Changes from plenary report to adopted text

Recommendations

104. Calls on the Commission to:

(i) re-consider the practice of 100 % Union funding in Union crisis response instruments, where increasing pre-financing might provide faster availability of funds, while maintaining a shared financial budgetary control responsibility in implementation of the funds by maintaining financial involvement from both national and Union level;

(ii) ensure selection of qualitatively good projects with cohesion policy funds by favouring long-term investments, and duly justifying 100 % Union funding while limiting its application;

(iii) address the systemic issue of non-detection of errors at Member State level in cohesion policy spending with an action plan, aimed at reporting an accurate error rate in assurance packages, and detection of errors at the first lines of defence by making available more, and/or better targeting existing resources and increase detection capacity at Member State and Commission level;

(iv) calculate and report to the discharge authority the cost of control for all expenditure handled by national authorities concerning cohesion policy funds, and NGEU, and compare these figures with the cost of control when only Cohesion policy funds were handled by the same authorities;

(v) address the recurrent issue of insufficient documentation at beneficiary, programme authority and audit authority level, not only through checks, awareness raising and information on requirements, but also through increased digitalisation and where possible, through financial incentives to penalise non-respect of the requirements for sound financial management;

(vi) expand the scope of its desk review of assurance packages to review more quality criteria in addition to consistency to make a reliable estimate of the residual error rate for the assurance package under review, as well as of the risk at payment as a whole;

(vii) step up its monitoring of the horizontal and thematic enabling conditions in all Member States to identify potential threats for the protection of the Union Budget and ensure enhanced transparency and stakeholder participation in the application of this tool;

(viii) closely align the rule of law report with the Conditionality Regulation and report in more detail on the breaches of the principles of the rule of law that can be used as input to trigger the Conditionality Regulation;

(x) provide Member States with increased technical assistance in order to address delays in the implementation of national programmes in order to increase the absorption rate;

(xi) closely monitor and mitigate the increasing risk of double funding between Cohesion programmes and RRF funding and address any such occurrences without delay;

(xii) further enhance simplification in the implementation of cohesion programmes and work closely with Member States to identify best practices regarding the digitalisation of practices and procedures;

(xiii) take all necessary measures to bring down the error rate in close cooperation with the Court of Auditors;

114. Notes the Court’s Special Report 07/2024 on the Commission’s systems for recovering irregular expenditure, and the Commission’s reply; notes the Court’s observation that recoveries concerning agricultural expenditure have been relatively successful, attributed in part to the so-called 50-50 rule that incentivised Member States to recover funds; notes that this rule has not been retained in the 2023-2027 CAP and the Court’s warning that this might lead to a deterioration of the rate of recovery for agricultural expenditure;

115. Notes the Court’s Special Report 20/2024 on Common Agriculture Policy Plans and the Commission’s reply; stresses the importance of ensuring that all key elements for assessing performance are provided; considers that plans need to account for specific situations in specific Member States and that therefore a certain level of divergence is even desirable, is however worried that divergence in ambitions may mean that there is no level playing field for farmers across Member States; is further disappointed by the Court’s finding that although the new monitoring framework has been simplified, the CAP objectives lack clarity and indicators focus on outputs rather than results, and that important result indicators are missing; notes that the Court recommends the Commission to promote exchange of best practices in the plans and strengthening the future CAP monitoring framework;

116. Notes the Court’s Special Report 19/2024 on Organic farming in the EU, and the Commission’s reply; is once more worried by the Court’s finding that a weak strategic framework and data constraints prevent the measurement of the impact of the policy; considers that the increased focus on performance and definition of targets and indicators, and the related monitoring of results across Union policies needs to be supported by an equal increase of the Commission’s capacity to define performance frameworks and monitor performance;

117. Welcomes the increased competitiveness achieved through market measures in the wine sector and encourages the Commission and Member States to persevere in their efforts to replicate this success in other sectors;

118. Recalls that democracy and pluralism are fundamental values of the Union enshrined in Article 2 TEU; further recalls that, in line with Article 11 TEU, Union institutions shall give citizens and representative associations the opportunity to make known and publicly exchange their views in all areas of Union action in order to maintain an open, transparent and regular dialogue; underlines that separation of powers between the institutions as laid down in Article 13 TEU must always be respected and that Union institutions shall practice mutual sincere cooperation;

119. Recognises the importance of the LIFE programme; recalls the provisions of the LIFE+ Regulation, including those related to operating grants, the eligibility conditions, the award criteria, the overall allocation for 2021-2027 and the distribution of funds within the programme;

