Changes from report parliamentary committee draft to plenary report

9. MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

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with observations forming an integral part of the decisions on discharge in respect of the implementation of the general budget of the European Union for the financial year 2022, Section III – Commission and executive agencies

(2023/2129(DEC))

The European Parliament,

– having regard to its decision on discharge in respect of the implementation of the general budget of the European Union for the financial year 2022, Section III – Commission,

– having regard to its decisions on discharge in respect of the implementation of the budgets of the executive agencies for the financial year 2022,

– having regard to Rule 99 of and Annex V to its Rules of Procedure,

– having regard to the opinions of the Committee on Foreign Affairs, the Committee on Development, the Committee on Employment and Social Affairs, the Committee on the Environment, Public Health and Food Safety, the Committee on Transport and Tourism, the Committee on Regional Development, the Committee on Culture and Education, the Committee on Civil Liberties, Justice and Home Affairs, the Committee on Women's Rights and Gender Equality,

– having regard to the letter from the Committee on Agriculture and Rural Development,

Changed– having regard to the report of the Committee on Budgetary Control (A90000/2024),(A9-0139/2024),

– having regard to the inter-institutional agreement of 16 December 2020 on cooperation on budgetary matters and sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources;

Political priorities

1. Recalls its strong commitment to the fundamental principles and values enshrined in the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU), including sound financial management as set out in Article 317 of the TFEU and the combating of fraud and protecting the financial interests of the Union as set out in Article 325 of the TFEU;

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Changed2. Highlights the importance of the Union budget for achieving the Union’s political priorities, as well as its role in assisting Member States in unforeseen circumstances such as the COVID-19 pandemic, international conflicts or crisiscrises and their consequences; notes in this regard the continuing relevance of investments and support from the Union budget for reducing disparities between Member States and regions, for promoting economic growth and employment, for combating poverty and social exclusion, and thus for improving the daily life of Union citizens;citizens and economic impact within the Union; urges the Commission not to water down the pace and ambition needed to achieve the climate-related goals set in the European Green Deal and stresses the need for increasing the necessary investments for this purpose; stresses the fact that in 2022 the Union has fallen muchshort of the level of efficiency needed to achieve the climate-related goals set for 2030, 2040 and 2050;

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Changed3. Stresses that the sound and timely implementation of the budget contributes to addressing more efficiently and effectively the needs and challenges in different policy areas;areas warnsmore efficiently and effectively; stresses that the simultaneous implementation of themultiple budgetinstruments with different rules under time constraints, in addition to the pressure of the final closure of the 2014 - 2020 MFF, may lead to a delay in implementation and an increase in errorserrors, irregularities and irregularities;fraud; recalls the role of the Commission as guardian of the treaties to protect the financial interests of the Union;

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Changed4. Stresses the contribution of the Recovery and Resilience Facility (RRF)'s contribution(RRF) toin supportsupporting Member States in recovering from the economic and social consequences of the COVID-19 pandemic and creating a resilient Union that can shoulder the challenges of the future; notes the contribution of the RRF and RePowerEU in addressing the energy-related challenges caused by the Russia’s war of agressionaggression against Ukraine; regrets that milestones have not been better defined and calls on the Commission andto themonitor Member StatesStates' toimplementation implementof the associated actions swiftly in accordance with the agreed milestones and targets;

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Changed5. Highlights the crucial role the Union budget played in 2022 in addressing the fall-outconsequences of Russia’s war of aggression against UkraineUkraine, namely to secure food supply chains, address energy-related challenges, support Member States in welcoming Ukrainian refugees, and provide assistance to Ukraine in caring for its citizens; notes that this has put pressure on the budget and that all available flexibility measures have been used; notes in that regard the proposals madeadoption byof the Commissionmid-term inreview of the Multi-annual Financial Framework (MFF) review to re-orient fundsthat andre-orients tofunds, raiseraises fresh funds,funds; andstresses callsthe onimportance the CouncilCommission topresents swiftlya moveclear forwardand withrealistic theroadmap adoptionto ofrepay theEU proposals;debt;

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Removed6. Recalls the importance of carrying out an ex-post evaluation of financial programmes created to respond to a crisis concerning their effectiveness, efficiency, relevance, coherence and Union added value;

Added6. Recalls the importance of a strict application of the financial rules of the Union in all programmes and on all beneficiaries, in order to avoid all forms of fraud, conflicts of interest, corruption, double funding and money laundering; reminds in this framework of the key role played by the whole Union’s anti-fraud architecture and expresses some concerns about the refusal of some Member States to cooperate with one of its elements, notably the EPPO;

