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

2. A moment of change New Parliament New Commission
New spending programmes and financial rules for
Need to make best use of limited financial resources

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

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

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

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

7. 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.

8. 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

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

10. 2013 error rate Estimated error rate for 2013 payments = 4.7%
Close to 4.8% for 2012
Persistently higher than “materiality threshold” of 2%

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

12. 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%

13. 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%

14. 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%

15. 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

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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

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