On discharge in respect of the implementation of the general budget of the European Union for the financial year 2024: Section III – Commission

OPINION

The Committee on Regional Development calls on the Committee on Budgetary Control, as the committee responsible, to incorporate the following suggestions into its motion for a resolution:

1. Notes that, according to the Court of Auditors annual report for 2024, the estimated level of error in spending in the area of ‘Cohesion, resilience and values’ amounts to 5,7 %, down from 9.3 % in 2023; notes that the Commission estimates the risk at payment for this spending area at 2.9 %; acknowledges the different methodologies of each of the institutions and the conclusion of a recent study1 that the error rate and risk at payment are not directly comparable; is concerned, however, at the weaknesses and limitations of the Commission's method for calculating the overall error rate for cohesion that have been reported by the Court; notes that, nevertheless, both institutions agree that spending in this area is materially affected by errors;

2. Underlines that the main types of errors indicated in the Court’s report were ineligible costs and projects, irregularities in public procurement procedures and absence of essential supporting documents; notes that these are persistent and prevalent weaknesses in this spending area and underlines the need to strengthen Member States’ administrative capacity and preventive control in these respects; urges the Commission and the Member States to apply, in particular, the Court’s recommendations regarding the need for individual verifications in cases where flat-rate financial corrections have been applied;

3. Stresses, that error is not synonymous with fraud; underlines therefore the importance of strengthening the single audit principle, reducing duplication, and clearly distinguishing between unintentional errors and fraud; calls on the Commission and relevant institutions at the national level to provide appropriate advisory support and trainings for beneficiaries and local authorities in order to avoid and, where relevant, to correct errors prior to the imposition of any financial corrections; stresses, at the same time, the importance of enhancing the control and detection capacity of the audit authorities, fully implementing the recommendations made by the Court regarding sampling, audit trail and checklists;

4. Notes that there is insufficient detection capacity, as shown by the significantly reduced detection rates (0.22 % for fraud and 0.76 % for irregularities) and the fact that risk analysis still contributes only marginally to the detection of fraud; reiterates the need to strengthen risk analysis systems and support for whistle-blowers and civil society, whose role has remained crucial for the exposure of fraud;

5. Stresses the critical role of digitalisation in the management of EU funds and utilization of Artificial Intelligence (AI) for detecting frauds in financial transactions; points out that in the new NRPPs simplification should not come at the expense of anti-fraud safeguards;

6. Notes that both the Commission and the Court of Auditors have repeatedly stated that the complexity of the rules governing cohesion policy is responsible for a large share of the errors in this spending area; points out to the issue of gold-plating and additional layer of rules created by Member States at national level; reiterates its previous calls for further simplification and for the adoption of a single set of eligibility rules for all cohesion policy funds, as well as for the further expansion of simplified cost options); insists that this would improve the efficiency of the cohesion policy, reduce the risk of errors and bureaucracy for all stakeholders and, at the same time, ease beneficiaries’ access to funding; strongly warns, however, that such simplification must in no way result in deregulation that undermines the effectiveness of controls; reiterates that the partnership principle, subsidiarity, shared management and decentralisation must be at the heart of any future simplification and reform of the cohesion policy;

7. Underlines that, as highlighted in the Court of Auditors (ECA) annual report, the complexity of public procurement procedures contributes to the occurrence of errors on the part of both beneficiaries and national audit bodies; notes, in particular, that in one case the complexity and lack of clarity of the procurement legislation led ECA experts to conclude — contrary to the assessment of the managing authority and the national audit services — that a beneficiary should have cooperated with its competitors in the implementation of an infrastructure project; calls for a simplification of public procurement procedures and for the provision of clear and consistent guidance to stakeholders, managing authorities and auditors;

8. Notes with concern the slow rate of implementation of cohesion policy programmes and contracting of projects in several Member States; stresses that this situation will result in increased pressure on managing authorities and control systems in the remaining years of the programming period; calls on the Commission to step up the support granted to Member States to speed up implementation, including through targeted technical assistance, the standardisation of procedures and the promotion of simplification measures, so as to avoid decommitment risks and ensure an efficient and predictable absorption of funds in the coming years; reiterates the need of strengthening the administrative ability and capacity of local, regional and national authorities, together with civil society organizations and all relevant stakeholders, to ensure an effective and efficient implementation of the policy in the future;

