Debate: Presentation of the Court of Auditors' annual report
Date: WEDNESDAY, 19 OCTOBER 2022
Speaker: Tony Murphy
Language: EN

However, today I am also here before you in my previous function as the member for our annual report for the year 2021. My colleague Jan Gregor, who has taken over this function following my election, is here with me today. Our annual report is our core product. It contains detailed information on the results of our financial and compliance audit work that support our key messages, on which I will focus today. As in previous years, for the EU accounts, we adopted a clean opinion. In other words, they were not affected by material misstatements. On revenue, we found that the overall error rate was not material. On expenditure, for the first time this year, we provided two separate opinions, reflecting that there are fundamental differences between budget spending under the multiannual financial framework and that of RRF spending. Firstly, on EU budget spending, based on a representative sample of 740 transactions, we found that the overall level of irregularities increased significantly from last year, reaching 3% in 2021, from 2.7% the previous year. We estimated that it is 4.7% for the high—risk spending, which makes up a clear majority of our audit population, being 63% of the population. Given the widespread nature of the problems that we have found, that is the pervasiveness of the error, we gave an adverse opinion for the third year in a row. If we look closer for a moment under different policy headings, we estimate that the level of error is material for single market, innovation and digital, at 4.4%, compared to 3.9% the previous year, and in the cohesion policy area, at 3.6%, compared to 3.5%. For natural resources, when taken as a whole, we find the error to be close to materiality, although our results indicate that direct payments are below materiality, whereas rural development, market measures and other areas outside the CAP are above materiality. Finally, for administrative expenditure, we estimate the level of error to be not material. So far, I have mainly focused on the compliance aspect of EU spending. However, making use of available EU funds is another area that we look at and which has regularly been an area where we raised concern. This has not changed in 2021. Outstanding commitments at the end of 2021 totalled EUR 341.6 billion. This compares to 303.2 the previous year. However, this amount includes, for the first time, a standing commitment in relation to the RRF of almost EUR 90 billion. Excluding this amount, outstanding commitments actually decreased compared to last year, mainly due, however, to delays in the implementation of shared management funds under the 2021-2027 MFF. Through our work in 2021, we also found suspected cases of fraud, and we have reported 15 such cases to OLAF, compared to 6 in 2020. And from the information that we have been given, OLAF has so far opened five investigations. So beyond these individual cases that we transmit to OLAF and now also to EPPO, the ECA tackles this very important topic through specific, dedicated reports. Ladies and gentlemen, I now turn to our audit of the expenditure under the RRF. This is a novelty in our annual report this year. And as I noted when presenting our annual report to the CONT last week, it’s an area of particular importance. For that matter, I expect that it will continue to be in the coming years, and that’s why I would like to express the Court’s gratitude for Parliament’s support in obtaining additional temporary auditor posts in this year’s and next year’s annual budgets. The RRF Regulation provides for a different delivery model than that for EU budget spending under the MFF. The RRF delivery model focuses on the achievement of milestones and targets, rather than the reimbursement of costs incurred, which has implications on what makes a payment legal and regular. In this statement of assurance, on the RRF, we therefore have to focus on whether the Commission has got sufficient and appropriate evidence to support its assessment that the milestones or targets were satisfactorily fulfilled. Compliance with other EU and national rules does not form part of this Commission’s assessment on the legality and the regularity of payments and is, therefore, not covered through this opinion. This aspect will be looked at through future audits when the Commission work in this regard has been completed and can be assessed. Furthermore, we do not assess the effectiveness of the different reforms contained in the milestones. Again, this would rather be a topic for future dedicated special reports. For 2021, the RRF audit population included a single payment of EUR 11.5 billion made to Spain, following the reported fulfilment of 52 milestones, all of which related to reforms. Given that there was only a single payment, we had the opportunity to examine this in detail. We found that one of the milestones, in our view, was not satisfactorily fulfilled. This view, based on all available information and using our professional judgment, is that the impact, however, was not deemed to be material. While a number of payments to different Member States have been made in the meantime, we are still awaiting a Commission proposal in relation to quantifying the impact of when a milestone or target is not satisfactorily fulfilled. Mr President, honourable Members, I would like to conclude and take this opportunity to thank the Commissioner for his institution’s cooperation over the past year. We may sometimes differ on specific points, but together, we both strive, within our respective responsibilities, to ensure that the EU’s budget is put to good use. Thank you for your attention and I look forward to a good debate this afternoon.