European Court of Auditors

“Mind the gap” in accountability around covid recovery funds, say auditors

Tony Murphy is president of the European Court of Auditors. Photo: EU/ECA

Tony Murphy is president of the European Court of Auditors. Photo: EU/ECA

The control system of the European Union’s €724bn Recovery and Resilience Facility has been examined by the European Court of Auditors. In a report published on 8 March, the ECA found that there is a gap in assurance and accountability in protecting the EU’s financial interests.

To help countries recover economically from the consequences of the covid-19 pandemic, the European Union put in place the Recovery and Resilience Facility (RRF). The temporary instrument, which consists of €385.8bn in loans and €338bn in grants, supports member states’ measures from February 2020 to 30 August 2026.

“However, it represents a novel approach in terms of EU spending programmes,” said ECA president Tony Murphy during a press briefing held on 8 March. “This spending models differs from other EU spending programmes in that bonds are paid on the basis of the progress and achievement of reforms and investments that member states have committed to in their recovery plans, and not on the basis of costs actually incurred, which is a significant difference.”

To date, €144bn has been paid out to EU countries, noted Murphy--€97bn of grants and €47bn of loans--which represents approximately 20% of the total facility. “Excluding pre-financing, payments have been made to 11 member states,” he added. Five countries had not yet signed the necessary arrangements for receiving RRF instalments.

In examining the design of this control system, the European Court of Auditors found “an assurance and accountability gap in protecting the EU’s financial interests,” the ECA said in a press release published on 8 March.

Main findings from the auditors

“Unlike other EU funding programmes, we’ve found that compliance with the relevant EU and national rules is not covered through the commission’s checks of member states payment requests,” Murphy said during the briefing. “Compliance of these RRF funded projects with such rules is in a way self policed by the member states.” The rules, for example, are related to procurement, state aid or other eligibility criteria.

“What is concerning for us is that non-compliance with these rules represent the main sources of errors on which we continually report on across other EU spending programmes,” stated Murphy. “Without verified information on whether investment projects funded through the RRF comply with these rules, an assurance gap at EU level exists. In our view, this result represents a serious risks to EU financial interests.”

The ECA also had concerns around what “constitutes the reversal of a previously fulfilled milestone or target,” and found “room for improvement” on fraud reporting. Their audit also found that the EU commission had not made a methodology regarding the partial suspension or adoption of an RRF payment available, but Murphy added during the press briefing that a “well overdue” methodology had been published by the commission “in the last week or so,” and that the ECA was currently analysing it.

To end on a positive note, “we did find that the commission, in a relatively short time, has put in place extensive checks to verify the data that countries provide as evidence for the fulfilment of milestones and targets,” said Murphy.

Five recommendations

To ensure that the control system in place for the RRF is “adequate” and that its goals are achieved, as well as to protect the financial interests of the EU, the auditors made five recommendations:

- Improve procedures for ex ante verifications (before payment)

- Develop guidance on the reversal of a measure related to a previously fulfilled milestone or target

- Address the EU-level assurance gap on compliance with EU and national rules

- Align reporting on fraud related to the RRF

- Develop internal guidance on corrections

Read the full ECA report here.