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DRAFT REPORT (2023/2183(DEC))

On discharge in respect of the implementation of the budget of the ninth, tenth and eleventh European Development Funds for the financial year 2022

CONT-PR-753512

Committee on Budgetary Control · Rapporteur: Joachim Kuhs

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This is the rapporteur's draft report on discharge for the ninth, tenth and eleventh European Development Funds for the financial year 2022. It proposes that Parliament grant the Commission discharge, or postpone that decision, and separately approve or postpone the closure of the accounts. It sets out observations on budget implementation, the reliability of the accounts, the legality and regularity of transactions, monitoring and assurance systems, fraud prevention, budget support and follow-up to the 2021 discharge. It notes the Court of Auditors' estimated error level of 7.1% for 2022, up from 4.6% in 2021, and concerns that errors systematically exceed the 2% materiality threshold. It echoes the Court's recommendations to the Commission on clearing accounting balances, clearing pre-financing and invoices, improving EU delegations' controls, complying with VAT rules, strengthening ex ante controls and improving the residual error rate methodology.

Committee position. The rapporteur proposes that Parliament grant the Commission discharge for the 2022 EDF budget, or postpone that decision, and approve the closure of the accounts, or postpone that closure. The draft sets out observations on implementation, accounts, legality, controls, fraud prevention and budget support.

Key points

  1. Proposes that Parliament grant the Commission discharge for the 2022 budget of the ninth, tenth and eleventh European Development Funds, or postpone that decision.
  2. Proposes that Parliament approve the closure of the accounts of the ninth, tenth and eleventh European Development Funds for 2022, or postpone that closure.
  3. Notes that 2022 financial implementation for the 10th and 11th EDF was marked by Council Decision EU 2022/1223 to reuse EUR 600 million of decommitted funds.
  4. Notes that 60% of contracts are closed under the eleventh EDF, that the Commission should complete closing the 9th EDF in 2024, and that 95.2% of 10th EDF contracts are closed.
  5. Notes DG INTPA exceeded its targets for reducing old pre-financing and old unspent commitments, but regrets that its key performance indicator does not consider how long pre-financing has remained open, some up to 12 years.
  6. Notes the Court concluded the 2022 EDF accounts present fairly the EDFs' financial position and that revenue is legal and regular, but reiterates concern over successive adverse opinions on expenditure.
  7. Notes with concern that of 140 transactions examined, 57 contained errors, and the Court estimated the 2022 error level at 7.1%, above the 2% materiality threshold.
  8. Notes with concern errors related to expenditure not incurred, ineligible expenditure, serious failure to respect public procurement rules, absence of essential supporting documents and other types.
  9. Notes that the Commission had sufficient information to prevent or correct errors in 23 quantifiable and five non-quantifiable cases, and that proper use of information would have lowered the error level by 5.5 percentage points.
  10. Notes the eleventh residual error rate study estimated the overall rate at 1.15%, below the 2% threshold, but the Court considered it underestimated and calculated 1.35%.
  11. Notes DG INTPA's anti-fraud strategy, its contribution to the Commission anti-fraud strategy, 24 ongoing investigations at end-2022, and regrets the lack of fraud prevention training in four delegations.
  12. Notes EDF budget support payments of EUR 105.2 million in 2022, that the European neighbourhood was the largest recipient, and urges substantially lower EDF support to Morocco and Tunisia until concerns are addressed.

Who is affected

  • The Commission, which would receive discharge and whose accounts would be closed for the 2022 EDF budget.
  • DG INTPA, which manages almost all EDF funds and is asked to improve controls and reporting.
  • Morocco and Tunisia, for which the report urges substantially lower EDF support until concerns are addressed.
  • International organisations, which provided limited access to documents and are subject to audit and control discussions.
  • EU delegations, whose control systems for clearing pre-financing are to be improved.

Figures and deadlines

  • EUR 853 million in individual commitments and EUR 2 386 million in payments for the 10th and 11th EDF in 2022.
  • EUR 600 million of decommitted funds from the 10th and 11th EDF reused under Council Decision EU 2022/1223.
  • EDF represents 33.2% of DG INTPA's portfolio in payments in 2022, amounting to EUR 2 452 million (98.08% of the annual target).
  • Outstanding commitments of the EDFs reached 12.6% or EUR 8 250 million in 2022.
  • The Court examined 140 transactions, of which 57 (40.7%) contained errors, and estimated the 2022 error level at 7.1% (4.6% in 2021).
  • The estimated level of error systematically surpasses the materiality threshold of 2%.
  • DG INTPA estimated the overall amount at risk at payment at EUR 83.3 million (1.4% of 2022 expenditure) and at closure at EUR 71.7 million.
  • Budget support payments under EDF in 2022 amounted to EUR 105.2 million.

Legal basis: Article 319 of the Treaty on the Functioning of the European Union.