The audit authorities in individual EU member states are not doing enough to monitor and identify potential infringements of the state aid rules in their financial reporting of key projects, according to a report from the European Court of Auditors (ECA) which identified problems with 20% of the projects assessed
The ECA says the problem is particularly acute in the area of cohesion policy and call for changes in the way projects are approved and monitored.
Cohesion policy is one of the main spending areas in the EU budget. For 2014-2020, the total budget for the European Regional Development Fund, the Cohesion Fund and the European Social Fund amounts to €352bn (£308bn), up from €347bn during the 2007-2013 programme period.
The European Commission estimates that cohesion policy spending accounted for more than a quarter of state aid granted in the EU during the 2007- 2013 period.
The auditors assessed the level of non-compliance with state aid rules in cohesion policy in the years up to 2014 and the extent to which the Commission was aware of the causes of non-compliance. They also examined whether the Commission’s new rules for 2014-2020 were likely to lead to improvements.
The report found a significant level of non-compliance. Almost 20% of cohesion policy projects with state aid relevance were affected by state aid errors.
However, audit authorities in the member states detected infringements at a far lower rate than either the Commission or the EU auditors. Member states found errors in just 3.6% of relevant projects, while the EU auditors detected more than five times as many using a similar methodology.
Oskar Herics, the ECA member responsible for the report, said: ‘Member states’ audit authorities are an important part of the control chain in cohesion policy. But our findings indicate that so far they have not focussed sufficiently on state aid in the course of their audits.’
Member states rarely notify infrastructure investments to the Commission for state aid clearance and, until the end of 2012, the Commission did not systematically check whether major projects complied with state aid rules. To reduce this risk, the Commission has introduced new rules for 2014- 2020, but these do not always provide legal certainty, the report says.
The auditors note that the Commission has simplified state aid legislation to reduce bureaucracy and increase transparency, but has at the same time placed greater responsibility on member states for designing and implementing aid measures. The ECA says this shift in responsibility risks increasing the number of state aid errors and will require continuous attention.
It recommends the Commission should impose corrective action where state aid measures are not in compliance with the rules and use its state aid database so that it can easily analyse the type, frequency, seriousness, geographical origin and cause of irregularities.
The ECA also wants to see regular monitoring of member states’ capacity to comply with state aid rules, stating that major projects should only be approved after internal state aid clearance. Member state audit authority checks on compliance also need to be improved in terms of their scope and quality by mid-2017, while payments to member states should be suspended if there is evidence projects are not meeting state aid rules by the end of 2016.
