Changes from plenary report to adopted text

42. Underlines that the Commission’s projections for the reduction of the outstanding commitments are based on the assumptions that Member States effectively make more efforts to accelerate the absorption of the 2021-2027 shared management funds and that automatic technical adjustments of payments ceiling are sufficient to cover the payments needs; is concerned that these two assumptions may not be fulfilled hence creating a very dangerous situation for the Union budget;

43. Notes the Court’s warning that for the 2021-2027 shared management funds under the CPR, the decommitment risk has risen significantly due to a series of factors, namely the slow start because of the late adoption of sector-specific regulations, the prioritisation of the remaining European Structural and Investment (ESI) Funds and NGEU funding, the fact that those funds have a shorter payment timeframe by one year compared to the previous MFF period and the overlap with NGEU payments until 2026; stresses, therefore, the Court’s 2021 recommendation for the Commission to ensure that there is additional advisory support to national authorities so all bodies responsible for managing and controlling these funds can ensure sound financial management;

44. Welcomes the vital role played by NGOs in representing civil society and in promoting and defending the values enshrined in the Treaties and the Charter of Fundamental Rights of the European Union (‘the Charter’) while implementing programmes and projects financed by the Union budget in full respect of the Union’s financial rules and the protection of the Union’s financial interests; calls to ensure that all Union funding beneficiaries, including NGOs, that have misused or misappropriated Union funds, or engaged in activities contrary to Union values, including inciting terrorism, hate speech, supporting or glorifying violence, political and religious extremism are listed in the Early Detection and Exclusion System (EDES) and blocked from access to Union institutions and funding programmes; considers that fraud, conflicts of interest, double funding, corruption and money laundering or embezzlement must be prevented and tackled in all situations and for all beneficiaries irrespective of their nature and legal status (as noted in Parliament resolution of 17 January 2024 on the transparency and accountability of non-governmental organisations funded from the Union budget ); calls on the Commission to implement the recommendations of that resolution;

45. Notes with concern that Union debt increased from EUR 236,7 billion in 2021 to EUR 344,3 billion in 2022; notes that of the entire debt, only the share of NGEU non-repayable support (EUR 185,6 billion, 53,9 %) creates interest rate risk for the Union budget; notes that, due to growing market interest rates, the cost of new NGEU funding rose from 0,14 % in the second half of 2021 to 1,24% in the first half of 2022, and a further increase to2.60% in the second half of 2022, resulting in EUR 0,5 billion of interest payments for NGEU in 2022, and a considerable increase was projected for 2023; is concerned about the strong increase in interest rates since 2020 resulting in a higher financial burden for the annual budget; recalls that, in addition, the repayments of NGEU borrowing should start in 2028 and must be completed by 2058, which will require sufficient financial resources; notes that the maximum utilisation of the Union budget in 2022, using all available flexibility, does not allow any repayment of debts, unless cuts are made in other areas of Union expenditure; calls on the Members States to develop and agree on a repayment plan out of new own resources without damaging the new MFF;

46. Notes that since December 2022, the Commission has a new debt management strategy in place, namely a “diversified funding strategy” which consists of the techniques and funding instruments used by sovereign issuers; recalls the Court’s Special Report 16/2023 on NGEU debt management that concluded that the Commission quickly established its debt management system, allowing for a timely start of borrowing operations, that met all regulatory requirements concerning debt portfolio and risk management;

47. Supports the Court recommendation that the Commission should act more proactively to ensure the tools available to mitigate the exposure risks have sufficient capacity;

48. Notes that the total exposure of the Union budget because of guarantees and contingent liabilities for loans rose to EUR 248,3 billion, of which EUR 57,8 billion for an additional safeguard has been created through the Common Provisioning Fund (‘CPF’); notes that higher interest rates also require a higher provisioning rate in the future;

49. Notes that in 2022 the Commission changed the disclosure of contingent liability in its consolidated accounts, making the comparison of year by year extremely complex and long; invites the Commission to report more clearly on its annual account, in order to facilitate conclusions and analysis also in view of the discharge procedure;

50. Notes that the exposure of the Union budget to Ukraine increased in 2022 to EUR 15,6 billion, with related provisions; notes with concern that for the MFA+ support to Ukraine with a value of EUR 18,0 billion, agreed at the end of 2022 and disbursed throughout 2023, no provisions were required in the CPF to cover the risks of default, posing a serious risk to the Union budget as expressed in the Opinion 07/2022; draws attention that possible losses related to MFA+ will have to be covered by future Union budgets or by the budgetary ‘headroom’ between the MFF ceiling and the own resources ceiling; invites the Commission to provide additional measures to protect the Union budget from future losses related to the MFA+;

51. Notes that during 2022 consumer price inflation increased significantly, affecting the Union budget in several ways, by reducing the relative size of the Union budget and reducing the efficiency of the Union funds to achieve the objectives to the same extent as initially planned; considers that high inflation affects the proportion of revenue from different sources, with a net reduction of the share of the GNI-based own resources; strongly supports the Court recommendation to the Commission to assess the impact on the Union budget of increasing inflation in order to proactively apply mitigating measures;

