Recovery and resilience plans: Commission must tighten checks and oversight

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The Budgetary Control Committee recommended signing off the Commission’s budget, while voicing concerns on the limited options to check the use of recovery funding.

By 19 votes in favour to six against, the Budgetary Control Committee recommended on Wednesday that Parliament grants discharge to the Commission’s 2021 budget. In the same voting session, they signed off the accounts of European Development Fund and 33 EU agencies (click here for vote results).

Vulnerability to misuse and fraud

In the resolution accompanying the discharge decision (adopted by 19 votes in favour, 3 against and 3 abstentions), MEPs say that since the recovery and resilience funds (RRF) have been set up “under time pressure”, control requirements are much lighter than those in place for cohesion and agriculture funds.

MEPs also stress that for the recovery funds member states bear greater responsibility to protect the EU’s financial interests when compared to cohesion or agricultural programmes, while some national authorities’ control systems are “too error-prone and unreliable”, uneven in quality or too complex, and may attract misuse, fraud and organised crime.

MEPs ask the Commission to make sure that internal control systems and rules in the member states to prevent and detect fraud, corruption and conflicts of interests, are in place. They also request that a fraud reporting mechanism be introduced, reporting to the Commission and the European Public Prosecutor’s Office (EPPO).

Similarly, MEPs are worried by “first indications” that in some EU countries RRF funds may be used to replace national expenditure and call on the Commission to perform additional checks to prevent that.

Lack of clarity on RFF milestones and targets

MEPs question the Commission’s assessment of national compliance of ‘milestones and targets’ (conditional criteria for EU countries to receive RRF payments) and stress their lack of clarity and comparable definitions. They ask the Commission to refrain from assessing this compliance “on the basis of political negotiations”, and to put in place a reliable system to check if milestones and targets are actually being implemented and to assess how well member states’ audit and control arrangements are functioning.

Local and regional actors must be involved

MEPs are worried about the risk of ‘renationalisation’ in planning, monitoring and control in the case of the EU recovery funds and call on member states to fully involve local and regional authorities, civil society, social partners, academia and other interested parties in national recovery plans.

NGOs’ access to EU institutions

To make sure EU funds finance only organisations that strictly respect EU values, MEPs propose to set up a public list of NGOs that engaged in activities such as hate speech, incitement to terrorism, religious extremism or misused EU funds, to block them from accessing EU institutions. The Transparency Register must be improved and NGOs must register as lobbyists.

In addition, MEPs call on the Commission to propose a new NGO Regulation that includes conditions for receiving EU funds and obligations to report sources of funding as well as activities performed on behalf of foreign principals.

Quotes

Co-rapporteur for the Commission’s discharge Monika Hohlmeier (EPP, DE) said: “Talks between the Parliament and Commission during this discharge process made an impact on how the EU currently controls, and how it will perform its control on recovery and resilience funding in the future. The system for checking the RRF is not as established as for e.g. EU cohesion or agricultural funding programmes, and we initially raised the alarm over issues of transparency, missing methodologies and scrutiny protocols that would allow the protection of the EU’s financial interests to be guaranteed. We are yet to be reassured that recovery money will reach the final beneficiaries in due time and will not be used by member states for other purposes. We warn against “nationalising” the RRF and strongly insist on involving local authorities and stakeholders in the implementation of national recovery plans”.

Co-rapporteur for the Commission’s discharge Jeroen Lenaers (EPP, NL) said: “There has been a constructive dialogue between the discharge authority and the Commission, and an excellent cooperation with the Court of Auditors. We are worried about the Court’s findings that the Commission overstated the European Union budget contribution to climate spending €72 billion. In addition, we have seen the error rate for high-risk expenditure rising again compared to the previous year, to 4.7%. This is unacceptable and worrisome. On a positive note, it was good to see broad support to increase transparency and improve checks on the activities of NGOs, after Qatar-gate exposed serious deficiencies in this regard. The Commission should guarantee that EU funds are traceable from the direct recipient to the final beneficiary”.

Next steps

Parliament as a whole will take its final decision on the EU 2021 budget discharge during 8-11 May plenary session.

Background

The discharge procedure is a process of parliamentary scrutiny on the way the Commission and other institutions and bodies have used the EU budget, in accordance with the principle of sound financial management.