Removed7. Emphasises the role of the European anti-fraud office (OLAF), the European Public Prosecutor's Office (EPPO), the European Union Agency for Criminal Justice Cooperation (Eurojust) and the European Union Agency for Law Enforcement Cooperation (Europol) in the fight against corruption; calls for the capacities of the EPPO and OLAF, as well as cooperation between them, to be strengthened further; calls for common anti-corruption rules applicable to all staff of Union bodies;

Added7. Recalls the importance of carrying out ex-post and mid-term evaluations of financial programmes created to respond to crises, concerning their relevance, coherence and European added value on top of compliance and regularity, efficiency, effectiveness, performance and long-term economic impact; notes that decisions related to the COVID-19 response instruments were made under enormous time pressure, although such instruments will be implemented until 2026; stresses that a quick response should not be to the detriment of proper control over expenditure and calls, therefore, on the Commission to draw lessons from such instruments;

Removed8. Welcomes the measures undertaken by the Commission in 2022 and 2023 under the Rule of Law conditionality mechanism for the protection of the Union budget and asks the Commission to continue to be vigilant and proactive in the current and future cases when the lack of respect for Union values and the Rule of Law affect or threaten to affect the Union’s financial interests;

Added8. Recalls the importance of the RRF in facing the economic downturn following the COVID-19 pandemic, reminds that the RRF delivery model puts much, lighter requirements on the Commission, and reduces the control burden from the Commission towards the Member States;

Removed9. Welcomes the agreement reached in the negotiations on the revised Union financial rules in December 2023; welcomes, in particular, the enhancements related to tracking Union funds through digital tools that will bolster the protection of the Union Financial Interests, the reference to the Rule of Law conditionality mechanism and Union values, the introduction of the principle of social conditionality, as well as the opportunity to streamline support for small and medium-sized enterprises and individual applicants by the introduction of very low-value grants;

Added9. Underlines the risk of conflicts of interest in cases where actors involved in the implementation of the Union budget, at any level, might be compromised for reasons beyond economic interest, particularly family, emotional life, political or national affinity; notes the highly fragmented legal framework across Member States and regions concerning conflicts of interest and welcomes the Commission’s guidance in promoting a uniform interpretation and application; supports the Court’s observation in its Special Report 6/2023 that “data mining, by comparing information from different sources, has the potential to help detect possible conflicts of interest”;

Removed10. Reminds the Commission that all legislative proposals that have a significant economic, social and environmental impact have to be accompanied by solid and thorough impact assessments, including their impact on gender-related issues, which will ensure that gender-mainstreaming in the Union Budget is successful;

Added10. Emphasises the role of the European anti-fraud office (OLAF), the European Public Prosecutor's Office (EPPO), the European Union Agency for Criminal Justice Cooperation (Eurojust) and the European Union Agency for Law Enforcement Cooperation (Europol) in the fight against corruption; calls for the capacities of the EPPO and OLAF, as well as cooperation between them, to be strengthened further and their competences to be better defined; appreciates the efforts of the EPPO in the investigation and prosecution of fraud and other criminal offences affecting the financial interests of the Union and highlights the importance of its full independence and impartiality for the effective exercise of its functions; recalls the importance of providing the EPPO and OLAF with sufficient financial and human resources; calls for common anti-corruption rules applicable to all staff of Union bodies and calls to make the inter-institutional Transparency Register mandatory for all EU Institutions and Agencies, to ensure that the independence which is required of certain EU institutions is not affected; reiterates the need to step up the efforts in the fight against fraud both at Union and Member State level, in close cooperation with the EPPO and OLAF;

Removed11. Is concerned that the late adoption of several sectoral regulations governing different Union policies, such as the Cohesion policy, resulted in a significant delay in the implementation of the 2021-2027 programming period; urges the Commission and the Member States once moreto take all the necessary measures to continue to speed up the implementation of the policies on the ground, while keeping a high focus on compliance with the rules, achievement of results and protection of the financial interests of the Union; highlights in this context the importance of avoiding decommitments which in turn would decrease the impact of the Union budget;

Added11. Stresses the deterioration of the Rule of Law in some Member States and emphasises the major importance of the Rule of Law Conditionality Mechanism for the protection of the Union budget; calls on the Commission to make full use of the tools available to address the clear risk of a serious breach of Union values and to promptly invoke the Conditionality Regulation when breaches of the Rule of Law risk impacting the Union's financial interests; supports the blocking of Union funds as long as the conditions are not entirely fulfilled and not giving in to blackmail; urges the Commission to guarantee a unitary, comprehensive and integrated approach across different funds and legislative instruments and to avoid a technocratic and contradictory approach across various financing instruments;

