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The European Court of Auditors: how does the EU budget watchdog work, and why should it interest you?

The European Union processes an unthinkably vast sum of money every year. But who takes care of it?

Do you know how big the annual expenses of the EU are? They only amount to 1.1 % of the EU’s Gross National Income (GNI), but it is still a vast sum: almost triple the annual budget of the Czech Republic.  In 2020, the European Union’s expenses reached 173,310 million EUR. But let’s not forget, this massive number is not just for the Czech Republic’s 10 million citizens, but all 447 million EU citizens – including the Czechs.

The European Commission is responsible for budget implementation, but because they can’t manage to control everything, they need help from specialized institutions. That is what the European Court of Auditors  (ECA) is for – as the highest supervisory body of the EU, it is responsible for controlling the Union’s public finances.

The ECA is indispensable for the EU and its budget, and it is therefore crucial to ensure that it is led by independent, transparent, and, most importantly, highly qualified civil servants. European taxpayers’ money is directly dependent on the Court’s efficiency. As a member of the European Committee on Budgetary Control (CONT), I regularly vote on recommending individual candidates for this challenging role.

The budget for the whole continent

Managing the shared budget for all 27 Member States is no mean feat. To make it possible, the EU adopts a Multiannual Financial Framework every seven years, which determines what projects will be funded and how much in the upcoming period. The priorities differ in every framework – the current MFF (2020-2027), for example, reflected the destructive impacts of the Covid pandemic by establishing the Next Generation EU recovery fund worth 750 billion EUR.

About one-third of the EU’s entire budget is invested in natural resources, such as farms. Another third goes for cohesion, meaning assistance to less developed regions, and the rest is swallowed by competitiveness for growth. It is important to realize that 80 % of this budget is allocated through shared management, meaning EU Member States are responsible for distributing the funds and spending money on individual projects. 

EU expenses to Member States in 2020:

3.7 % – Security and Citizenship

6.0 % – Administration

6.6 % – Global Europe

35.0 % – Sustainable Growth: Natural resources

48.2 % Smart and Inclusive Growth

0.6 % Additional expenditure

The watchdog of EU funds

Therefore, this seemingly complex system is supervised by several audit institutions, such as the European Court of Auditors. As the EU’s independent external audit institution, the ECA is responsible for ensuring all the money from the EU budget ended up where it had initially been allocated to and fulfilled its purpose.

The reports and audits published by the ECA are used by a number of EU institutions, such as the Commission, other EU bodies, and Member State authorities. The ECA uses its audits to warn of risks, point out irregularities, and offer recommendations for improving the EU’s financial policy management. To put it simply, the ECA’s goal is to make sure that EU funds are used correctly, find room for improvement and warn of issues.

Another notable role of the ECA lies in making Annual Reports at the end of the financial year. This report checks whether the seven-year budget was correctly implemented, and the European Parliament uses it to grant discharge to the Commission – the final certificate at the end of the financial year.

Who watches whom?

Despite all the checks, EU expenses are not flawless. In 2020, almost two-thirds of all audited EU expenses were marked as high-risk. While the error rate is going down, it was still 4 per cent for these expenses in 2020 – much more than what might be acceptable. Every year, the ECA also identifies fraud cases relating to the EU funds – in 2020, they found six.

Since the ECA is an independent auditor, it has no authority to investigate cases where it suspects fraud damaging to the EU budget. Therefore, it reports any identified fraud, corruption or other illegal conduct directly to two European investigation organs – the European Anti-Fraud Office(OLAF) and, in case of more widespread issues, also the European Public Prosecutor’s Office(EPPO). I have been pushing for the establishment of this office for a long time.

Some of you might be asking: “Mikuláš, it’s nice that an independent audit body is watching the European budget, but who watches the watcher?” That, of course, is a reasonable question. The European Court of Auditors safeguards EU funds, and as such, it must be transparent and ethical. Therefore, it undergoes an audit by an independent private auditor every year. The audit findings are published alongside all the other important information in the Offical Journal of the European Union.

Voting gaps

Voting on the candidates for ECA members is absolutely vital in determining how well the Court can do its job. All 27 members must have a great deal of experience managing and controlling public funds and must also be independent of their national governments. If they are not independent, they might not proceed objectively if serious irregularities, fraud or corruption are identified in their country. That might mean not forwarding the findings for investigation and sweeping it under the rug instead.

ECA candidates must be nominated by their national government. Then they face a parliamentary grilling in the Committee on Budgetary Control. My colleagues and I ask them complex and constructive questions to ensure they are well qualified. Then the Committee votes on the candidates and issues recommendations to the Parliament, which takes another vote.

However, only the European Council, consisting of the heads of state and government of Member States, has the last say. The Council takes the Parliament’s opinion into account when deciding on the candidates, but they do not need to adhere to it. That might be nice on paper, but it actually causes more trouble.

Namely, there is trouble now with the current member from Poland, Marek Opiola. As the group rapporteur (Greens/EFA), I asked Mr Opiola about several points during the grilling session in CONT, and he failed to give adequate answers. He has had no experience with budget control, and instead, he became famous for his love for the army. He even misused Polish military vehicles during his political campaigns.

Not only was Opiola unqualified, but he was also not impartial – he has spent years working for the Polish conservative Law and Order party. Yet, despite all this and a clear lack of a recommendation from the Parliament, the Council still appointed him. The Council’s undemocratic conduct is a considerable problem showing the need for widespread reform to prevent similar cases.

ECA members have direct influence over EU funds. Therefore, the institutions should do their best to make sure people get these jobs based on competence, not nepotism.

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