Changes from plenary report to adopted text

12. Notes with concern the absence in the legislation of performance-based instruments, such as the RRF, and in the Commission proposals for the MFF 2028-2034 of clear standards and thresholds for cases when national management and control systems are considered insufficient or unreliable, thereby leaving corrective measures or suspensions to discretionary judgement;

13. Underlines that the generalised use of FNLC requires the ECA and national audit authorities to significantly adapt their activities and move towards a different auditing approach; warns that such a shift, without ensuring the readiness of audit authorities, will pose significant challenges and could create a structural gap in the audit trail with serious consequences for both the sound financial management of the Union budget and the discharge procedure;

14. Regrets the incomplete audit trails observed by the ECA under the performance-based instruments, such as the RRF, which weaken traceability and limit the ability of Parliament and the ECA to exercise scrutiny;

15. Emphasises that heavy reliance on national authorities and external auditors, without strong safeguards and detailed Commission guidance, technical assistance and dedicated training on performance audit methodology, risks variability in the quality and independence of controls, thereby exposing the EU to reputational risk; underlines that supporting national audit authorities will contribute to improved quality and greater consistency;

16. Highlights that fund absorption or disbursements are not by definition an indicator of success; regrets that in the latest amendments of the national recovery and resilience plans, the focus on absorption has led to a reduction in the initially envisaged ambition, specifically in relation to reforms;

17. Recalls that audit bodies in Member States must comply with internationally accepted audit standards; warns that failure to do so undermines the reliability of their work and poses risks to the single audit approach; notes the ECA’s repeated findings of certain national audit authorities’ shortcomings in terms of scope, quality, documentation and reporting; stresses the need for a clear framework of responsibilities to guarantee quality and consistency;

18. Emphasises that fragmented IT and data systems across Member States increase the risk of errors, irregularities, double funding, delays and inconsistent reporting; recalls that, in order to ensure full traceability of EU funds, Parliament has repeatedly called for the establishment of a single, integrated and interoperable information and monitoring system, including a single data mining and risk-scoring tool, building on – but not limited to – existing tools and databases in the context of the recast of the Financial Regulation; regrets, however, the refusal of Member States to make the use of such a system compulsory from the beginning of the next MFF; welcomes the Commission’s ongoing effort to develop such an interoperable system, building on the ARACHNE tool and urges all Member States to make full use of this system; stresses that the effectiveness of any new funding model depends on the reliability and consistency of the underlying data and monitoring tools; underscores the importance of designing an interoperable system that adheres to the General Data Protection Regulation (GDPR); underlines that such a system must deliver accurate, timely information, minimise false positives and operate reliably;

19. Stresses that shared management in the next MFF must involve regional and local authorities and stakeholders including in the case of performance-based instruments, both in the design, decision-making and planning phase as well as in the implementation and delivery phase, through a multilevel governance approach, in order to ensure the added value for the EU of cross-border projects and to focus on measurable results rather than outputs;

20. Notes that combining grants and financial instruments in performance-based frameworks adds complexity and increases the risks of double funding, irregularities, fraud, over-compensation and weak accountability chains; stresses, in particular, that when financing is not linked to costs, the absence of cost verification further heightens the risk of overlaps between different funding streams and undermines assurance of sound financial management;

21. Points out that performance-based monitoring does not necessarily reduce administrative burdens, as weak verification systems may create hidden costs without enhancing assurance; calls on the Commission to streamline performance indicators, simplify reporting templates, eliminate redundant data requests and address the unnecessary complexity of payment requests; considers that any shift to the use of performance-based delivery models requires capacity building at the EU level and in Member States as the monitoring, control and audit needs in the case of performance-based delivery models differ from those of instruments based on the reimbursement of eligible costs;

