Changes from plenary report to adopted text

Court’s observations

236. Notes that the Court issued a qualified opinion on the legality and regularity of the RRF expenditure in 2022; is concerned that the Court concluded that 11 out of 13 RRF payments made in 2022 were affected by quantitative findings and that 6 of these payments were affected by material error; notes that in the Court’s opinion, except for those matters, the RRF expenditure accepted in the accounts for the year 2022 is legal and regular in all material respects; notes that the nature of the RRF spending model relies on the assessments to be made by the Commission and thus, the Court does not provide an error rate but estimates the minimum financial impact of its findings to be below, but close to the materiality threshold;

237. Notes that the Court audited 244 out of 274 milestones and all 37 targets included in 2022 payment requests for grants; regrets that the Court considers that 15 of them were affected by regularity issues (below 5 % of the total); notes that the Court considers that the requirements had not been satisfactorily fulfilled for 8 M&Ts in 8 payments and that the Commission had made the corresponding payments; notes that the Court's conclusions are based on extensive audit work and that the Commission contests the Court's interpretation of the legal requirements set by the Council or qualitative judgements different from the Commission; notes that all the RRF payments must be assessed against the framework communicated and applied by the Commission, who must take into consideration for each payment the opinion of the Economic and Financial Committee and the scrutiny by Member State experts under the comitology procedure;

238. Notes that the Court has identified what it considers to be two cases of continuation of a pre-existing project, that started before the eligibility period, and targets that were a substitution of recurring national budgetary expenditure; is concerned about such situations, although this conclusion does not agree with the Court’s own consideration that recurring actions refers to types of expenditure like staff and operating costs of government entities; recalls that the RRF shall not be used to finance recurring budgetary expenditure and calls for adequate measures to be taken, including partial payments, when such cases are identified by the Commission;

239. Recalls the Court’s observation in Special Report 21/2022 and its Annual Report for 2021 that milestones and targets often lack clarity and are not well defined and that the Court makes the same observation in its annual report 2022; calls on the Commission to draw on lessons learned when designing future performance based instruments;

Audit and control

248. Underlines that the control framework is tailored to the unique nature of the RRF and built upon two types of controls, namely (i) controls by the Commission to provide reasonable assurance over the legality and regularity of commitments and payments, based on the satisfactory achievement of M&Ts as set in the Council Implementing Decisions approving the RRPs, and (ii) controls by the Member States to ensure adequate protection of the financial interests of the Union as provided in Article 22 of the RRF Regulation;

249. Notes that, based on the Court’s recommendations and the experience gained, the Commission presented its methodologies on (i) assessing the satisfactory fulfilment of M&Ts, (ii) calculating the suspended amounts in case of non-fulfilment of a milestone or target, and (iii) dealing with potential situations where M&Ts initially assessed as satisfactorily fulfilled by the Commission were subsequently reversed by the Member State;

250. Notes that the framework for assessing M&Ts lacks explanations, including why the verification mechanism as described in the operation arrangement should not be considered for the assessment; notes that definitions of “satisfactory fulfilment” of the relevant M&Ts are defined through terms that lack a clear definition and contain discretionary elements, such as ‘minimal deviation from a requirement’ or ‘proportional delays’, and that the methodology for the determination of partial payment does not provide an explanation for the values chosen as coefficients; asks that further clarifications are given;

252. Notes that 12 national RRPs contain Rule of law or anti-corruption reforms in their milestones and targets; notes the recent case of a potential reversal of two milestones concerning the Rule of law in one Member State; emphasises the need for the Commission to pay more attention to the potential reversal of M&Ts in the area of the Rule of law as they are particularly vulnerable to arbitrary governmental decisions;

253. Notes that the Commission verified the adequacy of the control systems of Member States as a precondition for the positive assessment of the RRPs; notes that additional specific ‘control milestones’ were added, in turn, as a precondition for the first payments in the RRPs of 16 Member States where gaps or deficiencies required additional measures to ensure the full adequacy of the systems to protect the financial interests of the Union; is concerned about the Court’s observation of persisting weaknesses in the Member States’ control systems that put the sound financial management of RRF funding at risk and urges the Commission and national authorities to address them swiftly; welcomes that the Court did not raise any issues related to their satisfactory fulfilment assessed during 2022; notes problems with the reliability of the information provided in the management declarations by Member States, casting doubts on the possibility to rely on them when assessing milestones and targets; notes that the Commission performed 16 system audits in 2022 and 14 in 2023, including whether they check compliance with Union and national rules, so that all Member States’ control systems will have been audited at least once by the end of 2023; understands that the RRF Regulation places the principal responsibility to ensure respect for national and Union law on the Member States but is concerned about the Court’s observation on an assurance and accountability gap regarding compliance because there is an absence of compliance audits by the Commission on RRF funded investments projects; calls on an adequate and equal application of Article 22 of the RRF Regulation for all Member States and recalls that non-fulfilment of M&Ts related to a Member State's control system may lead to the suspension of the full instalment and all future instalments;

