Changes from report parliamentary committee draft to plenary report

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170. Recalls that the Preparatory Action on Defence Research (PADR) was a precursor programme of the EDF with a budget of EUR 90 million that funded 18 research projects selected following calls for proposals in the years 2017 to 2019; notes with concern that the Court, in its Special Report 10/2023 ‘The Preparatory action on defence research’, observes that the Union still lacks a long-term strategy for the projects under the EDF, particularly in terms of impact, additional research, development, manufacturing, procurement, and other aspects; welcomes that the Commission has accepted all of the Court’s recommendations;

171. Notes the Court’s observations in its Special Report 10/2023 regarding the limited availability of human resources at the Commission and the subsequent risk for the EDF; notes that, as a result of security issues, the number of staff needed to manage defence projects is higher than for other projects; notes that the ever-growing number of proposals to evaluate and projects to manage puts considerable pressure on human resources and creates challenges in terms of recruiting qualified and suitably experienced staff;

Recommendations

172. Calls on the Commission to:

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Added(i) develop a longer-term strategy for the EDF, building on the experience with PADR and the Court’s recommendations;

(ii) secure the provision of adequate budget and skilled human resources to enhance defence cooperation and investment and to implement the EDF; and

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Added(iii) focus its controls on expenditure found by the Court to be highly affected by eligibility and procurement issues in 2022 and asks the Court to expand a sample of audited transactions to be able to provide an estimate of the error rate;

(iv) monitor the implementation of the outstanding OLAF’s financial recommendations;

Neighbourhood and the world

173. Notes that the budget for the programmes under MFF heading 6 ‘Neighbourhood and the world’ was EUR 14,5 billion (7,4 % of the Union budget) distributed as follows: 64,8 % for the Neighbourhood, Development and International Cooperation Instrument - Global Europe (NDICI-Global Europe), 16,8 % for Humanitarian Aid (HUMA), 14,4 % for Pre-Accession Assistance (IPA III) and 4 % for other actions and programmes; notes that as of 31 December 2022, the final adopted budget commitment appropriations were EUR 17 670,49 million and 99,79 % of them were implemented (EUR 17 632,52 million); notes further that the final adopted budget payment appropriations amounted to EUR 13 156,10 million and 99,19 % of them were implemented (EUR 13 049,50 million);

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Changed119.174. Notes that the Court examined a sample of 72 transactionstransactions, which is not representative enough of the spending under this MFF heading and, therefore, cannot provide an estimate of the error rate; notesconsidering that the Court’s audit results show that this is a high-risk area (34 out of 72 transactions audited, i.e. 47 %, were affected by errors);errors), invites the Court to provide a clear estimation of the error rate for this chapter; notes that the Court found 25 errors that had a financial impact on the Union budget, relating to ineligible costs, absence of supporting documents, public procurement and expenditure not incurred;incurred, areas that could point to risks of unreliable functioning of the national authorities’ control mechanism or even the administrative or political unwillingness to properly execute Union financial rules;

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175. Recalls that the Directorate-General for Neighbourhood and Enlargement Negotiations (DG NEAR) reports the risk at closure in its Annual Activity Reports (AARs) based on a study carried out by an external contractor, known as the residual error rate (RER), the aim of which is to estimate the rate of errors not detected by the internal control system and to conclude whether it is effective or not; notes the results of the 2022 RER study that the residual error rate in 2022 is 1 % and thus, below the materiality threshold of 2 %;

176. Notes that the Court identified limitations regarding the methodology used to determine the RER that may contribute to its underestimation, in particular, that the contractor can rely entirely on the results of previous control work in some cases and the fact that the estimation of the residual error rate for grants under direct management is not included in the calculation of DG NEAR’s overall RER; notes that the Commission affirms that it is not subject to such limitations because (i) the reliance on previous control work is subject to strict conditions and (ii) the global error rate includes grants under direct management;

177. Welcomes that the Commission implemented the Court’s recommendations to disclose the limitations of the RER study in DG NEAR’s AARs since 2021, to strengthen checks by identifying and preventing recurrent errors, and for DG NEAR to establish obligations for the RER study contractor to report to the Commission any suspected fraud against the Union budget detected during its work on the RER study;