22. Warns that, in the current geopolitical context and given the increased budgetary pressure, the growing use of performance-based instruments, without addressing the weaknesses identified in the RRF, including by strengthening parliamentary scrutiny, risks shifting institutional balances in favour of executive discretion and away from democratic accountability; insists that any governance model for performance-based instruments must involve Parliament and the Council on equal terms; rejects any proposal to upset the institutional balance and undermine Parliament’s role as the budgetary and discharge authority;

Recommendations for strengthening control, transparency and accountability of performance-based instruments

23. Believes that the FNLC model for performance-based instruments should not be used as a generalised method of implementation or reimbursement between the Member States and beneficiaries, except for smaller beneficiaries implementing projects under certain financial thresholds, enabling a simplified system of delivery while maintaining a robust control framework; underlines, in particular, that large-scale and complex projects should remain cost-based, as their scope, duration and multilevel financing require detailed financial reporting and verifiable expenditure data to ensure proper monitoring and accountability; stresses the importance of establishing a mechanism for recoveries in cases where significant deviations arise between ex ante cost estimates and ex post checks, particularly when projects are delivered below the initially estimated cost; stresses that such adjustments must reflect actual expenditures to ensure financial integrity, value for money and accountability; calls for the continued and expanded use of lump sums and simplified cost options, in particular for smaller or medium-scale investments, as effective and proportionate tools to reduce administrative burdens, increase accessibility for smaller beneficiaries, and maintain accountability and traceability in the use of Union funds;

24. Insists that a simplified budget must also result in a transparent budget; urges the Commission to provide public access to procedural information, including the cost estimation methodology, and to provide Parliament with access to the estimated costs of national and regional partnership plans (NRPPs);

25. Calls for a unified accountability system that enables the traceability of EU budget contributions to specific projects and their real final beneficiaries, including contractors and sub-contractors, as well as beneficial owners; emphasises the importance of ensuring the visibility of EU-funded projects for citizens; highlights the necessity of linking payments to the fulfilment of coherent, clearly defined milestones and targets to strengthen the alignment between reforms and investments; stresses the importance of introducing an ex post evaluation system based on the targets achieved by each instrument, as measured by their performance indicators;

26. Stresses that Union financing should be granted only for measures directly linked to concrete, verifiable projects that demonstrate tangible progress, measurable results, contribute to Union policy objectives, and can be effectively monitored and audited, subject to transparent reporting, including on value for money and visibility requirements;

27. Calls on the Commission to refrain from introducing complex or speculative cost estimation methodologies, which risk undermining transparency and comparability across Member States; urges instead the development and wider use of harmonised and verifiable simplified cost options that provide clarity, reduce administrative burdens and maintain an appropriate level of accountability;

28. Calls for unambiguous compliance criteria to determine when any performance-based instruments fulfil planned outputs or results, with uniform definitions across Member States;

29. Calls for periodic assessments of real costs incurred in the implementation of performance-based instruments against the cost estimates of Member States in order to prevent discrepancies; believes that such assessments should automatically trigger controls and audits in cases where there are significant differences between real and estimated costs;

30. Insists that any use of the FNLC model must require a correlation between the payment applications and the fulfilment of milestones and targets on the one hand and the implementation of concrete projects on the other hand; stresses that without such correlation, the traceability of Union funding is severely compromised;

31. Calls for the establishment of a single, integrated, interoperable information and monitoring system, including a single data mining and risk-scoring tool; demands that the use of this new interoperable system must be a precondition for accessing Union funding in the next MFF; demands that the Commission create publicly accessible dashboards, allowing citizens to assess the value generated by EU funding; calls on the Commission to deploy advanced data analytics and AI tools to enhance performance tracking, evaluation and reporting, alleviate manual workload and streamline reporting processes, and prevent double funding and other risks to protect the EU’s financial interests;

32. Demands that the Commission establish and publish clear thresholds for corrective measures, including severity levels, to guarantee equal treatment and consistent enforcement;

