EU Trend Report 2011

Our first main conclusion relates to the regularity of the use of EU funds. Developments in regularity show a mixed picture. Fewer EU funds were below the acceptable error rate of 2% than in the previous year. If we look at all funds flows together, however, the error rate has declined in recent years. This improvement is attributable chiefly to a lower error rate in structural funds. Nevertheless, it is still higher than 5%.
Our second main conclusion relates to the cost of controls of structural fund programmes in the Netherlands. Depending on the calculation model used, there are significant differences in estimated costs of controls. They are lower if the standard cost model is used rather than the less-detailed cost centre model preferred by the European Commission. The Commission cites the high control costs assumed in some policy fields as a reason for different (and higher) tolerable risks of error in those fields. Before the European Commission takes such a far-reaching decision, we suggest that it review the two calculation methods in consultation with the actors concerned in order to gain a better insight into the actual cost of controls.
Our third main conclusion relates to the length of the current programming period for structural measures: seven years. In our opinion, there are a number of drawbacks to such a long programming period. Firstly, it is not conducive to effective parliamentary control of expenditure and results. Secondly, fundamental changes in systems and regulations between old and new programming periods create uncertainty among programme implementers and controllers and to delays in the start-up of projects in the new programming period.
Our fourth main conclusion is that the audit chain in the Netherlands is not sound with regard to the levying and collection of agricultural levies and customs duties and their remittance to the EU. The Ministry of Foreign Affairs is responsible for remittances to the EU but the precise scope of its responsibility for levying and collecting them is uncertain. Furthermore, the cost of collecting agricultural levies and customs duties is not recorded separately. It therefore cannot be determined whether the payment the Netherlands receives from the EU to defray collection costs covers the actual costs incurred.

We made several recommendations to the ministers concerned with a view to improving accountability and transparency in the EU and the member states. The main recommendations were that they should:

• continue to insist at European level on the timely publication of accountability documents so that parliament and other supervisors can use them in their controls;
• draw the European Commission's attention to the importance of simplifying regulations on EU funds and investigate the impact of simpler regulation on management and control costs and error rates; 
• investigate, in cooperation with the European Commission, the feasibility of shorter programming periods.

We also made the following main recommendations with a view to improving accountability for and transparency of the use of European funds in the Netherlands:

• the Minister of Finance should raise our audit findings on the cost of controls of structural measures in the negotiation of the new EU Financial Regulation and ask whether it would be appropriate to relax standards in light of the findings;
• the Ministers of Finance and Foreign Affairs should clarify as soon as possible the division of their responsibilities for the remittance of traditional own resources to the EU and optimise their cooperation regarding controls of agricultural levies and customs duties.

The government will work hard on the simplification of regulations regarding the implementation and enforcement of EU policy in the Netherlands. As in the previous year, it will publish its annual summary of the use of EU funds and urge other member states to do the same. The government thinks our findings on the cost of controls of structural measures will form valuable input in the debate of different tolerable thresholds. For the time being, it will not adopt the cost/benefit method proposed by the European Commission. The government agrees that effective parliamentary control of programme expenditure is essential. However, it does not agree with our conclusion that it is frustrated by the long programming period. Finally, the government believes the system of audit responsibilities in place for the agricultural levies and customs duties the Netherlands remits to the EU is sound.