What changed

SUGGESTIONS

The Committee on RegionalEmployment Developmentand Social Affairs calls on the Committee on Budgetary Control, as the committee responsible, to incorporate the following suggestions into its motion for a resolution:

1. Reminds that cohesion spending is reimbursement-based and hence very complex and more prone to error than other spending areas; acknowledges that the proximity of the closure of the 2014-2020 period, the flexibilities and additional funding made available through CRII(+), CARE and REACT-EU and the parallel implementation of the RRF may have contributed to increasing the pressure on the managing authorities and beneficiaries and thus the number of errors;

– having regard to the European Court of Auditors’ Annual report on the implementation of the EU budget for the 2022 financial year;

2. Stresses, in this regard, the inherent risks posed by these simultaneous activities for all bodies responsible for managing and controlling these funds and concurs with the Court of Auditors that an additional advisory support from the Commission to national authorities would be needed in this particular context;

– having regard to the European Court of Auditors’ Annual report on EU agencies for the financial year 2022;

3. Urges the Commission to simplify administrative procedures with a view to ensuring that cohesion policy funds are spent responsibly and appropriately; stresses in particular the need for further simplification of rules, greater use of simplified cost options and improved effectiveness of ex ante and ex-post checks;

1. Is worried by the fact that by the end of 2022, total outstanding commitments reached a record level of over €450 billion; takes note, however, that, according to the Commission, after a further increase to some €460 billion in 2023, the outstanding commitments should decrease during 2024 to 2027 to €314 billion;

4. Takes note of the Commission’s statement which mentions that particular attention is being paid to the implementation of the Just Transition Fund (JTF) due to the timeframe to spend NextGenerationEU (NGEU) resources by the end of 2026, but underlines the quite insufficient progress in its implementation and absorption rate;

2. Expresses satisfaction that the biggest part of the Union budget spending in 2022 went to the Heading 2 “Cohesion, resilience and values” (EUR 79.1 billion, or 40.4 %);

5. Welcomes the financial flexibility available in the use of cohesion funds and underlines that, thanks to this flexibility, cohesion policy played a frontline role to address the Covid crisis, the war-related emergencies, as well as the energy crisis; reminds, however, that the rationale of this policy is to ensure a long-term planning of measures that should strengthen economic, social, and territorial cohesion between European regions; believes that post-2027 cohesion policy must provide the flexibility needed in the use of funds to enable the Member States and regional and local authorities to steer resources in an appropriate and reliable manner, always in line with cohesion policy long-term objectives;

3. Recalls that spending under the subheading “Economic, social and territorial cohesion” (Subheading 2a) focuses on reducing development disparities between the different Member States and regions of the EU; stresses the importance of EU cohesion policy in supporting the implementation of the European Pillar of Social Rights and assisting Member States and regions to harness new opportunities and address challenges, such as globalisation, unemployment, industrial change, digitalisation and supporting up and re-skilling and lifelong learning;

6. Reminds that, without prejudice to the need to support the authorities, including in particular local and regional authorities, as well as beneficiaries to better comply with spending rules and minimise errors, the most pressing issues to be addressed in the area of cohesion policy are the overly complex rules and procedures, with the need of more flexible processes, and the disproportionate administrative burden they entail, and the effective targeting of the funds;

4. Is greatly worried that the overall level of error was material at 4.2 %, compared to 3.0 % in 2021; and is particularly worried that the level of error is mainly driven by ‘Cohesion, resilience and values’, which was the biggest contributor to this rate (2.5 %); recognises that the majority of spending in this area is deemed high-risk expenditure as mainly reimbursement-based and often subject to complex rules; notes that the most common errors under the Cohesion heading were ineligible projects and infringements of internal market rules, in particular non-compliance with public procurement and state aid rules; calls for urgent action to decrease the error rate in the future, especially for the new funding period, and calls on the Commission to assist the agencies to improve their internal procedures in order to ensure compliance with applicable public procurement and state aid rules;

7. Also highlights the recurrent problems caused by the diversion of cohesion funds towards other policy areas as a rule and not as an exception, as happened recently with the STEP proposal;

5. Notes that the EU budget’s loss of purchasing power will affect its expenditure to differing degrees, as parts of the EU budget are fixed costs and they typically correlate with inflation, and these budget items will thus increase more than had been expected at the start of the MFF period; acknowledges that a key example of this is administration costs, which are impacted by inflation; notes that in 2022, the Commission already had to allocate an additional €0.2 billion to heading 7 – European Public Administration – because of rising inflation and energy prices;

8. Points out the importance of the legality and regularity of cohesion spending as well as the crucial role that managing and audit authorities play in this respect; recalls the need to simplify and rationalise audits, concentrating on what is necessary to fight against fraud; reminds, in addition, that according to the 21-27 Common Provisions Regulation, Member State authorities should report all cases of suspected or established fraud related to EU-funded projects that they identify, and that they should report these cases even if they detect them before declaring expenditure to the Commission;

6. Stresses that the Commission should assess the impact on the EU budget of high inflation continuing over several years and identify tools to mitigate resulting key risks; is of the opinion that in this regard, the Commission should protect the EU budget’s ability to meet its legal and contractual commitments, such as rising financing costs;