120. Notes that some members of the Budgetary Control committee requested access to a series of grant agreements under the LIFE programme, as well as other Union funding programmes, and after scrutinising them expressed concerns on the content of several of the programmes in February 2024; notes that the Commission, including the Internal Audit Service (IAS), was initially not aware of any issue, but adopted a series of measures with the aim of addressing the concerns; recalls the discharge written questions and hearings with the Secretary-General of the Commission on 5 November 2024, the responsible Commissioners for MFF Heading 3 on 12 November, and the Commissioner responsible for Budget and administration on 9 December 2024 where the concerns and the Commission’s response were discussed;

122. Underlines that Union financing should not contribute to undermining the rule of law, nor the values on which the Union is founded; recalls the provisions of Article 163 of the Financial Regulation; considers it crucial that there should be no funding without traceability of funds;

123. Notes the actions taken by the Commission to address the allegations which included the issuance of guidance for Commission services on funding activities related to the development, implementation, monitoring and enforcement of Union legislation and policy and screening of their contract portfolios to determine which agreements were not in line with the guidance; takes note of the measures adopted so far by the Commission while awaiting the results of the screening of the grant agreements with all the beneficiaries, which was requested by the Commission’s Corporate Management Board;

124. Notes the decision-making structure, including the evaluation board within CINEA, for deciding on contracts between the Commission and beneficiaries; urges the Commission to ensure that the decision-making structure of CINEA for deciding on contracts to be awarded features clear accountability, clear responsibilities and a practical structure;

125. Notes that the executive agency conducts annual bottom-up risk management exercises and that these bottom-up risk management exercises did not identify any critical risks; notes that irrespective of the financing programme, evaluation procedures should be constantly reviewed and adapted if needed;

Recommendations

127. Calls on the Commission to:

(i) closely monitor the Member States’ progress as regards the processing of performance data and the aggregation of data for the annual performance report and keep the discharge authority informed about issues with reliability of performance data, in particular where it concerns manually aggregated data;

(ii) inform the discharge authority why the Court concludes that for several years several errors could have been prevented, had the Commission and Member States used all information at their disposal and why the Commission and Member States do not manage to address this issue appropriately;

(iii) apply the lessons learned as regards the reduction of the administrative burden from its response to the farmers’ protests in future policy initiatives, while taking due account of the risk of abuse of funds where control measures are reduced, or risk of too much divergence between Member States when discretionary powers are used without proper oversight;

(iv) keep the discharge authority informed about the recovery rates of agricultural expenditure, in particular if the rate deteriorates in comparison to the recovery rate under the previous CAP and swiftly mitigate the causes for the deterioration, including considering the introduction of new incentives for Member State authorities to recover funds;

(v) assess the differences in ambition of strategic plans and inform the discharge authority whether there is divergence between Member States, threatening the level-playing field for farmers, and assess how the Commission addresses those differences;

(vi) make better use of its capacity for setting-up performance frameworks, for defining objectives and indicators and holding those contributing to the achievements, be they Member States or beneficiaries, accountable for their contributions;

(vii) update the Commission’s anti-fraud strategy to devote attention to advocating for and upholding a clear separation of executive and legislative power in the Union;

(ix) ensure a fair distribution of Union funds to CSOs to contribute to a pluralistic and vibrant society;

(x) ensure that the Commission’s guidance adopted in 2024 is applied by all authorising officers and, if necessary, further develop guidance to fully align grant agreements with Treaty provisions and existing legislation;

(xi) make the results of the screening of grant agreements available to the discharge authority in order to allow an assessment of the extent to which the Commission may be exposed to a reputational risk;

(xii) adequately address issues such as revolving doors, transparency in financing and donations, the fight against money laundering, limiting foreign interference, independence from political and economic influence, whistleblowing and transparent governance structures, in respect of all entities receiving Union funds;

(xiii) review the template for MoUs between the Commission and executive agencies to ensure clearer division of responsibilities;

(xiv) instruct the audit structure to review contracts with beneficiaries and to flag in case they identify contracts that are not in line with applicable financial rules;

(xv) have the IAS review contracts between the Commission and grantees, specifically to search for content that is not in line with applicable financial rules within work packages;

(xvi) evaluate the decision-making structure in the areas of the awarding of contracts and instruct Commission services and executive agencies to perform better checks on the content of contracts at all stages, including by ensuring that work packages and key performance indicators as listed by applicants align with the objectives of respective funding programmes;

(xvii) adopt more precise categorisation of entities listed in the Financial Transparency System;

(xviii) review its rules for special advisers to remove the arbitrary selection and remuneration;