9. Recalls that in 2024, several amendments to the cohesion policy framework, namely STEP and RESTORE, entered into force; highlights the importance of these instruments to enhance EU competitiveness and addressing the consequences of natural disasters; reiterates, nevertheless, that constant amendments to the cohesion policy framework lead to legal uncertainty and instability, do not help the simplification process, and could undermine the long-term structural cohesion objectives of reducing disparities across the EU; stresses that the cohesion policy needs a stable regulatory framework in order to provide predictability for beneficiaries and all stakeholders, as well as to preserve its proven approach, which has delivered results and earned public trust;

10. Highlights the role of the European Anti-Fraud Office and the European Public Prosecutor’s Office in protecting the financial interests of the Union, and defending the rule of law and ensuring the efficient implementation of the Union budget in accordance with the principles enshrined in the Treaties; reiterates the need to provide these EU bodies with sufficient resources and calls for immediate review and strengthening their cross-border investigation and detection capabilities; calls for good and sincere cooperation between the Member States’ judicial bodies and the European Anti-Fraud Office and the European Public Prosecutor’s Office;

11. Points out to the necessity of making difference between the beneficiaries and final recipients in order to improve transparency;

12. Notes that the rights of persons with disabilities must be fully respected in all EU-funded projects; calls on the Commission to cooperate closely with the Member States in the implementation of the Convention of the Rights of Persons with Disabilities and to ensure a more thorough assessment of whether projects comply with these rights;

13. Is deeply concerned about the current EU budget proposals for 2028-2034, which intend to deliver cohesion policy through 27 separate national and regional plans; rejects the proposed merging of cohesion, agricultural and fisheries funds, that undermines their political autonomy and visibility, and puts in a direct competition both local and regional authorities and all the sectoral policies covered by the fund; underlines that the merger of the funds can be particularly harmful for Member States with strong regional disparities and geographical specificities, and for the less developed regions firmly rejects any attempt to nationalise cohesion policy planning; is concerned about the impact of the proposed model on the placed-based approach and multilevel governance of cohesion policy; stresses that the involvement of local and regional authorities, civil society organisations as well as social and economic partners (including SMEs) in the design, adoption and implementation of the national and regional partnership plans should be mandatory; strongly opposes the discontinuation of the Just Transition Fund in the next programming period as well as reduced support to outermost regions;

14. Stresses the need for continuous work towards the achievement of climate and biodiversity mainstreaming targets and asks for increased efforts in the new budget to the targets of spending and in particular to achieve the intended impact;

15. Warns that making access to funding conditional on milestones, targets and reforms, based on the model of the RRF, poses a major risk to cohesion policy as it does not contribute to the achievement of the Treaty-based cohesion objective i.e. the reducing of territorial disparities; stresses that local and regional authorities must not be deprived of funding because of the failure of national authorities to carry out reforms;

16. Stresses that, as the Next Generation EU (NGEU) recovery plan has been financed through the issuance of a joint debt on the markets, from 2028 the EU will have to pay interest on these loans, which could reach up to EUR 222 billion over the entire duration of the NGEU borrowing scheme, or 0.6 % of average annual EU GDP;

17. Is preoccupied about the proposed performance-based delivery model for cohesion policy post 2027 and its likely impact on irregularities and error rates since a focus on results and the related need to improve data quality and evaluations has proved a challenge for Member States and regions in the past; considers it imperative that any future application of the ‘cash for reforms’ model be supported by a sufficiently robust compliance framework, and one which defines the payment criteria unequivocally and ensures respect for national and EU rules; calls also for the introduction of mechanisms that enable full traceability of funding and its recovery in cases where the funds disbursed are disproportionate to the results achieved or have not been spent in accordance with the rules, as would be the case in the traditional management of funds;

18. Stresses the need to define clearly and in a binding manner the supervisory and control responsibilities of both the Commission and the Member States prior to implementation beginning; considers that the Commission should not rely solely on Member States’ control systems, but should define its own minimum requirements and verification mechanisms, similar to those provided for under shared management, in order to avert any non-compliance with national and EU rules, as requested by the Court.

ANNEX: DECLARATION OF INPUT

The rapporteur for opinion declares under her exclusive responsibility that she did not include in her opinion input from interest representatives falling within the scope of the Interinstitutional Agreement on a mandatory transparency register, or from representatives of public authorities of third countries, including their diplomatic missions and embassies, to be listed in this Annex pursuant to Article 8 of Annex I to the Rules of Procedure.

INFORMATION ON ADOPTION BY THE COMMITTEE ASKED FOR OPINION