254. Recalls that Council Regulation (EU) 2017/1939 (the ‘EPPO Regulation’) provides that the EPPO shall be competent in respect of the criminal offences affecting the financial interests of the Union that are provided for in Directive (EU) 2017/1371 in the terms set out in the EPPO Regulation and specifically in its Chapter IV;

255. Expresses concern about the cases reported to the EPPO after the first year of implementation of the RRF, namely 15 active cases as reported in the EPPO Annual Report 2022; calls on the Commission to cooperate with OLAF and the EPPO in order to identify patterns of fraud, corruption and money laundering related to RRF and calls on the Commission to act in such situations; calls on the Commission to draw consequences for Member States with too many cases of fraud;

256. Notes with concern, that EPPO’s responsibility in investigating crimes involving RRF funds is being put into question in 9 cases in a Member State; notes that the European Court of Justice was asked via a preliminary question to give an opinion in one of these cases;

Implementation and impact

257. Notes that in 2022, the Commission made 13 payments to 11 Member States amounting to a total of EUR 72,2 billion, following the satisfactory fulfilment of 366 M&Ts (328 milestones and 38 targets); notes that as of the date of publication of the second implementation report in September 2023, the Commission has received 32 payment requests from 20 Member States and disbursed a total amount of EUR 153,4 billion (EUR 106,3 billion in grants and EUR 47,1 billion in loans);

258. Notes that the Commission reports that the achievement of M&Ts is broadly on track, after the first year of the RRF's functioning was more focused on the necessary reforms to build the framework for subsequent investment projects to have a higher impact; notes that the Commission reports delays compared to the indicative calendar of payments, due to the process of revising the RRPs in the context of the REPowerEU Plan and implementation challenges Member States are facing, such as administrative capacity issues, investment bottlenecks, and consequences of Russia’s war of aggression against Ukraine, including the energy crisis, unexpected price shocks, shortages of certain materials and high inflation;

259. Notes that Member States may be overwhelmed administratively with the transfers of large RRF funds and cohesion funds at the same time, thus delaying implementation and potentially threatening transparency; notes the risk of double funding between the RRF and the European Structural and Investment Funds and encourages the Commission to actively check, including the relevant databases, and to communicate with Member States about their administrative capacities to ensure double funding does not occur;

260. Notes that several Member States have proposed to use RRF funds through financial instruments implemented by the EIB and other national investment banks to incentivise private investments under certain conditions; is concerned about the possible use of these instruments with the goal of extending the use of RRF funds beyond 2026; recalls that the RRF is a crisis instrument and that funding should be implemented within its lifetime;

261. Notes that the Commission is supporting all Member States in accelerating the implementation and revision of their plans, including through the Technical Support Instrument; stresses the importance of the Commission’s proactive role in supporting the Member States to best avoid the delays and under-implementation problem, as well as to ensure that Member States protect the financial interests of the Union and that EU taxpayers’ money is adequately spent; points out that, in particular, the countering of serious irregularities and double funding should receive appropriate resources and attention; notes concerns, as brought to the attention of the discharge authority, about the administrative capacity of the Member States to absorb the funds and the implementation of high quality projects, especially towards the end of the RRF period;

262. Is concerned that according to the Commission’s RRF scoreboard, 3 Member States have not submitted any payment request to the Commission by end December 2023; calls for speedy implementation of RRPs, including an evaluation by the Commission regarding barriers and results; is concerned that under-implementation, unless swiftly mitigated, might result in a payment crisis;

264. Emphasises that when reviewing revised national recovery plans, the Commission should still diligently apply the ‘Assessment guidelines for the Facility’ as outlined in Annex V of the RRF Regulation, which requires the Commission to assess and rate national recovery and resilience plans under the criteria of relevance, effectiveness, efficiency and coherence (article 19(3)), as well as coverage of the six pillars, namely a) green transition, b) digital transformation, c) smart, sustainable and inclusive growth, d) social and territorial cohesion, e) health and economic, social and institutional resilience, f) policies for the next generation (Article 3); asserts that this is an important process to avoid revised national recovery plans that are much weaker than the original plans or that no longer fulfil the criteria;

