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European Commission - Speech - [Check Against Delivery]

Speech by Vice-President Kristalina Georgieva at the Budgetary Control Committee of the European Parliament following the presentation of the European Court of Auditors' annual report

Brussels, 10 November 2015

Madame Chair, Madame Rapporteur,

President Caldeira, Member of the Court Mr Lazarou,

Honourable Members and Members of the Court present today,

Over the last year since I have first joined President Caldeira in front of this committee to discuss the Court's presentation of the 2013 annual report, myself and my colleagues in the Commission have had many opportunities to benefit from very constructive and very useful interactions with the Court and I want to express our appreciation for the work the Court does to help us improve the financial management of the EU budget, to improve the quality of using our taxpayers' money. My gratitude to all of you and your colleagues.

I fully agree with President Caldeira on the challenges that require urgent action:

- to generate growth and jobs for our people;

- to secure our energy future and fight climate change;

- to deal with the urgency of the refugee crisis.

I would add one more: the criticality of regaining the trust of our citizens and for that the work of the Court and our work in the Commission are absolutely paramount.

I also very much agree and fully endorse, fully embrace the new approach President Caldeira outlined: new realities require new actions. And we at the Commission are working to align the budget with priorities, focus on results and strengthen controls. I also subscribe to President Caldeira's caution that what we are talking about is a systemic change in the EU's financial management culture and practice. And that does not happen overnight but we have to take it step by step, day after day. In this work we are very keen to benefit from critical views from the Court, and from this Committee.

In my comments, I would like to highlight:

- first, where progress has been made;

- second, where we need to do more;

- third, specifically I would like to highlight some particularly important challenges.

So let me start with progress made:

As President Caldeira highlighted, the EU accounts are in order – we received for the 8th time a clean bill of health from the Court. And the accounts are ''modern''. They are based on up-to-date international standards which ensure a high level of information and transparency. In comparison to some of our Member States this is a better standard.

It is the result of a fundamental reform that was launched 10 years ago and it shows that when we embrace a new approach it takes time, but it also pays off.

I want to stress that the Court of Auditors was and is a valuable partner in this reform process – it keeps us on our toes, pushes us to do better. It helps us to find solutions for new challenges, such as accounting for financial instruments.

Second, the increasing trend of the error rate of recent years has been arrested. We now see a stable and even slightly decreasing error rate.

For revenue and administrative expenditure the Court found it to be below the threshold of 2%. For operational expenditure, we see different shades of grey – but the overall level of error is slowly moving in the right direction.

We have to recognise that with 80% of our operations being in shared management, it is critical to work with national authorities. Our services are dedicating more and more time exactly to that: to provide guidance on a wide range of issues, to clarify rules, to share information on how errors occur and how they can be prevented.

In this context, I would like to thank you, Madame Chair, for the Committee's initiative to have an exchange of views with national parliaments on November 16th. Because increasing awareness of the EU budget and its implementation at national level is where we are going to see the biggest benefits.

Third, we have improved our reporting on preventive and corrective actions. I presented the communication on these actions to you on  October 19th and I would like to draw your attention again to the important information we provided. Over the past 6 years (2009-2014), the average amount of financial corrections and recoveries confirmed was €3.2 billion per year. This corresponds to 2.4% of average budget payments per year.

This shows that the Commission's multi-annual corrective capacity is effectively protecting the EU budget. I would once again stress that we need to put the Court's findings on the annual error rate in the context of the multiannuality of programmes and the financial corrections we undertake under this multiannual cycle.

Of course we can do better. And this is why each and every time the court gives us guidelines, gives us recommendations, we take them very seriously.

Fourth, and this is very important. We have increased our focus on performance. This is where President Caldeira's speech is headed. And rightly so. We have received this message from the Committee as well: value for money, get the best possible results for our taxpayers' sacrifice. And as you know we have launched a programme, this is going to be persistently a concentrated effort of this Commission on Budget Focused on Results. And on September 22nd we got very illuminating exchanges. I think you will see us working hard in this area over the next years. 

Our intention is to take stock and come up with the Communication on Budget Focused on Results to help us be more concentrated in our activities over the next years.  

This focus on results goes hand in hand with recognising that money must follow priorities. And this strong alignment of our budget with priorities is already evident in what we have proposed in our draft 2016 budget, including the amending letter that was mostly corresponding to heighten the tension to the refugee crisis. And as you know we are now in the process of negotiating exactly on that kind of focus on priorities in our budget. 