178. Notes with concern that the AARs of DG NEAR and the Directorate-General for International Partnerships (DG INTPA) reported difficulties in the implementation of the new operational information system OPSYS, which was at times unstable, failing to meet expectations, and requiring frequent intervention from DG DIGIT support teams, leading to it being identified as a critical risk in DG NEAR’s risk assessment exercise;

179. Notes that the Court assessed awareness raising among Union delegation staff in the areas of fraud prevention, ethics and integrity; notes with concern that some members of staff interviewed by the Court had not been trained in fraud prevention in the past five years; notes that DG NEAR makes a series of tools and resources available to its staff to cover fraud-related issues, such as training, an anti-fraud network with focal points and guidance; notes the positive results of the surveys carried out by DG NEAR to monitor the level of fraud awareness of its staff, as well as that some areas for improvement were identified and an action plan is being implemented;

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Added180. Recognises the importance of NGOs in ensuring that the Union, as the largest donor of development aid in the world, continues to contribute to promoting stability and peace, overcoming poverty and advancing sustainable development; commends in particular the activity of NGOs in areas of conflict in ensuring that humanitarian aid reaches the civilian population in a rapid and effective manner; notes the control and audit, transparency and accountability requirements applicable to all Union funding and different stakeholders, but considers that there is always room for improvement, particularly by making the most of digitalisation;

Added181. Stresses the role of local NGOs and partners in service delivery and support to local communities; underlines the importance of enhancing their capacity to manage and implement actions financed by the Union and invites the Commission to facilitate adequate training towards this aim; is concerned about the continued difficulties faced by small local organisations to access Union funding; encourages the Commission to improve these funding procedures and to systematically prioritise local organisations in order to provide better capacity-building on the ground; highlights the efficacy of local ownership in project implementation in terms of prioritisation, allocation of resources and building local know-how;

Added182. Highlights the fact that the legitimacy and effectiveness of Union development cooperation hinges on the correct implementation of activities and their proper funding; recognises the work of the Commission in applying controls to make sure that transactions are made in a legitimate manner and that activities are implemented in accordance with the priorities set by the legislator; calls on the Commission to further improve controls in order to decrease the amount of transactional errors, to act upon ECA recommendations that have not been implemented and to redouble efforts to find eligible projects and to ensure a sufficient amount of payments under the current expenditure ceiling; welcomes the finding of the ECA report on the Union budget for 2022 that DG ECHO implemented ECA recommendation and established a procedure ensuring that partner organisations base their allocation of shared costs on expenditure actually incurred;

Added183. Calls on the Commission to send clear signals to those candidate countries in which a backlash against rule of law standards - including limitations on the freedom of expression, the freedom of press, women’s and minority rights, the harassment of NGOs and human rights defenders - is jeopardising or delaying their accession to the Union; invites the Commission to examine the efficiency of the funds spent on the improvement of the state of the Rule of Law in the accession countries and report back to the AFET and CONT committees;

184. Welcomes the implementation by the Commission of several mechanisms to mitigate risks and safeguard the proper use of Union funds spent in unstable or conflict zones; notes that the Commission systematically assesses corruption risks in partner countries and uses an array of tools to mitigate them, at the same time applies conditions and performance indicators to promote fiscal transparency and accountability through its budget support; welcomes the fact that, according to World Bank data, countries benefiting from Union budget support have improved in the control of corruption over time;

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Changed126.185. Notes with concern that the Court, in its Special Report 14/2023 “Programming the Neighbourhood, Development and International Cooperation Instrument – Global Europe” found that, although the Commission and the EEAS had merged funding into a single instrument, the NDICI-Global Europe Instrument, which covers more than 70 % of the Union funding allocated for external action in the 2021-2027 financing period, they followed two different fund allocation methodologies for Neighbourhood and non-Neighbourhood countries, and that the multiannual indicative programmes did not ensure that the selected sectors of intervention were those in which Union funding could achieve ana high impact;