265. Notes that the RRF should create synergies and measures implemented should lead to structural reforms that have added-value; is concerned that some countries have repackaged old national reforms into the national RRPs;

266. Emphasises that there should be a better co-governance approach in all Member States so that local and regional authorities, civil society organisations, social partners, academia or other relevant stakeholders are adequately involved in the design and the implementation of the national RRPs; calls for their involvement based on clear, fair, transparent and non-politicised principles, in the implementation of the national RRPs to the maximum extent possible under the national legislative framework;

267. Calls on the Commission to ensure that Member States apply a zero-tolerance approach to corruption and fraud, including embezzlement, without any exception;

269. Welcomes that reforms and investments proposed by the Member States in support of the green and digital transitions have exceeded the objectives set in the RRF Regulation, as the estimated climate expenditure amounts to about 40 % and the digital expenditure to 26 %, while the objectives were set at lower percentages of 37 % and 20 % respectively;

270. Notes the progress reported on the six pillars of the RRF and, in particular, on the implementation of country-specific recommendations (CSRs), with at least some progress having been made for 68 % and substantial progress in 12 % of 2019-2020 CSRs, which shows the incentives provided by the RRF; notes that progress in the implementation of the 2022 CSRs has also been substantial, with at least some progress in almost 52 % of the recommendations addressed to Member States in July 2022;

271. Recalls that the COVID-19 pandemic revealed structural weaknesses in health systems across the Union, such as lack of resilience and crisis response capacity; highlights that health is a policy area within one of the six pillars of the RRF, which make possible reforms and investments to strengthen their capacity, quality and resilience; notes that 531 M&Ts and 223 measures, as well as 48 % of the estimated contribution to this pillar is related to healthcare but regrets that some national RRPs have a health-related milestones or targets that do not contribute to strengthening the national health system; notes that an estimated 45 million people can use or be served by new or modernised health care facilities thanks to the RRF; urges the Commission to strengthen M&Ts related to preparedness and resilience in the health sector where possible when revising national RRPs and to report to the discharge authority;

272. Notes from Special Report 26/2023 that, despite the little time available to design the performance model of the RRF, the Commission and Member States managed to set up a monitoring system, including an IT-system, that allows implementation progress to be measured; welcomes the Commission’s commitment to work on the identified issues and implement the related recommendations;

273. Stresses that the mere completion of projects financed by the RRF funds does not guarantee a positive economic and social impact as well as quality and sustainability; notes the Court’s observations highlighting some of the drawbacks of using a performance-based framework, in particular trying to quantify results as M&Ts rather measure outputs; urges the Commission to apply the lessons learned and the Court’s observations, and to ensure that the design of future performance-based instruments also measure results and not only outputs;

274. Welcomes the considerable progress shown by the common indicators and across all policy pillars by December 2022, such as 22 million Megawatt (‘MWh’) of savings in annual energy consumption achieved, 1,43 million enterprises helped either through monetary or in-kind support, 4 million people trained, and support provided to 4 115 196 young people aged 15-29 years;

275. Recalls that on 15 December 2022, the Council adopted an Implementing Decision on the approval of the assessment of the RRP for Hungary based on the Commission’s positive evaluation; recalls that 27 ‘super milestones’ were added to the national RRP with remedial and audit and control measures; notes that on 7 December 2023, the Council adopted the Implementing Decision approving Hungary’s amended RRP, including a REPowerEU chapter, which allows Hungary to receive EUR 0,9 billion in pre-financing of the REPowerEU funds; regrets that the mentioned pre-financing is not subject to the ongoing procedure under the rule of law conditionality mechanism;

276. Notes that the RRF Scoreboard provides real-time information on the disbursements and progress made by Member States, as well as additional data, indicators and thematic analysis and welcomes the launch of the Union-wide interactive map showing RRF projects by geographical location and providing information on the state of play; is concerned, however, that the Court concluded that presented performance lacks transparency as regards inclusion of estimates and that aggregated information is not comparable, as well as that the information on the progress under the six pillars is misleading, i.e. when a measure is assigned to a primary and a secondary policy area belonging to the same pillar, the contribution of each measure is counted twice; highlights that transparency about limitations is of the utmost importance as it affects the (perceived) reliability of all presented information; calls on the Commission to immediately remedy the detected shortcomings and to proactively inform on the limitations of the data presented on the RRF Scoreboard;

