EU members breaching state aid rules within cohesion policy projects

4 Oct 16

European Union member states are breaking the state aid rules of the bloc’s major investment policy at a much higher rate than thought, according to the European Court of Auditors.

 

Under EU cohesion policy, the European Commission attempts to improve the economies of European regions. This constitutes one of the largest expenditures of the bloc’s budget. Auditors examined whether member states’ own public funding for projects financed under this policy were in line with the rules of state aid.

Another key aim of the cohesion policy, which will be worth €352bn up to 2020, is to prevent regional economic disparities. The improper use of state aid could create such disparities by giving certain companies a competitive advantage and affecting trade between member states.

The auditors’ report, published today, found that of the cohesion policy projects with state aid relevance that were examined, almost 20% were affected by errors or infringements.

As Oskar Herics, the member of the ECA responsible for the report, explained, member states’ audit authorities play an important part in the control chain of cohesion policy. They are responsible, as well as the commission, for ensuring that project expenditure complies with eligibility conditions, including compliance with state aid rules.

Auditors found that the rate at which the European Commission detected state aid was similar to the ECA. However, member states only found errors in 3.6% of relevant projects – five times less than ECA auditors.

Herics said this suggests that “member state authorities have not focused sufficiently on state aid in the course of their audits”.

Until the end of 2013, auditors said the commission also failed to pick up or act on state aid errors. It did not systematically check whether major projects complied with state aid rules, its database was unable to properly analyse errors, and its monitoring did not result in any significant recovery of state aid.

For the 2014-2020 period, auditors noted the commission introduced new rules to reduce the risk of weak monitoring and simplified state aid legislation to reduce bureaucracy and increase transparency.

But auditors were critical of the fact that, as a result, member states are more responsible for designing and implementing aid measures – an area that member states made many mistakes during the previous period till 2013.

“This shift in responsibility therefore risks increasing the number of state aid errors and will require continuous attention,” auditors said.

A European Commission spokeswoman said that last year, the commission launched an action plan for administrative capacity building for authorities in charge of running cohesion policy programmes.

Under the plan, a strengthening of capacity at the national and local level has become one of the pre-conditions for the release of cohesion funds.

“These preventative measures will improve the detecting capacity and reduce error rates in member states. We are working closely with managing authorities to strengthen their monitoring and control systems,” she said.

The ECA made a number of recommendations on how the commission could improve the way state aid in cohesion policy projects is handled, going forward. The recommendations included: to penalise member states for infringements, to approve major projects only after state aid has been cleared, and to ensure member state audits on state aid compliance are sufficient by mid-2017. 

  • Emma Rumney

    Emma is a reporter at Cooking Recipes International. She also writes for in the UK.

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