The Committee on Budgetary Control adopted the report by Joachim KUHS (ID, DE) on discharge in respect of the implementation of the budget of the ninth, tenth and eleventh European Development Funds for the financial year 2022.

Budget implementation

The report noted that, in 2022, the financial implementation for the 10th and 11th EDF (individual commitments: EUR 853 million and payments EUR 2 386 million ) was marked by the Council Decision EU 2022/1223 to reuse EUR 600 million of de-committed funds from the 10th and 11th EDF.

Members took note of the Council’s decision which allocated EUR 600 million from de-committed projects under the 10th and 11th EDFs for the purpose of financing actions addressing the food security crisis and economic shock in African, Caribbean and Pacific (ACP) countries following Russia’s war of aggression against Ukraine. They believe that in view of the exceptionally dire food security situation in ACP countries, those funds need to be complemented with appropriate measures to enhance food autonomy of local communities.

The EDF represents 33.2 % of the portfolio of DG INTPA in terms of payments in 2022, which amounted to EUR 2 452 million (i.e., 98.08 % of the annual target). European Investment Bank (EIB) payments amounted to EUR 461 million. There were no new commitments in 2022, with the exception of commitments of the funds stemming from the reuse of the 10th & 11th EDF reserve.

Members noted the efforts of DG INTPA to reduce old pre-financing with a target of 40 % and old unspent commitments with a target of 35 %.

As regards unspent commitments, it achieved the target of 35 % for the EDFs with 36.83 %. However, the Court considered that the DG INTPA’s key performance indicator does not reflect the difficulties it had encountered in clearing older pre-financing transactions, some of which had been open for up to 12 years.

Impact of the activities in the financial statements

The report noted that pre-financing experienced a decrease of EUR 239 million largely as a result of fewer advances paid out due to the decrease in the number of contracts signed (EUR 2 118 million in 2021 compared to EUR 853 million in 2022). It noted an increase of EUR 123 million of accrued charges as a result of the increase in the number of open contracts at the end of the year. It also noted an overall decrease in operating expenses of EUR 74 million mainly as a result of the winding down of the Trust Funds.

Legality and regularity of the transactions underlying the accounts

The Court stated that the accounts for the financial year ending 31 December 2022 present fairly, in all material respects, the EDFs’ financial position, the results of their operations, their cash flows and the changes in their net assets for the year then ended. The revenue underlying the accounts for the year ended 31 December 2022 is legal and regular in all material respects.

Members noted with concern that, out of the 140 transactions examined, 57 (40.7 %) contained errors, compared to 54 (38.8 %) in 2021 for the same number of transactions. Moreover, the Court quantified 48 errors (43 in 2021), on the basis of which it estimated the level of error for the financial year 2022 to be 7.1 % (4.6 % in 2021).

The estimated level of errors in the financial year 2022 related to expenditure not incurred was 51 % (14.9 % in 2021), to ineligible expenditure was 24 % (38.6 % in 2021), to serious failure to respect public procurement rules was 16 % (14.6 % in 2021), to absence of essential supporting documents was 7 % (23.3 % in 2021) and related to other types of errors was 2 % (8.6 % in 2021).

Members noted that in 2022 DG INTPA’s ex-ante controls have prevented the payment of a total amount of EUR 167.94 million of ineligible expenditure. They are concerned that Benin´s EDF national authorising officer awarded a contract to a consultancy company to strengthen civil society involvement in the country, in serious breach of the public procurement rules.

Transparency and effectiveness of the monitoring and assurance systems

Members noted the Court’s observation that, in 2022, the Commission and its implementing partners committed more errors in transactions relating to programme estimates and grants and to contribution and delegation agreements with beneficiary countries, international organisations and Member State agencies than they did with other forms of support (such as those covering works, supply and service contracts). According to the Court’s report, in 23 cases of quantifiable error and five cases of non-quantifiable error the Commission had sufficient information to prevent, or to detect and correct the error before accepting the expenditure.

Members are concerned that, as in previous years, some international organisations provided only limited access to documents which hindered the planning, execution and quality control of ECA audit and led to delays.

The report noted that, since 2014, DG INTPA has developed and implemented its own anti-fraud strategy on the basis of the methodology provided by the European Anti-Fraud Office (OLAF) and that the strategy has been updated three times since its entry into force. DG INTPA also contributed to the Commission anti-fraud strategy and followed up to OLAF’s financial recommendations issued in 2018-2022 resulting in the closure of only 24 % of financial recommendations and the follow-up of 76 % of financial recommendations.

Union budget support

The report noted that the budget support payments made under EDF in 2022 amounted to EUR 105.2 million . Ukraine came out as the third budget support portfolio in 2022, with nearly EUR 800 million of ongoing operations.

In 2022, the European neighbourhood became the largest recipient of budget support (38 %), followed by sub-Saharan Africa (24 %), Asia (18 %), the western Balkans (8 %), Latin America (6 %), the Caribbean (2 %), overseas countries/territories (2 %) and the Pacific region (2 %), and that by contract type, sector reform performance contracts (SRPCs) outweigh state- and resilience-building contracts (SRBCs) and SDG contracts (SDG-Cs), with 74 % of the portfolio in value compared to 24.5 % and 1.5 % respectively.

The largest recipients of EDF payments in 2022 were Mozambique, Sudan and Democratic Republic of Congo, while the sectors with the highest funding were government and civil society, agriculture, energy and social infrastructures and services.

The report noted that the implementation of the EDF concerns countries that are facing aggravating impacts of climate change, biodiversity loss and food insecurity and are weakened by rising debt, new and forgotten humanitarian crises and conflicts, generating growing inequality and poverty. It called for the EDF to be conditional when there is evidence of human rights violations and to be checked against corruption and tax evasion.