277. Notes that many purely national projects are listed as cross-border projects as soon as they have energy saving or energy reducing elements; criticises the overestimation of the published number of cross-border projects as misleading;

278. Notes that the Court found that, concerning reporting on the common indicators, quality and underlying methodologies are not checked by national audit authorities in any visited Member State; is astonished that in a Member State, for expenditure under MFF heading 3, the indicated planting of trees did not exist when the Court made an on-the-spot check; notes that the Commission does not require supporting evidence or explanations on the reported data, except in cases where estimates are reported; notes that the Court concludes that this poses a risk to data reliability and comparability across member states; concludes that data reliability in the absence of audits might affect the performance information reported on common indicators to a larger extent than information based on milestones and targets; considers this, given the issues identified in the milestones and targets by the Court, a worrying situation and calls on the Commission to improve its assurance on the reporting on common indicators; notes the differing practices among audit authorities regarding the timing of the checks on the fulfilment of targets and reforms; believes that such checks should be better harmonised and should include a compulsory check on the reliability and accuracy of the data on milestones and targets before those milestones and targets are included in a payment request; points out the risks of an approach that uses mostly ex-post checks and calls on Member States to avoid such practices;

Transparency

279. Notes that the Ombudsman acknowledges that progress has been made in pro-active transparency, specifically through the RRF Scoreboard and the publication of the 100 largest recipients; notes however the points for improvement indicated by the Ombudsman and supports its recommendations to ensure greater transparency and accountability with regard to the RRF;

280. Notes that, following an explicit demand of the Parliament, the amended RRF Regulation requires Member States to publish information on the 100 final recipients receiving the highest amount of funding under the RRF; regrets the late publication of the lists by Member States and notes that all Member States have published the required list on the RRF Scoreboard by December 2023; observes a large variety of the size of the payments both across the Member States and within each country, which is explained by the heterogeneous nature of RRPs; expresses concern over the interpretation of the Commission of the concept of “final recipient” under the RRF, as often they are listed only at the ministry level, and that the descriptions are extremely vague, with many examples available in almost all lists provided by Member States; reiterates its demand that the list of 100 largest final recipients provides the factual natural person or entity that is the last in a chain of money transfers; is concerned that otherwise it will be problematic to measure the impact and guarantee visibility of the RRF funds to the citizens;

281. Recalls that transparency and accountability in the implementation of the Union budget are crucial and stresses, in this context, the need for further efforts by both the Commission and the Member States; welcomes the other initiatives undertaken by the Commission to increase transparency on the implementation of the RRF; notes that key documents governing the implementation, such as RRPs, Operational Arrangements, methodologies for assessment, and documents supporting or containing key decisions concerning Member States’ implementation are publicly available and easily accessible;

282. Is concerned about reports from the Court regarding difficulties in accessing RRF data to perform its duties; urges the Commission to ensure full access to the Court to the relevant databases of the Member States and the Union; urges the Commission to guarantee that data in the FENIX database are updated in a timely manner for the purposes of audit and control; underlines that data should be accurate and transmitted in a standardised format;

283. Recommends when implementing performance-based instruments in the future, that milestones and targets are clearly defined and linked in a timely manner to avoid accountability gaps and that the measuring of outputs and results is possible; recommends for performance based instruments to create a clear and precise verification mechanism from the beginning; notes that this is crucial in the context of transparency and accountability to the Union taxpayer;

284. Is concerned about transparency and accountability towards the public; urges that the Commission communicates with Member States about appropriate labelling of projects including reference that a project received Recovery and Resilience Funds; regrets following the Court’s annual report 2022 that even at the Commission level there is no clear oversight what specific projects RRF funds are supporting; underlines that the European taxpayer has the right to see what projects EU funds are supporting, where the projects are occurring, and what their added value is; calls on the Commission to increase visibility to insist on clear labelling of projects whether in the form of plaques for physical buildings or renovations, notifications on websites, announcements at conferences or trainings, or labelled on printed documents;

Recommendations

285. Supports the Court’s recommendations in its Annual Report as well as in related special reports, and welcomes that the Commission accepts a majority of them; calls on the Commission to implement them and to keep the discharge authority informed on the progress of the implementation;

286. Furthermore, calls on the Commission to:

(i) improve the ex-post monitoring of the continued satisfactory fulfilment of M&Ts, including in the area of the Rule of Law, and strictly apply the provisions of the RRF and the adopted guidelines to address concrete instances of reversal resorting to clear financial measures, including suspension of payments and recovery of funds when reversal of M&Ts occurs in accordance with the RRF Regulation and methodologies;