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Removed127. Notes that, following the despicable terrorist attacks carried out by Hamas against Israel on 7 October 2023, the Commission announced on 9 October 2023 its decision to review the Union’s assistance for Palestine; welcomes that the review, finalised on 21 November 2023, has shown that the Commission has ex-ante and ex-post controls, and a system of safeguards in placethat work well and that no evidence has been found to date that money has been diverted for unintended purposes; highlights, furthermore, that according to the Commission’s reply, the current rules in tender procedures and calls for proposals “make the participation of entities, individuals or groups affiliated with terrorist organisations categorically incompatible with any Union funding”;

Added186. Emphasises the significance of meeting all spending and program-related targets outlined in the NDICI-GE instrument and calls for comprehensive information to be provided on the progress achieved; expresses regret over the significant shortfalls in reaching the Instrument's 30% climate target, in contributing to the 10% biodiversity target in the MFF for 2026 and 2027, and in ensuring that the Union's global financial commitments under the UN framework are fulfilled, in particular as regards the contribution to the Loss and Damage Fund; highlights the increasing pressure climate change puts on food production and access, particularly in vulnerable regions, impacting food security and nutrition; reminds that biodiversity is key in combating climate change, and its loss undermines progress on approximately 80% of the assessed targets for the SDGs; calls on the Commission for a detailed plan outlining how it intends to meet spending and gender targets by the end of the MFF;

Added187. Urges the Commission to increase transparency and accountabililty of the programming and implementation of Home Affairs funds in third countries, and NDICI funding, such as in countries like Tunisia and Libya; calls the Commission to generate a publicly available overview of all migration related spending in third countries, and urges for ex ante human rights impact assesments for migration related spending in third countries, and to share these assesments with the Parliament where required by rules;

Added188. Stresses that, following the despicable terrorist attacks carried out by Hamas against Israel on 7 October 2023, the Commission announced on 9 October 2023 its decision to review the Union’s assistance for Palestine; notes that the review, finalised on 21 November 2023, has shown that the Commission applies adequate ex-ante and ex-post controls, that the safeguards in place are effective and that no evidence has been found to date that money has been diverted for unintended purposes; insists on the need for European funds to go only to beneficiaries that share Union values regarding Rule of law, democracy and human rights; recalls in this regard the Parliament’s report 2023/2122 INI adopted the 17 January 2024 on transparency and accountability of non-governmental organisations funded from the Union budget calling for a reinforcement of the Commission control mechanisms and the development of a harmonised monitoring system aiming to track Union funds up to final beneficiaries;

Added189. Underlines that the Union budget must continue to provide support to build peace and stability in the Middle East region, to combat hate and fundamentalism and to promote human rights; awaits the review the Commission is conducting on the use of Union funds; underlines the interlinkages between stability and sustainable development, particularly in fragile countries and regions;

Added190. Stresses that Union aid should under no circumstances - directly or indirectly - be financing terrorism, hence it should not support any entity connected to Hamas or any other terror organisation; stresses that the Union should help the Palestinian civilian population and should foster peace in the region; asks the Commission to keep Parliament informed about new developments and efforts undertaken to provide direct support to Palestinian civilians and refugees and to prevent terrorist from diverting funds;

Added191. Is concerned by the serious allegations made by Israel that 12 employees of the United Nations Relief and Works Agency for Palestine Refugees (UNRWA) might have participated in the despicable terrorist attacks in October 2023; notes that the Agency immediately terminated their contracts and welcomes the launch of an UN investigation; notes that the allegations involve 12 out of 13 000 local members of staff of UNRWA in Gaza alone, who are themselves victims of the ongoing humanitarian tragedy while playing a critical role in distributing food, water, and medicine; notes that UNRWA has developed a specific framework to ensure the neutrality and independence of its operations in line with the UN standards, which includes vetting and due diligence measures, and shares the list of all its staff with the host countries, including Israel, on an annual basis; calls for full transparency regarding the conclusions of the UN investigation;

Added192. Expresses deep concern regarding the recent announcement by some countries of suspension of funding to the UN Relief and Works Agency for Palestine Refugees (UNRWA) pending the outcome of the investigation; calls for increased and sustained funding in recognition of the agency's crucial role in the humanitarian response in Gaza, and to ensure the uninterrupted delivery of vital services to a vulnerable population in the Middle East; recalls the essential role of humanitarian aid given to the Palestinian refugees throughout the Middle East;

