Auditors find rising errors in EU development spending

The European Commission has been taken to task by the European Court of Auditors and members of the European Parliament for failing to follow proper procedures in its development spending. An ECA audit for the 2021 financial year found that expenditure under the European Development Funds — managed by the commission and paid into by European Union states — had an estimated error rate of 4.6%, up from 3.8% in 2020 and 3.5% in 2019. The types of mistakes identified in the sample of 140 transactions included ineligible expenditure, 39% of errors; absence of essential supporting documents, 23%; expenditure not incurred, 15%; and serious failure to respect public procurement rules, 15%. “The error rate, once again, is high,” Olivier Chastel, a Belgian liberal member of the European Parliament told the commission at a hearing last month. He added that the 4.6% “undeniably is too high.” The audit cites a number of examples. Some €1.2 million ($1.3 million) was found to have been erroneously awarded to a consultancy to improve road maintenance in Mali on the grounds that its rival’s bid was abnormally low — even though the latter was just €200,000 less than the contract ceiling amount. In another case, an unnamed international organization that had received €16 million — virtually all from the EU — to improve private-sector investment in Ugandan timber was unable to prove an employee with salary costs of €9,000 for the project had done the relevant work. In written responses to the auditors, the commission argued that in the Ugandan example, “It was not possible to detect these ineligible costs from the documents that the International Organisation was required to provide for the release of the payment in compliance with the signed agreement.” ECA member Baudilio Tomé Muguruza told the parliament hearing that in some cases the commission had sufficient information either to correct the errors before accepting the expenditure. The audit found that “had the commission made proper use of all the information at its disposal, the estimated level of error would have been 2.4 percentage points lower.” The hearing also shone a light on the EU’s relationship with the United Nations, which Brussels often funds to carry out its development work. Jutta Urpilainen, the EU commissioner responsible for development policy, raised the example of the €500 million Spotlight Initiative — where the EU funded U.N. work on the rights of women and girls — as one area where auditors had difficulty accessing documents to determine what was done with EU taxpayers’ money. Urpilainen said the issue of access to information on how U.N. was spending EU money was on the agenda of almost all her meetings with U.N. representatives, who she said often counter that they cannot give the EU a privileged position over other donors. Urpilainen told the hearing that she favored taking a “case-by-case approach.” A separate study, undertaken for the commission by consultants, found that €41 million, or 2.36% of the €1.75 billion amount that was examined, was ineligible expenditure in 2021. That’s compared with €42.6 million, or 3.06% of the checked amount in 2019, and €38.2 million, or 2.48% in 2020. The auditors have previously criticized the commission’s own report, however, arguing in 2019 it is not rigorous enough about the details of procurement processes, involves few on-the-spot checks, gives too much discretion to contractors to avoid providing documents, and relies too much on previous control work. The commission spokesperson told Devex that audit findings are followed up, including through the recovery of ineligible expenditure. “The Commission sends a pre-information letter to the debtor and allows for a reasonable amount of time to present comments before the recovery order is drawn up,” the spokesperson wrote. “In case the debtor provides additional justifications and/or further supporting documents, the Commission assesses them and decides on the final ineligible expenditure and amount to be recovered. Every step of the procedure and of the decisions taken is registered and documented.”