52. Welcomes the online based transparency platforms developed and maintained by the Commission which provide data on the implementation of Union spending programmes and allow to search through the recipients Union funding and projects, such as the Financial Transparency System, giving information about Union funding under direct and indirect management, the RRF Scoreboard, the Cohesion Open Data Platform and Kohesio platform;

53. Notes the Commission’s methodology for tracking gender aspects of expenditure as of 2023; recalls that only 2% of the Union’s budget was assessed as having a principle objective of improving gender equality; calls on the Commission to improve this score by mainstreaming gender from the start of programme design; reiterates that further detail is needed so that the majority of spending (73%) currently assessed as 0* ‘potential to contribute to gender equality’ can be fully understood; notes with concern that Special Report 10/2021, published by the ECA confirmed that the Union’s budget cycle does not yet adequately take gender equality into account since key elements, such as gender analysis, gender-related objectives, indicators and accountability through reporting, are largely missing;

Recommendations

55. Strongly supports the recommendations of the Court in its Annual Report on the implementation of the budget for the financial year 2022 (‘Annual Report for the 2022 financial year) as well as in related special reports; calls on the Commission to implement them without delay and to keep the discharge authority informed on the progress of the implementation;

56. Calls on the Court of Auditors to:

(i) differentiate the types of errors and to make more transparent the rate of errors caused by severe misuse, fraud or other criminal activities and the errors caused by administrative oversight or inaccurate application of rules;

(ii) to assess more intensively also the quality, the European added value, the sustainability, the performance and the practicability of the implemented projects;

57. Calls on the Commission, in particular, to:

(i) engage with the Court in order to increase understanding, convergence and comparability of the two approaches to address irregularities;

(ii) undergo an ex-post evaluation of the reliability of their own estimation of the risk at closure for the financial year for which the programs were closed and presents the results of such an evaluation to the Discharge authority;

(iii) continue to simplify rules and procedures without compromising the quality of the controls; and continue to digitalise audit procedures;

(iv) step up efforts to improve transparency in the use of funds, including as regards information on final beneficiaries;

(x) ensure the protection of the Union budget by making general and systematic use of digital and automated systems for reporting, monitoring and audit and urgently establish a compulsory integrated and interoperable system building on, but not limited to, existing tools and databases in the context of the concluded recast of the Financial Regulation;

(xi) modify and improve the Recovery and Resilience Scoreboard as well as the respective Commission RRF website to ensure that the implementation, the performance and fulfilment of indicators are regularly updated, accurate and, clearly structured and transparent;

(xii) ensure that the outcome of the audits is transparent;

(xiii) ensure that all Member States use the systems and central registers to report on beneficial owners and final beneficiaries;

(xiv) assess the impact on the Union budget of high inflation continuing over several years and identify tools to mitigate resulting key risks;

Performance of the Union budget

58. Notes the re-integration of the Court’s work on performance of the Union budget into its Annual Report; regrets to note that the content of the related chapter is of considerably less depth than the previous year’s annual report on performance; regrets in particular that the link to the Sustainable Development Goals has become much less evident in the current set-up; notes that the Court’s work on performance as included in its 2022 Annual Report lies primarily in summarising the findings from Special Reports;

59. Notes that the Court has followed-up on the implementation of 213 of its recommendations made in 2019, out of which 179 were addressed to the Commission; notes that four of the 179 recommendations were not yet due for implementation by the time the follow-up review was carried out and that, of the remaining 175 recommendations, the Commission has fully implemented 101 (58 %), 26 in most respects (15 %), 24 in some respects (13 %), and has not implemented 17 (10 %) of them at all, the Court being unable to conclude in 7 cases (4 %) where the auditee had not accepted them or it was too early to assess the implementation;

60. Considers the overview of special reports, which spans the largest part of chapter three of the Court’s Annual report, gives a good overview of reports presented by the Court that relate to 2022 strategic areas; considers a deep analysis of the performance of the Union budget could be an added value to the follow-up of the auditor recommendations; notes the issue of timing concerning to the publication of the AMPR;

61. Notes that the Commission publishes the ‘Programme Performance Statements’, which is an overview of the performance information of the programmes of the 2021-2027 Union budget, and the ‘Horizontal priorities’, a section on how the Commission tracks and reports on what is spent on green budgeting, gender equality mainstreaming, digital tracking and the sustainable development goals;

62. Notes the Court’s review 06/2023 on the Commission’s 2022 AMPR for the Union budget and its conclusion that Volume I of the 2022 AMPR followed the Commission’s corporate management board strategic guidance when it presented the facts and achievements concerning budgetary management for 2022, and notes that there was scope to improve the quality of performance data; notes the Commission’s replies to written questions on an IAS audit on the Commission’s control system in relation to the reliability of performance information and the reassurance given that the identified issue is being dealt with;