Added193. Stresses the importance of education and the critical need to denounce and eradicate all manifestations of hate speech and violent actions on both sides; underscores that the suspension of funding should not occur arbitrarily or without transparent and independent evidence of misuse; commends UNRWA for its indispensable humanitarian endeavours in Gaza and its pivotal role in delivering quality education, with a specific emphasis on fostering a human rights culture, even in challenging times;

Added194. Recalls that the findings of the study commissioned by the Commission to Georg Eckert Institute on the Palestinian Textbooks revealed a complex picture where the textbooks (i) adhere to UNESCO standards and adopt criteria that are prominent in international education discourse, including a strong focus on human rights, (ii) express a narrative of resistance within the context of the Israeli-Palestinian conflict and (iii) display an antagonism towards Israel; notes that the Union does not fund the Palestinian Textbooks and that neither are they the responsibility of UNRWA, which works to deliver quality education with an emphasis on fostering a human rights culture, even in challenging times; underlines that education and pupils’ access to peaceful and unbiased textbooks is essential; stresses Parliament’s position that textbooks drafted by Union funds, must be made conditional on full compliance with UNESCO standards of peace and tolerance; as already was decided upon by the Parliament in its 2023 recommendation on relations with the Palestinian Authority, and as repeatedly requested in its latest adopted resolutions on Prospects for the Two-State Solution;

Added195. Recalls the Union strategy to promote and ensure quality education for children across the world, especially when specific Union financial support is provided; condemns the problematic and hateful contents encouraging violence, spreading antisemitism and inciting hatred in Palestinian school textbooks drafted by Union-funded civil servants as well as in supplementary educational materials developed by UNRWA staff and taught in its schools; reaffirms in the context of the despicable terrorist attacks carried out by Hamas on 7 October 2023, that education to hatred have direct and dramatic consequences on the security of Israelis as well as on the perspectives of a better future for young Palestinians; therefore requests the Commission to closely scrutinise that no funds are allocated or linked directly or indirectly to the use of such educational materials and that the Palestinian Authority modifies the full curriculum expeditiously as repeatedly requested in the discharge decisions in respect of the implementation of the general budget of the Union for the financial years 2016, 2018, 2019, 2020 and 2021; stresses that financial support from the Union to the Palestinian Authority in the area of education shall be provided on the condition of a national Palestinian curriculum, with reference textbooks and educational material, that is free from anti-Semitic contents and incitement to violence and complies with quality education; calls in that regard the Commission and Member States to provide expertise, share knowledge, guidance and technical support to empower Palestinian teachers, trainers and experts towards the implementation of education that fully complies with UNESCO standards;

Added196. Highlights that according to the answers of commissioner for Neighbourhood and Enlargement for the 2021 Discharge Report the ongoing development portfolio for the Palestinians, under the Neighbourhood, Development and International Cooperation Instrument (NDICI) Regulation, is EUR 681 million between 2021 and 2023, for the Palestinian Authority, UNRWA and development projects in the West Bank and Gaza; notes that about one third of the funding benefitted projects in Gaza and two third in the West Bank; underlines that the Union provided EUR 271 million to UNRWA for the provision of social services to the Palestinian refugees and in addition, the Union provided support to the Palestinian Authority’s recurrent expenditures, mainly the salaries and pensions of civil servants, the social allowances paid through the cash transfer programme and part of the costs of referrals to the East Jerusalem Hospitals through the PEGASE mechanism;

Added197. Underlines that the ECA AR 2022 highlights an example of ineligible expenditure included in the cost claim concerning a project in Palestine on the sustainable use of natural resources to support Palestine’s transition to a green economy with an incentive component that was intended to support SMEs in the form of grants for ‘green’ projects in the areas of energy efficiency, renewable energy and pollution abatement; Underlines that EUR 190.500 had been approved and paid to a development agency, with the task to monitor the implementation of the project by the final beneficiary, but the project was not realised;

Added198. Is concerned about the destruction and confiscation of Union-funded projects in the West Bank and notes that in 2022, 101 structures funded by the Union or Member States were demolished or seized by Israel with a value at EUR 337 019, representing the third highest financial injury since 2016; recalls that representatives of Union institutions, concerned Member States and other donors have requested on several occasions the return or compensation for Union-funded assets demolished, dismantled or confiscated; recalls the position of the Council expressing its commitment to ensure that all agreements between Israel and the Union must unequivocally and explicitly indicate the inapplicability to the territories occupied by Israel since 1967, as well as to continue the effective implementation of existing Union law and bilateral arrangements applicable to settlement products;

