The European Commission can still not be certain that EU Member States have effective systems to ensure that the Recovery and Resilience Facility complies with public procurement and state aid rules, according to special audit report published on Monday by the European Court of Auditors (ECA).
The Recovery and Resilience Facility (RRF) has supported reforms and investments in EU countries since the start of the COVID-19 pandemic in February 2020, and will run until 31 December 2026. €650 billion has been committed, consisting of €359 billion in grants and €291 billion in loans.
The RRF has been subject to several opinions and audits by ECA, including the annual report on the 2023 EU budget . From the very start, ECA warned that the RRF funding model (financing not linked to costs) leads to a higher risk of errors and irregularities and raised the issue of an assurance gap. In a previous audit report in October 2024, ECA even warned about the risk of double funding.
“Non-compliance with public procurement and state aid rules is a persistent problem in EU budget expenditure and, as our findings show, both the European Commission and the Member States did not focus enough on this issue at the beginning”, said Jorg Kristijan Petrovič, the Slovenian ECA Member who led the new audit.
“With hundreds of billions of euros still to be invested by the end of 2026, we hope that our audit will contribute to protecting the EU’s financial interests more effectively.”
For the audit, ECA selected a sample of five member states (Croatia, Czechia, France, Italy and Spain) from those that had submitted payment requests by end of April 2023. The auditors examined the Commission’s audit work until May 2024.
Weaknesses in controls systems
The main criterion for the selection was to include Member States that had milestones and targets that had been declared as achieved and would be subject to public procurement and state aid controls and audits. “Many member states were delayed in their initial payments when we were scoping the audit and were therefore not chosen,” ECA Member Petrovič told The Brussels Times.
He cannot say that the situation in other Member States is likely to be the same but it cannot be excluded. All member states have been assessed by the Commission as having adequate audit and control arrangements and no reservations were raised in its annual activity reports.
What does ECA mean when it writes that it “cannot be sure” that the rules are complied with? “Because of weaknesses in the Commissions audit work and risk categorization that supports its assurance on the public procurement and state aid control systems in the Member States, we are of the opinion that its assurance is still insufficient according to our assessment.”
Most of the audited countries had weaknesses when it comes to checking public procurement compliance. The picture was somewhat better for state aid. There checks were mostly in place and covered the main risks. However, the RRF regulation has no specific requirements on the timing of audits. Audit bodies’ checks on state aid were absent or conducted only after payment requests had been submitted.
In for example France, there was no evidence on coverage, depth, timing or audit trail for both procurement and state aid. According to the auditors, unclear rules are partly responsible, as EU countries were given no detailed guidance on how to check EU public procurement and state aid rules.
The Commission has improved its audit strategy during the audit but ECA still found problems. Did the update of the audit strategy come too late to be reflected in your audit?
The detailed checklists and the updated audit strategy in 2023 were indeed later than we would like, and it would have been better if they had been in place from the beginning of the RRF implementation,” he replied. “However, our audit took them into account and reflected the Commissions efforts in this regard. Still, issues related to public procurement and stated aid remained.”
Neither recovery nor return of funds
In addition, the auditors highlighted shortcomings in the corrective action taken by EU countries. In practice, EU countries do not always recover the money owed by final recipients (except in the case of serious irregularities). ECA says that it is not possible to quantify the amount of unrecovered money.
Is it legal by Member States not to recover funds? “Yes, under RRF they can use their own national budget management arrangements,” Petrovič replied. “Under these arrangements, recoveries, which are not fraud, corruption or conflict of interests, are not seen as breaches of the rules.”
When funds are recovered, they are not returned to the EU budget or deducted from future payments. It might sound unbelievable that the Member States are not obliged to return the money but Petrovič confirmed that this is the case. Recovered money is only returned to the EU if recovered by the Commission for serious irregularity breaches and not recovered already by the Member State.
“Public procurement and state aid are not a condition for legality and regularity of payment from the Commission to Member States,” the ECA member explained. “The Commission generally does not assess these aspects as part of each payment request assessment, as they are considered to have no effect on the achievement of the target.”
The auditors acknowledge that these shortcomings reflect the RRF design, where progress and the satisfactory fulfilment of milestones and targets is the main condition for payment. They warn that, in practice, this means that RRF payments can be made in full, even if public procurement or state aid rules have been breached.
Despite disagreement on the assurance gap the Commission accepted or partially accepted most of the audit recommendations on improving compliance with public procurement and state aid rules for the remaining implementation of RRF and future similar instruments. It only rejected one recommendation on defining corrective measures for breaches of public procurement rules.
Update: The article has been updated as follows to include the European Commission’s replies to specific questions by The Brussels Times. The comments have been edited for clarity.
The Commission does not share ECA’s view that there is no certainty that public procurement and state aid rules are complied with in the RRF as this would contradict the logic and legal framework of the RRF. Under the RRF Regulation, the responsibility to protect the financial interest of the Union, and notably to comply with public procurement and state aid rules, lies primarily with the Member States.
The Commission cannot comment on whether it is legal or not on under national law not to recover funds from final recipients. Under the RRF Regulation, the Commission has signed a financing agreement with each Member State, which outlines national control obligations. In case a specific serious irregularity is detected, the Member State should take actions to correct them and when relevant recover the funds from the final recipients.
In case the Commission detects that a Member State is systematically breaching its obligations, the Commission can take additional measures and suspend or recover payments up to 100% of the RRF funds.
Under the RRF, payments are made by the Commission to the Member States based on the fulfilment of milestones and targets. If irregularities occur which do not put into question that the Member State achieved its overall milestones and targets for that measure, then the Commission has no legal basis to recover funds as long as the Member State has corrected the irregularities.
In case the irregularities are so grave that the fulfilment of the milestones and targets is no longer assured, the Commission will reduce the corresponding payment or can even recover funds retroactively. Lastly, the Commission takes care of the enforcement of infringement and state aid procedures through general legal frameworks outside of the RRF context.
Following recommendations in March 2023, the Commission immediately strengthened its audit framework with an extended scope since 2023, which has increased the overall assurance of compliance on public procurement and State aid. On that basis, the Commission had timely information to draw reasonable assurance for the year 2023 in DG ECFIN’s Annual Activity Report.
M. Apelblat
The Brussels Times