So, let me go to my second point: Where do we need to do more?

If we want to be effective in building a culture focused on results we have to improve our reporting on results. A lot of information is available – actually there is so much information that sometimes it is difficult to sort it out and get to a useful conclusion. This is an exercise that involves the Commission, but also Member States and other stakeholders.

Our objective is to achieve a useful, reliable and complete reporting. And reporting that is aggregated in one place. We have to be careful to avoid the trap of focusing on these results that are easy to measure. Not everything that is important is measurable in quantitative terms so we have to be clear that we need to combine quantitave and qualitative measurement of results. We also have to recognise that policy objectives change, and we have to have the agility to follow these changes. For example take the migration crisis. It was a priority but not of the magnitude it is today.

We ought to be able to move resources accordingly to serve our citizens best and to prevent a result framework to become an obstacle of agility of the budget.

Secondly, we must continue our simplification efforts. I am very grateful to the Court time and again reminding us that simpler rules mean fewer errors. We have taken a step with the simplified cost options but we can do more. And I want to emphasise the efforts of Commissioners Hogan and Crețu. They have very seriously embraced the work in agricultural and regional policy, including to the creation of a High-Level Group on Simplification that has already started its work.

And as President Caldeira stressed the mid-term review will provide an occasion to assess how the new instruments, programmes and rules have delivered and what we need to still adjust so we can do better.

And finally let me stress the most serious challenges we face. We have a tighter budget. At all levels. The good side of it is that we are forced to do more and better with less. But it also means that we have to be able to set up not only positive priorities, we have to be able to set up negative priorities. And it always proves to be so very difficult. And my plea here is to all of us, including the Parliament, to concentrate our energy on where we are getting the best value for our taxpayers and help us, help us in this strive to put priorities above the line but also below the line.

Also the second challenge is the cost-effectiveness of checks and controls. The Court in this year's annual report included an analysis of the relationship between expenditure type and the risk of error which shows that certain expenditure is indeed linked to a higher level of risk.

And the question is how to deal with this risk. The Commission or the Member States cannot send an auditor to check every single expenditure. We simply don’t have that kind of resource. So we have to be able to align our checks and controls with the degree of risk. Of course more controls for higher risk. But more controls for higher risk doesn’t mean that we can do 100% control of every single expenditure. So, again we need to work with the Court, we rely on the Court to make that effectiveness of controls higher. 

And finally, I want to focus on the particular challenge of developing a common understanding on performance.

Ms Dlabajova, the rapporteur for the discharge procedure, has mentioned that several times – and I fully support that. We cannot be working on parallel tracks, in different universes. Rather we need to work together on defining what is performance, how we can assess performance, come to operational targets, indicators and measures that are sound and viable so that what the Court does and what we do in the Commission do work in the same direction.

Let me finish with the budgetary management issues that President Caldeira highlighted. He highlighted absorption capacity and that is indeed very important. Absorbing money only makes sense if we absorb money well. And President Caldeira is right to say in the rush of increasing absorption, be careful, because we may actually decrease the quality of our project work.

I want to say that we have set up the Task Force for Better Implementation in order to help Member States to increase absorption with high quality and that task force has actually achieved quite a remarkable progress since it has started working. We have seen in the figures for 2015 a remarkable increase of the laggers - those who have been very slow to absorb - as a result of this concentrated effort.

I very much appreciate the point President Caldeira made on the necessity for us to continue to improve our forecast capabilities. We are working on that and I am very satisfied that we now have more precision which allows us to put the money where it matters most. When we have been working on finding resources to deal with the refugee crisis, the fact that we have better forecast capabilities certainly comes very handy. And I can pledge to you President Caldeira, we will continue to work on that important tool.

And finally on financial backlogs, we are keen to see that the backlog is to gradually melt down. We stick to our commitment for next year to go down to 2 billion and again here is where the budgetary procedure that we are undertaking now, needs to help us. So we have commitments and payment appropriations that are aligned with this commitment we have made jointly.

Let me finish by saying that the bdget we discuss, this is not the Commission's money, it is not the Parliament's money, it's not the European Institution's money. This is our people's money, our citizen's money. And we owe it to them to make the best possible, most responsible use of it.

SPEECH/15/6042

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