199. Notes that, in 2022, DG NEAR paid EUR 910,8 million in bilateral assistance to Ukraine, out of which EUR 698 million was paid through Budget Support; notes that close to EUR 200 million of ongoing projects were successfully repurposed to reach the beneficiaries before humanitarian partners could mobilise their aid programmes; notes that the constraints on adequately monitoring projects in Ukraine lead to a reservation in the 2022 AAR of DG NEAR and that corrective actions are being implemented, such as monitoring progress on project implementation through desk reviews, remote solutions and using a service provider;

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Added200. Notes the Reform Growth Plan for the Western Balkans which was proposed by the Commission to further support convergence efforts in the region; stresses the need for a more clarity on the use of different financial instruments toward the region, primarily among IPA III, Economic and Investment Plan, and the Reform Growth Plan; urges the Commission to provide the sub-national level to have more direct access to Union funds;

Added201. Welcomes that the Ukraine Facility lays out provisions to ensure effective controls; recalls that on 7 April 2022, the Parliament called for the confiscation of Russian assets owned by Russian individuals and entities, frozen as a result of Union restrictive measures, in order to finance Ukraine’s reconstruction;

Added202. Welcomes the Global Gateway strategy as a concerted Union response to global challenges bringing together public and private investment; notes that 2022 was the first full year of the implementation of the Global Gateway strategy; stresses the need for more transparency, accountability and regular assessments of the Global Gateway implementation as well as for enhanced Parliament’s involvement in respect of its democratic scrutiny role;

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203. Welcomes that OLAF signed administrative cooperation arrangements with both the Prosecutor General’s Office of Ukraine on 11 February 2021 and the State Audit Service of Ukraine in March 2023; notes that Ukraine is soon expected to be associated with the Union Anti-Fraud Programme (UAFP) and welcomes that OLAF is providing support to the Ukrainian authorities in their national anti-fraud efforts and strategies; welcomes that the EPPO signed working arrangements with the National Anti-Corruption Bureau of Ukraine, in July 2023, aiming to facilitate the cooperation in investigating corruption cases, and with the Ukrainian Prosecutor General’s Office, in March 2022, to protect the financial interest of the Union and Ukraine through effective investigation and prosecution;

Recommendations

204. Calls on the Commission to:

(i) as regards the OPSYS application system, enhance the quality of the new software, stabilise the application and improve interfaces between the different OPSYS modules, and allocate resources needed to enhance its maturity/robustness;

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Changed(ii) continue ensuring that all contracts involving Union funding fully respect applicable Union values, Union legislation, including accountability, transparency and protection of Union funds; make the participation of entities, individuals or groups affiliated with terrorist organisations categorically incompatible withensure anythat Unionstrict funding;monitoring and ensureex thatante strictand monitoringex andpost control mechanisms make sure that all individuals involved in Union funded actions exclusively pursue the Union objectives and activities approved for Union funding;funding, request, where necessary, the restitution, or compensation for Union-funded assets that have been demolished, dismantled or confiscated;

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Removed(iii) put in place adequate control measures in unstable or conflict zones to ensure the proper control of spending of Union funds;

Added(iii) to intensify its communication with international organizations in order to provide the ECA with complete, unlimited and timely access to documents necessary to carry out its task in accordance with the TFEU, and not just in read-only format;

Added(iv) put in place adequate ex ante and ex post control measures in unstable or conflict zones to ensure the proper control of spending of Union funds and ways to recover the Union funds;

Added(v) ensures the proper, timely and thorough audit, including with the inclusion of the EPPO and European Court of Auditors, of all funds provided under the Ukraine Facility and the upcoming Western Balkans facility;

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European public administration