Added12. Notes the measures undertaken by the Commission in 2022 under the Conditionality Regulation, but considers them to be introduced with considerable delays and following long-lasting political considerations; asks the Commission to conduct thorough assessments and ensure adequate control mechanisms to guarantee the sound financial management and the protection of the Union budget in current and future cases of lack of respect for Union values and the Rule of Law affect or threaten to affect the Union’s financial interests;

Added13. Welcomes the agreement reached in the negotiations on the revised Union financial rules in December 2023; welcomes, in particular, the enhancements related to tracking Union funds through digital tools and interoperability that will bolster the protection of the Union Financial Interests, the targeted extension of the Early Detection and Exclusion System (EDES) to shared management post MFF 2027, the reference to the Rule of Law conditionality mechanism and Union values as enshrined in Article 2 TEU, as well as the opportunity to streamline support for small and medium-sized enterprises and individual applicants by the introduction of very low-value grants;

Added14. Reminds the Commission that all legislative proposals that have a significant economic, social and environmental impact have to be accompanied by solid and thorough impact assessments, including their impact on the cost of living for Union citizens, the level of bureaucratisation for beneficiaries and administration as well as gender-related issues, to guarantee a fair distribution of the Union budget.; stresses that this is part of the Commission’s better regulation agenda; underlines that the Commission should conduct impact assessments in a completely neutral and impartial way; furthermore, expects the Commission to improve the costs-and-benefits analysis of the concerned options by enhancing the participation rate of different stakeholders with different views in open public consultations;

Added15. Recalls that spending areas subject to more complex rules and eligibility criteria are at higher risk of errors and create an excessive administrative burden for recipients of support, specially newcomers; reiterates the need to implement simplification in Union spending programmes to the extent possible, striking a balance with robust checks and controls; stresses that the digitisation of the management, reporting and auditing of Union funds is essential to improve access for potential recipients in an equitable way and to make the management of funds more efficient and transparent for all citizens;

Added16. Is concerned that the late adoption of several sectoral regulations governing different Union policies, such as the Cohesion policy, resulted in a significant delay in the implementation of the 2021-2027 programming period; urges the Commission and the Member States once more to take all necessary measures to continue to speed up the implementation of the policies on the ground with a better geographical balance, while keeping a high focus on compliance with the rules, quality of projects, achievement of results and protection of the financial interests of the Union; highlights in this context the risk that outstanding commitments bear on the Union budget, possibly generating significant decommitments which in turn would decrease its impact; calls on the Commission to indicate to the discharge authority which measures it intends to take to address this situation;

Added17. Calls on the Commission to take initiatives, such as technical assistance, to increase the absorption rate in the Member States on a permanent basis; calls on the Commission to closely monitor the progress of implementation in Member States, in particular in cases of under-implementation and low absorption rates and to deliver a country-analysis to the discharge authority, identifying the recurrent problems, as well as the measures taken to optimise the situation;

Added18. Stresses the importance of Union cohesion policy for economic and territorial convergence and development in the regions of the Union, as well as for supporting the implementation of the European Pillar of Social Rights; highlights the synergies of the cohesion funds in coordination with other Union programmes, particularly the RRF, to maximise the impact and efficiency of public spending;

CHAPTER I - Multi-annual Financial Framework (MFF)

The European Court of Auditors' statement of assurance and budgetary and financial management

Reliability of the accounts

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Changed12.19. Welcomes that the Court finds in its Annual report on the implementation of the budget for the financial year 2022, , that the consolidated accounts of the European Union for the year 2022 are reliable; notes with satisfaction that the Court has given a clean opinion on the reliability of the accounts every year since 2007;

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20. Notes that at 31 December 2022, total liabilities amounted to EUR 577,2 billion, compared with EUR 445,9 billion of total assets; notes that the difference of EUR 131,3 billion represented the (negative) net assets, comprising reserves and the portion of expenses already incurred by the Union up to 31 December 2022 that must be funded by future budgets;

21. Notes that at the end of 2022, the estimated value of incurred but not yet claimed eligible expenses due to beneficiaries, recorded as accrued expenses, was EUR 148,7 billion (2021: 129,9 billion), of which EUR 22,6 billion is related to accrued RRF expenditure;

22. Notes that after the end of the transition period following the UK’s withdrawal process, the Commission estimated that, at the balance sheet date, the Union accounts showed a net receivable due from the UK of EUR 23,9 billion (2021: 41,8 billion), of which it is estimated that EUR 9,1 billion will be paid in the 12 months following the reporting date;

