the support of public spending, while also introducing simplifications to the exemptions and deductions in order to ensure a minimum rate of 15 % by taxpayers.
On the other hand, the exemption for dividends and capital gains generated by their shareholding in subsidiaries, both resident and non-resident in Spanish territory, shall be reduced by 5 %.

The implementation of the measure shall be completed by 31 March 2021’.

The Commission appropriately assessed the element on the reduction of the exemption for dividends and capital gains.
However, it did not assess the element of the reform a minimum rate of 15 %, as provided for in the CID description of the reform.

Other weaknesses found in the Commission’s work when assessing the milestones, concern the insufficiently robust criteria for the control milestone and insufficient documentation of its work, though this does not affect the assessment of the achievement of the milestone.
55 What we recommend We recommend that the Commission: o o o clearly and transparently justify the elements contained in the Operational Arrangements and Council implementing Decision that are not considered to be relevant by them for the satisfactory fulfilment of milestones and targets; develop a methodology to determine the amount to be suspended in accordance with Articles 24.6 and 24.8 of the RRF Regulation; improve documentation of the assessment of milestones and targets by fully documenting all the elements examined during the ex ante work.
Want to know more?

Full information on our audit of EU expenditure for ‘Recovery and Resilience Facility’ can be found in Chapter 10 of our 2021 annual report.
56 European Development Funds Total: €3.4 billion What we audited Launched in 1959, the European Development Funds (EDFs) were the main instrument by which the EU provided development cooperation aid to the African, Caribbean and Pacific (ACP) countries and overseas countries and territories (OCTs) until the end of 2020 with the 11th (and final) EDF covering the 2014-2020 MFF.
The framework governing the EU’s relation with ACP countries and OCTs was a partnership agreement signed in Cotonou on 23 June 2000 for a period of 20 years.

Its primary objective was to reduce and ultimately eradicate poverty, in accordance with the primary objective of development cooperation as laid down in Article 208 of the Treaty on the Functioning of the European Union.
For the 2021-2027 MFF, development cooperation aid to Africa, Caribbean and Pacific has been integrated into the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI-Global Europe) and development cooperation aid to OCTs has been incorporated into the Decision on the Overseas Association, including Greenland.
However, the 8th, 9th, 10th and 11th EDFs themselves were not incorporated into the EU general budget and continue to be implemented and reported on separately until their closure.

For 2021, the total value of expenditure subject to our audit in this area was €3.1 billion.

This expenditure relates to the 9th, 10th and 11th EDFs.

The EDFs are managed by the Commission, outside the framework of the EU general budget, and the EIB.
The Directorate General for International Partnerships (DG INTPA, ex DG DEVCO) is the main DG in charge.

What we found The 2021 accounts were not affected by material misstatements.

We also conclude that the revenue of the EDFs did not contain a material level of error.

Our opinion on expenditure for the 2021 financial year is adverse: Amount subject to audit Affected by material error?
Estimated most likely level of error €3.1 billion Yes 4.6 % (2020: 3.8 %) To audit the regularity of transactions, we examined a sample of 140 transactions that were representative of the full range of spending from the EDFs.

Our sample comprised 26 transactions related to the Emergency Trust Fund for Africa, 92 transactions authorised by 17 EU delegations and 22 payments approved by Commission headquarters.
57 Due to the COVID-19 pandemic, it was not possible to carry out on-the-spot visits to EU delegations, which we replaced with desk reviews.

This prevented us from carrying out certain audit procedures, and particularly from verifying contract performance for the transactions selected, thus limiting our audit work.

We had to adapt our approach, carrying out desk reviews of transactions and projects and liaising remotely with our auditees.
Nevertheless, we consider that the evidence obtained enabled us to complete and conclude on our work.

Of the 140 transactions we examined, 54 (38.8 %) contained errors.

Based on the 43 errors we have quantified, we estimate the level of error to be 4.6 %.

The three most common error types were ineligible expenditure (38.6 %), absence of essential supporting documents (23.3 %), and expenditure not incurred (14.9 %).
As they did in 2020, the Commission and its implementing partners committed more errors in transactions relating to grants and to contribution and delegation agreements with beneficiary countries, international organisations and Member States agencies than they did with other forms of support (such as those covering works, supply and service contracts).

Of the 92 transactions of this type that we examined, 39 contained quantifiable errors, which accounted for 81.2 % of the estimated level of error.
Example: Absence of legal basis resulting in ineligible expenditure The Commission signed a grant contract with an international organisation to improve Niger’s cash management function and implement a treasury single account in the country.