Human Resources

205. Notes that the budget for the programmes under MFF Heading 7 ‘European Public Administration’ was EUR 11,6 billion (5,9 % of the Union budget), which comprises the expenditure of the Union institutions and bodies on human resources and pensions (about 70 % of the total), buildings, equipment, energy, communications and information technology; notes that of the total amount, 58,6 % is spent by the Commission (EUR 6,7 billion); notes that, as of 31 December 2022, the final adopted budget commitment appropriations for the European Commission were EUR 6 298,13 million (99,84 % of them were implemented, i.e. EUR 6 288,14 million), as well as that the final adopted budget payment appropriations amounted to EUR 6 298,22 million (94,66 % of them were implemented, i.e. EUR 5 961,72 million);

206. Notes that the Court examined a sample of 60 transactions covering the full range of spending under the MFF Heading 7 involving all the Union institutions and bodies; notes that the Court also examined the regularity information given in the AARs of all the institutions and bodies, including those of the Commission’s directorates-general and offices primarily responsible for administrative expenditure, and then included in the Commission’s AMPR; notes with satisfaction that the Court estimates that the level of error in the MFF Heading 7 was not material and notes that there are no new recommendations addressed to the Commission;

207. Notes that the Commission adopted its new Human Resources strategy (‘HR Strategy’) in April 2022, which aims to address emerging needs after the COVID-19 crisis and focuses on achieving an attractive workplace, faster and more agile selection and recruitment, and a flexible and rewarding career for all staff; notes that the document is a set of intentions for change and improvement that should gradually be implemented, and that part of its content shall be first negotiated in social dialogue with staff representatives;

208. Notes that the Commission has increasingly recruited contractual or temporary agents on permanent posts to carry out new tasks stemming from rapidly evolving priorities, in response to special or urgent situations and even to compensate geographically unbalanced recruitments; recalls its concerns about the loss of knowledge for the institutions, as well as the negative impact on perspective and job security of the members of staff concerned; highlights that recruiting contractual or temporary agents is not a sustainable solution to the decreasing and geographically unbalanced applications of those applying for Union competitions and, most importantly, to the long-identified and complex issue of the Union’s decrease of attractiveness as an employer;

209. Notes with satisfaction that the percentage of women in management functions has risen considerably since the beginning of the mandate: in July 2023, the share of women in management functions was 45,2 % at senior management level (up nearly 9 percentage points since the beginning of the mandate) and 47,5 % at middle management level (up 6 percentage points);

210. Acknowledges that, in order to ensure recruitment on the broadest possible geographical basis it is necessary to address the causes of the under-representation from the point of initial recruitment; welcomes that, to strengthen geographical balance across different categories of Commission staff, the Directorate-General for Human Resources and Security (DG HR) met all Member States to discuss their representation and finalised all joint action plans taking into account the specificities of each Member State to address the possible causes of under-representation jointly;

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Added211. Notes the adoption and implementation of an action plan to increase the attractiveness of careers in Luxembourg; notes the Commission’s considerations against introducing a correction coefficient for Luxembourg at this stage in its report assessing the evolution of purchasing power of remuneration and pensions of Union officials (COM(2022) 180 final); recalls its reiterated requests to the Commission to find ways to mitigate the growing problem of the purchase power disparity suffered by the members of staff posted to Luxembourg, which is mainly due to the cost of living;

212. Recalls the Court’s audit of the activities of the European Personnel Selection Office (EPSO) and the observations regarding its efficacy and efficiency; notes that, in 2022-2023, EPSO introduced remotely proctored testing and deplores that this system is now being reappraised due to the numerous technical difficulties experienced by many candidates; regrets the inconvenience caused to candidates, the direct budgetary costs of the suspension of the external competitions, and the additional effort made by the Commission’s recruiting services to find an adequate replacement;

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Added213. Recalls the Court’s conclusion in its Special Report 13/2019 that “any unethical behaviour by staff and Members of EU institutions and bodies is unacceptable and, even if it is only alleged, attracts high levels of public interest and reduces trust in the EU”; regrets the two cases of potential conflicts of interests involving high-ranked officials in DG MOVE for missions and DG NEAR for ownership reported by the press in 2022; notes the Commission implements effective internal control system in matters of ethics management according to the Court in its 2019 report and the European Ombudsman in its decision on the revolving doors inquiry; points out that unethical behaviour also has a budgetary cost for the institution concerned and reiterates its position and expectations of the Union's Ethics Body;