33. Insists that the fulfilment of milestones and targets must be assessed by the Commission, taking into account the data provided by Member States, and must follow a transparent and standardised methodology, with documented scoring and substantiated justification for any deviations above the legal threshold; calls for all assessment files to be made available to Parliament and the ECA;

34. Demands greater transparency in the implementation of performance-based instruments, requiring the timely publication of all Commission assessments, national reports, audit summaries and recovery actions, in formats that are accessible, comparable, verifiable and user friendly, ensuring that Parliament, the ECA and citizens can scrutinise the use of Union funds; stresses that access to information should follow a cascade approach, ensuring full and unrestricted real-time access for the ECA, a guaranteed and unrestricted right for Parliament to pose questions and request information, and appropriate, transparent access for citizens in line with the rulings of the Court of Justice of the European Union; recalls that all transparency measures must comply with data protection requirements under the GDPR and other relevant Union legislation; emphasises that the publicly available data must accurately reflect the actual implementation and progress of projects, rather than planned commitments or disbursements made solely for the fulfilment of milestones and targets under national plans, thereby providing a genuine picture of results achieved on the ground;

35. Stresses that all Commission databases and information systems used for the collection, exchange and monitoring of data between the Commission and the Member States must be accessible to the ECA; underlines that the ECA should have direct and prompt access to the original data as recorded in the system, without prior modification, aggregation or editing by national authorities or Commission services; emphasises that such access is essential to ensure the independence, reliability and effectiveness of audits and to uphold transparency and accountability in the implementation of the Union budget;

36. Calls for enhanced reporting of performance-based instruments to include project-level data similar to that of the Cohesion Policy, providing the geographical distribution of funding and interventions at subnational level;

37. Calls for improved audit trails by requiring systematic documentation of verification steps and ensuring that records are complete, accessible and auditable at both EU and national levels;

38. Demands that the Commission put in place robust safeguards to ensure consistent, independent and high-quality audit work across all Member States, including through detailed methodological guidance, sustainable technical assistance wherever audit authorities show persistent weaknesses, and dedicated training on performance audit standards; insists that reliance on national authorities and external auditors must be conditional on compliance with these safeguards to prevent variability in control quality; calls on Member States to establish safeguards to ensure the independence of national audit authorities from the political and administrative bodies responsible for fund management;

39. Calls for the introduction of predictive analytic tools powered by AI as well as machine learning capabilities that would enable auditors to conduct real-time risk assessments, identify anomalies more effectively and perform value-for-money audits and targeted reviews in cases of consistent insufficiencies identified by the ECA; stresses the importance of leveraging automated data-mining tools and AI to identify anomalies while avoiding additional reporting obligations on compliant beneficiaries; recalls that such AI technologies must be utilised in full compliance with EU data protection rules and supported by comprehensive training for national audit authorities;

40. Requests that the Commission strengthen safeguards for financial instruments, including stricter management fee ceilings, transparent rules for direct awards, and controls to prevent double funding and breaches of State aid rules; demands that the management fee ceilings, in particular for direct awards to fund managers for equity or quasi-equity products should not erode the value for money of Union support, especially where the volume of operations is modest;

41. Reiterates the need to enhance transparency by expanding the RRF Scoreboard model to all performance-based instruments, to improve the timeliness and comparability of national reporting, and ensure public access, traceability and accountability; urges the Commission to ensure full interoperability of EU and national data systems, to reduce manual inputs, improve data quality and enable real-time traceability down to the level of final beneficiaries; calls, in this context, on the Commission to ensure that data on the real, final recipients of performance-based instrument funding, including contractors and sub-contractors, is available in real-time to audit and discharge authorities as well as to the EPPO and the European Anti-Fraud Office;

42. Insists that Parliament’s prerogatives as legislator, budgetary authority and discharge authority must be fully respected, and that it be granted access to all necessary data to exercise its functions;

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43. Instructs its President to forward this resolution to the Council and the Commission.