The total cost of the action was estimated at €1.4 million (EU contribution of 100 %).

We reviewed the financing agreement, worth €82 million, signed between the Commission and Niger.
It stated that the funds were to be spent on budget support and other projects, but contained no mention of work to be done on a treasury single account.

The financing agreement also did not provide for the award of any related contract to the organisation concerned or to any other body, despite being cited as the legal basis for the award in question.

The entire value of the contract (€1.4 million) is affected by error.
As in previous years, some international organisations provided only limited access to documents (e.g.

in read-only format), meaning we could not make copies of them.

These issues hindered the planning and execution of our audit and led to delays in our work.

Although the Commission has stepped up its communication with the international organisations, we continue to have difficulties with some of them obtaining the requested documentation.
58 DG INTPA’s RER study In 2021, DG INTPA had its tenth residual error rate (RER) study carried out by an external contractor, to estimate the rate of those errors that have evaded all DG INTPA management checks to prevent, detect and correct such errors across its entire area of responsibility, in order to conclude on the effectiveness of those checks.

For the 2021 RER study, DG INTPA applied a sample size of 480 transactions.
This allowed it once again to present separate error rates for expenditure financed from the EU general budget and for spending financed by the EDF, in addition to the overall error rate for both combined.

For the sixth year in a row, the study estimated the overall RER to be below the 2 % materiality threshold set by the Commission (1.14 %).

The RER study does not constitute an assurance engagement or an audit.

It is based on the RER methodology and manual provided by DG INTPA.
Our previous annual reports on the EDFs have already described limitations in the studies that may have contributed to the RER’s underestimation.

One aspect of the RER study is the degree of reliance placed on the work of other auditors.

In this regard, full reliance increased from 15 % of transactions in 2020 to 34 % of transactions in 2021.
We maintain our view that placing such extensive reliance on the work of other auditors is contrary to the purpose of an RER study, which is to estimate the rate of errors that have evaded all DG INTPA management checks to prevent, detect and correct such errors.

Review of DG INTPA’s annual activity report The Director-General’s declaration of assurance in the 2021 annual activity report does not include any reservations.

From 2018, DG INTPA significantly reduced the scope of reservations (i.e.
the share of expenditure covered by them).

We find the lack of reservations in DG INTPA’s 2021 annual activity report unjustified and consider that it results partly from the limitations of the RER study.

DG INTPA is working to improve the quality of its data for calculating the corrective capacity.

We reviewed the calculation of the corrective capacity for 2021, which DG INTPA estimates at €13.62 million.
Having tested 35 % (by value) of the total population of recoveries, we identified no errors in our sample.

59 What we recommend We recommend that the Commission: o o strengthen internal control to ensure that no contracts are signed without the existence of a valid legal basis; take appropriate measures aimed at ensuring that any commitments or advance payments claimed as incurred costs by beneficiaries in their financial reports are deducted before carrying out payments or clearings.

Want to know more?
Want to know more?

Full information on our audit of EDFs can be found in the 2021 annual report on the activities funded by the 8th, 9th, 10th and 11th European Development Funds.

60 Background information The European Court of Auditors and its work The ECA is the independent external auditor of the European Union.

We are based in Luxembourg and employ around 900 professional and support staff of all EU nationalities.
Our mission is to contribute to improving EU administration and financial management and to promote accountability and transparency, and act as the independent guardian of the financial interests of EU citizens.

Our audit reports and opinions are an essential element in the EU accountability chain.

They are used to hold to account those responsible for implementing EU policies and programmes: the Commission, other EU institutions and bodies, and administrations in Member States.
We warn of risks, provide assurance, indicate shortcomings and good practice, and offer guidance to EU policymakers and legislators on how to improve the management of EU policies and programmes.

Through our work, we ensure that Europe’s citizens know how their money is being spent.
61 Klaus-Heiner LEHNE Germany Ladislav BALKO Slovakia Lazaros S. LAZAROU Cyprus Pietro RUSSO Italy Baudilio TOMÉ MUGURUZA Spain Iliana IVANOVA Bulgaria Alex BRENNINKMEIJER Netherlands († 14 April 2022) Nikolaos MILIONIS Greece Bettina JAKOBSEN Denmark Jan GREGOR Czech Republic Mihails KOZLOVS Latvia Rimantas ŠADŽIUS Lithuania Leo BRINCAT Malta Juhan PARTS Estonia Ildikó GÁLL-PELCZ Hungary Eva LINDSTRÖM Sweden Tony MURPHY Ireland Hannu TAKKULA Finland Annemie TURTELBOOM Belgium Viorel ȘTEFAN Romania Ivana MALETIĆ Croatia François-Roger CAZALA France Joëlle ELVINGER Luxembourg Helga BERGER Austria Marek OPIOŁA Poland Jorg Kristijan PETROVIČ Slovenia 62 Our output We produce: o o o o o annual reports, mainly containing the results of financial and compliance audit work on the EU budget and the European Development Funds, but also on budgetary management and performance aspects; special reports, presenting the results of selected audits on specific policy or spending areas, or on budgetary or management issues; specific annual reports on the EU’s agencies, decentralised bodies and joint undertakings; opinions on new or updated laws with a significant impact on financial management – either at the request of another institution or on our own initiative; reviews, providing a description of, or information about, policies, systems, instruments or more focused topics.
Finally, our audit previews present background information on a forthcoming or ongoing audit task.

