EU: clash between Court of Auditors and Commission over Recovery Fund

Brussels – The Recovery Fund, the special financial instrument created in the wake of the economic crisis produced by the COVID-19 pandemic and used to pay for member states’ recovery plans (NRRP), would be used too laxly. The EU Court of Auditors criticises the way the European Commission is allegedly handing out checks to governments, triggering the inter-institutional clash.

The EU executive disputes the passage in which Luxembourg auditors claim that the Recovery Fund is “an instrument that is not based on performance,” and therefore on the quality of reforms, speed, and efficiency. A note that makes Brussels grimace, starting with Executive Vice President Raffaele Fitto, who is responsible for reforms: “The Recovery Fund is a powerful tool that aligns financial support with performance on the ground.”

The Community Executive has always linked the disbursement of the various tranches of loans and grants to the progress made. Checks, in essence, time by time, based first on the reform program and then on their progress and implementation. According to the EU executive’s spokesperson service critic, the EU Court of Auditors’ finding “does not appear to be based on any feedback.”

Corte dei conti Ue: “Recovery fund meno ‘green’ di quanto dichiarato”

There is a particular insistence in Brussels on preventive controls, that is, the green light for new instalments if objectives and targets have not been met first. These are the foundational parameters that the EU executive monitors, and a dedicated portal listing achievements has been created.

However, the Court of Auditors takes a different view, and in its report dedicated to the topic, it goes into the substance of the matter. The regulation underlying the Recovery Fund “does not give a definition of ‘performance’.” This is the basic legal shortcoming. It does not specify what is meant by a result to be achieved, when in fact, for the Luxembourg auditors, performance “corresponds to the extent to which an action, project, or program financed by the European Union has achieved its objectives and ensures optimal use of resources.” It does not, in essence, ensure that the money is well spent.

In other words, the recovery instrument, the Court of Auditors’ report continues, “presents multiple critical issues with regard to performance, accountability, and transparency”. Certainly, the auditors admit, the Recovery Fund, with its 672 billion out of the total 750 billion in the entire NextGenerationEU post-pandemic recovery program, “has played a crucial role” in the EU’s economic revival. However, they complain that “information on results is scarce and information on actual costs is nonexistent.” As a result, “it is not clear what citizens actually get out of these funds”.

Once again, the European Commission is not buying it, and Fitto responds to accusations and criticism. “By incentivising member states to tackle structural challenges, the Recovery Facility has accelerated the implementation of vital reforms in areas such as employment, education, and the business world.”

Here, too, however, there is a dispute between the different EU institutions. For the Court of Auditors, the Commission miscalculates. Goals and objectives, i.e. milestones and targets, “provide information on the progress made in the implementation of RRF-funded measures, but focus on outputs rather than outcomes.” It looks at the technical-numerical data but not the substance. A clarification that reiterates an alarm raised by the European Central Bank, which on Recovery Fund and its use for recovery plans, urged to consider the possibility of doing well more than on schedule. A risk of waste is likely sensed.

After almost a year, the Court of Auditors also comes to this implicit but far from veiled suggestion.