9. Highlights the significant role of the European Anti-Fraud Office and the European Public Prosecutor’s Office (EPPO) in protecting the EU budget; calls on all Member States to join the EPPO; reminds that, in her appearance before the Committee on Regional Development on 25 May 2023, the European Public Prosecutor noted that the management and control system for EU expenditure currently in place is not designed to detect fraud and that audits or administrative investigations rarely detect financial crime, which often has a cross-border dimension; stresses the need to provide the EPPO with the necessary means to carry out its duties; is of the opinion that a strengthened EPPO would make it possible for the legislator to further simplify the regulatory framework for cohesion in order to improve the implementation of the funds;

7. Calls on the Commission to follow up and take necessary action with regards to all errors found by the Court and to request additional financial corrections, where deemed necessary;

10. Welcomes the adoption of national anti-fraud strategies by 24 Member States in total, as it should increase the protection of the EU´s financial interests; calls for more effort at EU level and in the Member States to tackle fraud;

8. Takes note of the Commission’s commitment to continue its close work with the audit authorities in order to strengthen their capacity to prevent and correct errors, to better document their audit work and therefore to contribute to the assurance process;

11. Expresses concerns about the Commission’s reported plans to disburse the suspended 6.3 billion EUR from the RRF to Hungary in exchange for its endorsement of the aid for Ukraine; points out, that the suspended funds should not be released to Hungary until the remedial measures adopted by the Hungarian government have proven effective in practice;

9. Asks the Commission to implement as soon as possible all outstanding Court's recommendations.

12. Notes that according to the European Court of Auditors (ECA) Annual report for the financial year 2022, the estimated level of error in spending on ‘Cohesion, resilience and values’ is 6.4% while the Commission’s error estimates, between 1.8 % and 2.6 %, are above the materiality threshold but are significantly lower than the Court’s; points out that, although both institutions apply different methodologies, the growing discrepancy between their assessments, especially in the area of cohesion, raises great concerns;

13. Acknowledges that both the Commission and the ECA identified ineligible expenditure, public procurement, audit trail and State aid as the main sources of irregularities; underlines that recurring errors such as ineligible costs and projects could be better addressed to support managing authorities in reducing these errors, but that this should be done in a way that does not complicate the management of the funds to the detriment of regional and local authorities and final beneficiaries;

14. Draws attention to the increased risk of decommitments in the coming years and urges the Commission to continue and strengthen its cooperation with the Member States and the regions to speed up and ease complete and correct good closure of the 2014-2020 programming period, allowing for these authorities to draw lessons for the implementation of the ongoing one;

15. Is concerned that the prioritisation of the RRF in the Member States is causing delays in the implementation of funds under the CPR 2021-2027; draws attention to the cases of weak design that the ECA has found in relation to the measures and underlying milestones or targets in the recovery plans; highlights that these latter should clearly define all milestones and targets and stresses that all the problems regarding the reliability of information that member states included in their management declarations should be properly addressed;

16. Calls on the Member States to accelerate the investment of cohesion resources to support the creation of jobs, economic growth, business competitiveness as well as inclusion of socially vulnerable groups and urges the Commission to take concrete measures to this end, such as the development of a one-stop-shop that consolidates the information relative to all available funds including updated and detailed information on beneficiaries;

17. Highlights the findings of the Court’s special report 09/2022 on climate-spending information for 2014-2020 and welcomes that the Commission accepted the three recommendations on the climate relevance of agricultural funding, the need for enhancing climate reporting and the link of the EU budget to climate and energy objectives;

18. Stresses the importance of cohesion policy in promoting gender equality and regrets that, in the EU’s budget cycle, gender equality has not been adequately taken into account and that the Commission has not yet lived up to its commitment to gender mainstreaming in the EU budget; welcomes nevertheless that the Commission implemented the methodology to track all EU spending programmes’ contributions to gender equality under the 2021-2027 multiannual framework and that this methodology was piloted in the 2023 draft budget.

ANNEX: ENTITIES OR PERSONS FROM WHOM THE RAPPORTEUR HAS RECEIVED INPUT

The rapporteur declares under his exclusive responsibility that he did not receive input from any entity or person to be mentioned in this Annex pursuant to Article 8 of Annex I to the Rules of Procedure.

INFORMATION ON ADOPTION IN COMMITTEE ASKED FOR OPINION

Date adopted

23.1.2024

Result of final vote

+:

–:

0:

33

0

3

Members present for the final vote

Pascal Arimont, Isabel Benjumea Benjumea, Stéphane Bijoux, Vlad-Marius Botoş, Corina Crețu, Rosa D’Amato, Christian Doleschal, Matthias Ecke, Mircea-Gheorghe Hava, Peter Jahr, Manolis Kefalogiannis, Elżbieta Kruk, Cristina Maestre Martín De Almagro, Nora Mebarek, Eric Minardi, Andżelika Anna Możdżanowska, Niklas Nienaß, Andrey Novakov, Younous Omarjee, Witold Pahl, Alessandro Panza, Tsvetelina Penkova, Wolfram Pirchner, Caroline Roose, Marcos Ros Sempere, Monika Vana

Substitutes present for the final vote

Franc Bogovič, Daniel Buda, Isabel Carvalhais, Sandro Gozi, Denis Nesci, Mauri Pekkarinen, Rovana Plumb, Bronis Ropė

Substitutes under Rule 209(7) present for the final vote

Jordi Cañas, Marie Dauchy

FINAL VOTE BY ROLL CALL IN COMMITTEE ASKED FOR OPINION

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