Audit approach for our statement of assurance – at a glance The opinions in our statement of assurance are based on objective evidence obtained from audit testing in accordance with international auditing standards.
As stated in our 2021-2025 strategy, for MFF 2021-2027 we will continue to develop our audit approach and use available data and information, which will allow us to continue providing strong assurance, based on our Treaty mandate and in full accordance with international public-sector audit standards.

63 Reliability of the accounts Do the EU annual accounts provide complete and accurate information?
Hundreds of thousands of accounting entries are generated by Commission directorates-general each year, taking information from many different sources (including Member States).

We check that accounting processes work properly and that the resulting accounting data is complete, correctly recorded and properly presented in the EU’s financial statements.
For the audit of the reliability of the accounts, we have applied the attestation approach ever since our first opinion in 1994. o We evaluate the accounting system to ensure it provides a good basis for producing reliable data.

o We assess key accounting procedures to ensure they function correctly.

o We perform analytical checks of accounting data to ensure it is presented consistently and appears reasonable.
o We directly check a sample of accounting entries to ensure the underlying transactions exist and are accurately recorded.

o We check financial statements to ensure they present the financial situation fairly.

Regularity of transactions Do the income and expensed payment transactions underlying the EU accounts comply with the rules?

The EU budget involves millions of payments to beneficiaries, both in the EU and in the rest of the world.

The bulk of this spending is managed by Member States.
To obtain the evidence we need, we assess the systems by which income and expensed payments (i.e.

final payments and clearing of advances) are administered and checked, and we examine a sample of transactions.

Where the terms of the relevant international auditing standards have been met, we review and re-perform the checks and controls carried out by those responsible for implementing the EU budget.

We thus take full account of any corrective measures taken on the basis of these checks.
64 o We assess the systems for revenue and expenditure to determine their effectiveness in making sure transactions are regular.

o We take statistical samples of transactions to provide a basis for detailed testing by our auditors.

We examine the sampled transactions in detail, including at the premises of final recipients (e.g.
farmers, research institutes or companies providing publicly procured works or services), to obtain evidence that each underlying event exists, is properly recorded and complies with the rules for making payments.

o We analyse errors and classify them as either quantifiable or not.

Transactions are affected by quantifiable error if, based on the rules, the payment should not have been authorised.
We extrapolate the quantifiable errors to obtain an estimated level of error for each area in which we make a specific assessment.

We then compare the estimated level of error against a materiality threshold of 2 % and assess whether the errors are pervasive.

o Our opinions take account of these assessments and of other relevant information, such as annual activity reports and reports by other external auditors.
o We discuss all our findings both with the authorities in the Member States and with the Commission to confirm our facts are correct.

All our products are published on our website: www.eca.europa.eu.

More information on the audit process for the statement of assurance can be found in Annex 1.1 to our 2021 annual report.

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A word on the ‘2021 EU audit in brief’ The ‘2021 EU audit in brief’ provides an overview of our 2021 annual reports on the EU’s general budget and the European Development Fund, in which we present our statement of assurance as to the reliability of the accounts and the legality and regularity of the transactions underlying them.
This year, for the first time, through our work we also covered the Recovery and Resilience Facility and provide a separate opinion on the legality and regularity of its expenditure.

The EU audit in brief also outlines our key findings regarding revenue and the main areas of spending under the EU budget and the European Development Fund, as well as findings relating to budgetary and financial management.

The full texts of the reports may be found at eca.europa.eu.
The European Court of Auditors (ECA) is the independent external auditor of the EU.

We warn of risks, provide assurance, highlight shortcomings and good practice, and offer guidance to EU policymakers and legislators on improving the management of EU policies and programmes.

Through our work we ensure that EU citizens know how their money is being spent.

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