23. Notes that the Court has assessed the impact of Russia's unprovoked and unjustified war of aggression against Ukraine on the Union accounts; welcomes the Court’s conclusion that this impact has been appropriately accounted for and disclosed in the consolidated annual accounts;

24. Welcomes the Court’s conclusion that the assets, liabilities, revenue and expenses, including those related to the European Recovery Instrument 'NextGenerationEU' (‘NGEU’), are presented fairly in the consolidated annual accounts;

Legality and regularity of Union revenue and expenditure

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Changed18.25. WelcomesRegrets the Court’sadverse conclusionopinion thaton the revenuelegality isand freeregularity fromof materialthe errorUnion andbudget thatexpenditure issued by the systemsCourt for managing the revenuefourth examinedyear byin thea Courtrow; wereunderlines generallythe effective;importance regretsof reinforcing the adversecontrol opinionmechanisms onof the legalityCommission and regularityMember States which are considered unreliable by the Court, therefore compromising the reliability of the UnionAnnual budgetManagement expenditureand issuedPerformance byReport (AMPR); notes the CourtCourt’s forconclusion that the fourthrevenue yearis infree afrom row;material error and that the managing systems examined by the Court were generally effective;

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Changed19.26. NotesIs concerned that the Court estimates the level of error for the 2022 expenditure to be 4,2 % (3 % in 2021),%, which is abovemore than double the materiality threshold; notes thethat Commission’sthis confidenceis thata thefurther riskdeterioration atcompared paymentto isthe estimatedprevious attwo 1.9years (3,0 % forin 20222021 (similarand to2.7 2020,% 2021in and2020); 2022),notes iswith representativeconcern ofthat the level ofCourt errordetected atsubstantial theissues timein ofreimbursement-based payment;expenditure, noteswhich thataccounts thefor Commission’s66 estimation% of the risk at closure,Court’s afteraudit ex-postpopulation, controlswhere andthe correctionsestimated havelevel beenof applied,error is 0.96 %; notes the divergence betweenthat the Court’s overall error rateeffects andof the Commission’s risk at payment, which iserrors observedfound forby the overallCourt Unionare budgetestimated expenditureas inboth 2022,material althoughand notpervasive into allthe expenditureyear's areas;accepted expenditure;

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Removed20. Underlines that the general estimate of the level of error in the Union budget, as presented in the Court’s Statement of Assurance, is an estimate of the money that should not have been paid out because it was not used in accordance with the applicable rules and regulations, and not a measure of fraud or of inefficiency or waste;

Added27. Notes that the Commission´s own estimation of the risk at payment is 1.9 % for 2022 (similar to 2020 and 2021), which is below the materiality threshold; notes that the Commission’s estimation of the risk at closure, after ex-post controls and corrections have been applied, is 0,9 %; notes the divergence between the Court’s overall error rate and the Commission’s risk at payment, which is observed for the overall Union budget expenditure in 2022, although not in all expenditure areas, notes that this is particularly evident in headings 1 and 2 as in the past; and remarks the fact that the Commission’s estimates for risk at payment are consistently in the lower range or below the statistical estimations of the Court; welcomes the Court’s estimate of the level of error as important indicator for the existing risks; calls for a common understanding to be found to avoid such divergence between the Court’s overall error rate and the Commission’s risk at payment;

Removed21. Recalls that the audit approach and methodology of the Court are based on international audit standards that require the testing of a random, representative sample of transactions that result in an estimate of the error rate; recalls that the Court differentiates between low-risk expenditure, i.e. entitlement-based payments under simplified rules, and high-risk expenditure, i.e. reimbursement-based payments subject to complex rules; notes that for the 2022 expenditure, the Court has selected 66 % of its audit population from the high-risk expenditure (63,2 % in 2021), amounting to EUR 110,1 billion, and 34 % from the low-risk expenditure, amounting to EUR 56,7 billion; notes that the Court’s estimated error rate for 2022 (4,2 %) is mainly driven by ‘Cohesion, resilience and values’ (2,5 % of the overall error rate), ‘Natural resources and environment (0,8 %), ‘Neighbourhood and the world’ (0,4 %), and ‘Single market, innovation and digital’ (0,3 %), all of them considered high-risk expenditure areas by the Court; notes that the Commission’s risk at payment for 2022 is 1,9 %;

Added28. Reiterates the concerns about the Court observation that the Commission’s risk assessment is likely to underestimate the level of risk in several areas; is also concerned by recurrent weaknesses identified by the Court on Member States’ ex post checks in heading 2, limiting the reliance that can be placed on their work;

Removed22. Recalls that the Court’s audit efforts are focused only on the year under review and cannot take account of the lifecycle of Union programmes and funds, as well as corrections and recoveries after the end of the year under review;