63. Welcomes that the Commission has included information in its AMPR on green budgeting, digital tracking and the gender-equality dimension in the Union budget; notes that the number of programmes for which the contribution to gender equality is unknown decreased to 72 %; supports the Commission’s position that this figure needs to be reduced further;

64. Recalls the findings of the Court’s Special Report 09/2022 “Climate Spending in the 2014-2020 EU budget”; notes in addition the Court’s Special Report 26/2023 on the Performance monitoring framework in the RRF; concludes that the Court identified in both Special Reports issues with the method the Commission presents performance information, both in the MFF and the RRF; notes in particular that disclosure about shortcomings in the performance monitoring methodologies show weaknesses in particular because of mixing estimates with actual numbers of achieved results and realised projects or blending budgeted amounts with actually paid amounts; considers that performance data presented by the Commission should not include estimations but only figures of realised actions; remains concerned about the Court’s finding that limited improvements are expected in the 2021-2027 climate reporting; regrets that the Commission has not yet addressed weaknesses in the reported figures of their new methodology;

Revenue

65. Notes that the revenue of the Union budget comprises own resources, external assigned revenue and other revenue; notes that in 2022 the Gross National Income (GNI)-based own resource accounted for EUR 103,9 billion (42,3 %), external assigned revenue accounted for EUR 62,2 billion (25,4 %), traditional own resources (TOR) accounted for EUR 25,9 billion (10,6 %), contributions and refunds connected with the Union agreements and programmes accounted for EUR 20,9 billion (8,5 %), value added tax (VAT)-based own resource accounted for EUR 19,7 billion (8,0%), non-recycled plastic packaging waste-based own resources accounted for EUR 6,3 billion (2,6 %), and other revenue accounted for EUR 6,4 billion (2,6 %);

66. Notes the Court’s Special Report 25/2022 on verification of Gross National Income (GNI) for financing the Union budget; recalls that the GNI data reported by Member States are the basis for calculating the Member States’ contributions and considers it therefore essential for the Commission to improve the efficiency in the verification cycle following the recommendations of the Court; welcomes the Court’s conclusions that the verification process of the GNI data carried out by the Statistical Office of the European Union (Eurostat) was effective; welcomes that Eurostat has prepared an action plan to address the recommendations with a view to implementing them after the 2020-2024 cycle;

67. Notes that the Union budget needs to respond to multiple challenges with additional financial programmes, such as the NGEU recovery instrument; notes that for 2022, the revenue from traditional own resources remained relatively stable, while budgetary guarantees for borrowing and lending operations were a substantial part of revenue; recalls in that regard Parliament’s resolution of 10 May 2023 on own resources: a new start for Union finances, a new start for Europe;

68. Welcomes the Court’s conclusion in its Annual Report for 2022 that the level of error in revenue transactions was not material and that the systems for managing the revenue are generally effective; is concerned by the weaknesses identified by the Court in certain Member States’ accounting and management of TOR, and in the Union action taken to reduce the customs gap and ensure that TOR is complete; welcomes the actions undertaken by the Commission and Member States in that regard;

69. Notes from the Annual Report on the Protection of the Union financial interests (PIF Report) that in 2022, the number of fraudulent irregularities relating to TOR (454) fell by 6,8 % and non-fraudulent irregularities (4 207) rose by 9,4 % compared to the 5-year average for 2018-2022; notes that most fraudulent cases reported in 2022 relate to incorrect value and incorrect classification or misdescription of goods, while smuggling remains one of the primary modus operandi; notes that most fraudulent cases are detected by inspections by national anti-fraud services together with customs release controls; notes that the recovery rate is currently 48 %, although it can be expected that it will go up in the future due to the length of the process;

70. Notes the summary of waivers of recoveries and established amounts receivable in Annex 9 of the 2022 AMPR; notes that the total general value of waived recoveries was EUR 40,4 million, an increase of 28 % in comparison with 2021 (EUR 31,4 million) and considers this is a loss of revenue for the Union budget;

72. Welcomes the developments that have resulted in lifting both the quantified and unquantified reservation in the area of textiles and shoes imported from China; notes with satisfaction that the United Kingdom has now paid the total amount due (final payment of EUR 1,57 billion in January 2023) including interest (EUR 1,4 billion in February 2023); notes that by the end of 2023, 27 Member States had made significant provisional payments for their expected amounts due to the Union budget and that in line with the CJEU judgment in the case C-213/19 the Commission will apply the same quantification method for these Member States as for the United Kingdom, which will result in recalculated amounts, allowing the Commission to finalise the exercise completely;

Recommendations

73. Calls on the Commission to:

(i) take over the suggestions of the European Parliament in its resolutions on own resources in order to ensure sufficient resources to repay the investments made under NGEU;

(ii) make use of all means available to stimulate cooperation between anti-fraud services and customs agencies to detect, prevent and correct fraud affecting Union revenue;

(iii) inform the discharge authority about the results of the review of the collected own resources;

(iv) examine carefully the differences in recovery rates by Member States in order to identify possible specific weaknesses;