5 November 2014
Annual Reports 2013
Vítor Caldeira, President

A moment of change
• New Parliament
• New Commission
• New spending programmes and financial rules for
2014 - 2020
• Need to make best use of limited financial resources

Lessons from 2013
• EU financial management not yet good enough overall
• Significant room for further improving how funds are spent

EU financial management challenge
• Use all available resources, and
• Ensure spending complies with EU rules, and
• Ensure it achieves valuable results for citizens

Spending
• 2013 payments almost 99% of the maximum available
• Total spending €148.5 billion - €290 for every EU citizen.

Clean opinion
• A clean audit opinion on the reliability of the EU accounts
• As since start of programming period in 2007

Managing cash-flows
• Outstanding commitments and other liabilities continued to grow
• €322 billion at year end - likely to rise
• Commission should prepare a long range cash-flow forecast.

Financial engineering instruments
• Commission plans to make even greater use of them
• Slow to reach recipients
• Complex and difficult to account for correctly
• Commission should ensure contributions to such instruments reflect real cash-flow needs and are properly accounted for

Compliance with the rules
• Revenue regular
• Financial commitments regular
• Payments materially affected by error

2013 error rate
• Estimated error rate for 2013 payments = 4.7%
• Close to 4.8% for 2012
• Persistently higher than “materiality threshold” of 2%

Error in different spending areas
• All spending areas apart from administrative expenditure affected by material error

Higher errors for shared management
• Spending shared between the MS and the
Commission is 80% of EU funds
• Error rate for payments under shared management =
5.2%
• In areas mostly managed directly by the EC = 3.7%

Effective internal controls can make a significant difference
• EC and national authorities took corrective actions on errors they found
• Otherwise, overall error rate would have been 6.3 % rather than 4.7%

Internal controls could be more effective
• National authorities had sufficient information available to have detected and corrected many errors before claiming reimbursement
• In rural development, could have reduced error rate from 6.7% to 2.0%

What needs to be done
• EC and MS need to generate better information about errors in spending and the corrective action they take
• Address the source of the problem

Main sources of error
• Claims for ineligible costs, projects, activities or beneficiaries
• Serious breaches of public procurement rules
• Incorrect declarations of agricultural areas

Financial managers not focused on results
• Primarily on spending the money available
• Secondly on complying with the rules
• Only to a limited extent on achieving results

Current spending culture
• Officials under pressure to spend or lose funding lack incentives to achieve results
• Systems set up to use resources and to ensure compliance, rather than get results
•  Need for change

Towards a culture of performance
• Court welcomes Commission initiatives
• Must be based on genuine commitment at EU and national level
• Essential that right incentives are in place
• Need suitable targets for results up-front
• Need reliable information on progress towards achieving them

Framework for reporting performance
• Better information is a pre-requisite for more effective accountability
• Annual evaluation report produced by Commission
• Framework too fragmented – needs further improvement
• Does not cover EU added-value or progress towards
Europe 2020

Recommendations to Commission
• Propose more coherent performance reporting framework at next review
• Summarise progress towards 2020 targets in annual evaluation report
• Further develop responsibility for contribution of EU spending to policy achievements

Conclusions
• EU Budget management could – and should – be better
• Not a choice between spending, compliance and results - need all three at once
• More manageable budget = clearer objectives and simpler arrangements for spending

European Court of Auditors
Annual Reports 2013
Vítor Caldeira
President
5 November 2014