Auditors report €7 billion of EU money wrongly spent last year

The ECA said that 4.8% of the EU's €138.6bn budget in 2012 had been spent in an erroneous fashion. (4-page / 89KB PDF) However, it said that it was wrong to assume the erroneous spending was all wasted.

"Typical errors include payments for beneficiaries or projects that were ineligible or for purchases of services, goods or investments without proper application of public purchasing rules," the ECA said. "Not all illegal or irregular payments will necessarily be wasteful, but nor is all legal and regular expenditure good value for money. Thus, this percentage should not be calculated in relation to the total EU budget as 'waste' or 'money lost'."

The ECA highlighted some of the inefficiencies, including the awarding of EU funds to businesses to hire unemployed people but failing to ensure the companies retained the staff long enough to derive the intended longer term benefits from the arrangements. In addition, funds were misspent when a contract was awarded for the building of a new road but where rival bids for the work had not be considered, it said.

"To be eligible for EU funding, beneficiaries are required to comply with specific EU and, in some cases, national rules," the ECA said. "These rules are there to try and ensure that expenditure takes place for the purposes intended by the Council and Parliament. Errors occur when these rules are breached: for example, farmers not honouring their environmental commitments, project promoters not respecting public procurement rules or research centres claiming for costs not linked to the EU-funded projects."

The auditors said that the error rate in the spending of EU funds has increased every year since 2009 but said the blame does not lie solely with the European Commission.

"The ECA estimates the error rate for expenditure jointly managed by the Commission and the Member States at 5.3%," it said. "For the rest of operational expenditure, which is directly managed by the Commission, it is 4.3%. Many examples were found of weaknesses in management and control systems at both Member State and Commission level."

"Shared management areas such as agricultural and regional policy represent 80% of EU spending. For many of the errors detected through the audit Member States’ authorities were in possession of information that should have allowed them to identify and correct the problem before claiming re-imbursement from the Commission. There is still potential to use financial management systems more effectively and to reduce the error rate," it added.