Added29. Underlines that the general estimate of the level of error in the Union budget, as presented in the Court’s Statement of Assurance, is an estimate of the money that should not have been paid out because it was not used in accordance with the applicable rules and regulations, and not an indicator of fraud or corruption; regrets that the general estimate of the level of error in the Union budget might give each year a negative impression to citizens;

Removed23. Recalls that Union spending programmes are multiannual by design and their related control systems and management cycles also cover multiple years; recalls that the Commission’s estimates of the risk at closure have a multiannual perspective that takes account of corrections and recoveries over several years; notes that the Commission’s approach is based on hundreds of thousands of tests as defined in control strategies, performed during substantive control and audit work which is primarily aimed at checking compliance with Union rules and regulations, applicable to given programmes, to ultimately establish whether funds need to be recovered from beneficiaries; notes that the range of the risk at payment, determined as part of this approach, resembles most of the Court’s estimated error rate and is considered by the Commission as the best estimate to express the exposure to the Union budget;

Added30. Recalls that the audit approach and methodology of the Court are based on international audit standards that require the testing of a random, representative sample of transactions that result in an estimate of the error rate; recalls that the Court differentiates between low-risk expenditure, i.e. entitlement-based payments under simplified rules, and high-risk expenditure, i.e. reimbursement-based payments subject to complex rules; notes that for the 2022 expenditure, the Court has selected 66 % of its audit population from the high-risk expenditure (63,2 % in 2021), amounting to EUR 110,1 billion, and 34 % from the low-risk expenditure, amounting to EUR 56,7 billion; notes that the Court’s estimated error rate for 2022 (4,2 %) is mainly driven by ‘Cohesion, resilience and values’ (2,5 % of the overall error rate), ‘Natural resources and environment (0,8 %), ‘Neighbourhood and the world’ (0,4 %), and ‘Single market, innovation and digital’ (0,3 %), for the most part considered high-risk expenditure areas by the Court; notes that the Commission in its AMPR categorises the expenditure into higher, medium and lower risk segments; notes that the Court uses the risk categories in a large part to determine the sample size to ultimately support its opinion on the legality and regularity of expenditure, whereas the Commission’s use of risk categories serves to identify areas where additional managerial attention is needed to correct errors; emphasises that the use of different risk categories by the Court and the Commission hinders the possibility for the discharge authority to make a comparative analysis between clerical form errors and substantial administrative errors;

Removed24. Considers that both approaches serve different purposes and have their benefits, disadvantages, strengths, and weaknesses, and should be used to complement each other while understanding the differences and particularities, such as the different concepts of error and the risk categorisation used by each institution; commends the Commission’s approach for its sheer size and the resulting granularity in identifying where additional efforts are most beneficial and where improvements are needed; considers the Court’s error rate to be an important indicator of compliance with legality and regularity of the implementation of the Union budget; welcomes in this regard the Court’s findings, observations and recommendations as a very useful contribution to the further improvement of the budget management and implementation under different management modes and by all relevant stakeholders;

Added31. Recalls that the Court’s audit focuses on the year under review; considers, nevertheless, that the Court takes into account findings of several years in its annual report and deepens the focus on specific topics within its Special Reports; notes that in contrast to this method, the Commission takes into account the whole lifecycle of Union programmes and funds covering multiple years, as well as corrections and recoveries after the end of the year under review; is of the opinion, however, that these different approaches do not entirely explain the large difference in the estimation of the error rate;

Removed25. Notes that, on several issues, the Court’s and Commission’s findings are aligned, most notably concerning the main sources of irregularities in ‘Cohesion’, and the higher risks for market measures and rural development in ‘Natural resources and environment’; notes that specifically in ‘Cohesion’ some cases of eligibility errors identified and quantified by the Court do not allow the Commission to qualify the error as an irregularity to be corrected in line with the definition laid down in Article 2(36) of Regulation (EU) No 1060/2021 (‘the Common Provisions Regulation’ or CPR) and thus, the Commission cannot pursue financial correction procedures, and such errors would not enter into the Commission’s estimate of risk at payment;

Added32. Recalls that Union spending programmes are multiannual by design and consequently their related control systems and management cycles also cover multiple years; recalls that the Commission’s estimates of the risk at closure have a multiannual perspective that takes account of corrections and recoveries over several years; notes that the Commission’s approach is based on tests as defined in control strategies aiming to check compliance with Union rules to ultimately establish whether funds need to be recovered from beneficiaries; notes that the range of the risk at payment, determined as part of this approach, resembles most of the Court’s estimated error rate and is considered by the Commission as the best estimate to express the exposure to the Union budget;