INTERVIEW/Klaus-Heiner Lehne (ECA): One of EU funds use problems is complexity; they should be better targeted

Complexity and parallel planning are some of the problems encountered in using European funds, which should be better targeted, European Court of Auditors (ECA) President Klaus-Heiner Lehne told AGERPRES in an interview.

He is paying an official visit to Romania, in the context of Romania's taking over the rotating presidency of the Council of the European Union, as well as to discuss with the Romanian authorities about the new 2018-2020 strategy of the European Court of Auditors, within which the approach related to audit issues will be modified.

The European official underscored that he discussed with the Romanian authorities about the future multiannual financial framework, as well, which should be more flexible, as, in a seven-year political process, there are always things that happen that hadn't been foreseen, such as the financial crisis and the migration crisis. Moreover, the regulations must be easier to understand, more practical, as systems are often much too bureaucratic and much too complicated. A third aspect Klaus-Heiner Lehne mentioned is that the multiannual financial framework must respond to all these new issues that have emerged, for example Frontex, the border protection.

The European Court of Auditors President also spoke in the interview about the areas in which the institution is focusing its activity and mentioned that cyber security would become an increasingly more important area and that ECA must be capable to perform an audit in this area.

AGERPRES: So the first question would be what is the main objective of your visit here?

Klaus-Heiner Lehne: First there's a very general reason and there is a special reason. The general reason is of course we are approaching the Romanian Presidency and I think it's a good tradition that the institutions of the EU, and we are one of the seven institutions, gets in contact with the presidency before the start. That's one of the reasons why I am here. So this is normal.

The second one is I have a special problem to discuss with the presidency. We have actually a new strategy - 2018 to 2020 - within the European Court of Auditors, we are changing a little bit our general approach for audit issues. You know, in the past our main product was the annual report, which is mainly dealing with compliance aspects. Because this is the main result of the annual report, we have issued a so-called estimated error rate and this estimated error rate was more or less the base of our professional judgment, how the EU Commission has managed the budget. And we did it in a way that we did checks, around 1.000 transactions checks all over the European Union and on the basis of a type of mathematical statistical system we, at the end, calculated an error rate, and that was the basis for that.

It's quite of an expensive and resource intensive operation. So more or less half of our resources we have used for this kind of compliance audits. And it's very unique. There is no one else in the world who is doing something like that. Most of the other supreme audit institutions in the world that have a similar task do it via checking systems, and more or less, at the end, doing a kind of attestation audit. We have not done that in the past because when we started with the statement of assurance in 1994, due to the new rules in the Maastricht Treaty, we, at the end, we were confronted with a situation in the EU budget where the major spending areas had a double digit error rate. It was more or less a situation in which there was no well-functioning management of the EU financial resources. And, you know, one of the consequences at that time was the stepping down of the Santer Commission because of lot of scandals within the structure of the commission. After that things changed. There was a new financial regulation. We, of course, did our audit.

And now take a look at the development of the 20 years, the financial management of the EU has improved massively. For the first time in the last two years, we have been able to issue a qualified opinion, we are now actually with the estimated error rate around 2.4 percent. Regarding international financial audits stand as we speak of materiality rate of two percent, that means what is below two percent as an error rate, normally, is understood to be error free. So there are no mistakes in the system. And actually we have this 2.4 percent plus around half of the budget is error-free. We now think if we want to do even more, then that would require additional testings, additional audits, additional controls, all these additional activities, at the end, have to be proportional. But they will not be proportional. You have to use much, much more resources even to achieve a little bit more of success. So it is now much better to move to the system of the attestation audit that means checking the functioning of the systems. If the systems produce relevant, useful, high-quality results, we can use them for our professional judgement. And only in the areas where we believe this is not the case, there we will still do transaction testing. That give us the chance to reduce the overall amount of resources that we use from around 50 percent maybe to 25-30 percent, and the difference we can use for additional performance audits.

Performance audits we already are doing, actually when I became President was around 20, actually already is up around 40. They are much more of interest for our stake holders. Because, of course, it's quite important if a public procurement in a public investment was done the right way. But the question that is even more important in this compliance question is does this investment make sense? Is there really a positive effect because of that investment? Is the terminal that is built at an airport really used by passengers? Has it produced additional jobs? Is it really a qualitative improvement of the infrastructure? Things like that. Or is a motorway that is built somewhere really used or is it just concrete gold, or was it built somewhere in the landscape? So this information, we try to pass, first we try detect it and then we try to pass it in the direction of our main stake holders, that they can use this as an information. So we set resources free that we do not need any longer on compliance, we still do compliance but in a different way, much more effective related to the rest of the task that is still there and we use our resources much more in the area of performances and the direction of economic efficiency and in the quality of that what is made out of the money in the European funds. That's more or less.

That, of course, I have to explain to the stake holders. In Parliament that's easy, you go to Strasbourg, you have in Strasbourg a meeting with the key people of the European Parliament, they support you, it's done. With the Council it's much more difficult, if I get an invitation for the ECOFIN, I have 25 minutes to discuss the annual report with them, but you do not have the chance to explain. You have to explain that to governments, and that's the reason why, of course, the President of the Court of Auditors has to do a kind of roadshow, to go to major governments to explain and the Romanian government simply because of the approaching presidency is one of the most important, actually.

AGERPRES: You had several meetings with Romanian officials. What are the conclusions of these meetings?

Klaus-Heiner Lehne: Actually, I had a meeting with the Finance Minister, I know him already from the preparation of the last ECOFIN, I think there's good chemistry between us. My feeling is that he is very supportive regarding our reform process. I have asked him, from our side, if the Romanian Presidency has specific wishes on audits and opinions we should deliver, for example in connection as well with the MFF [Multiannual Financial Framework] process, it would be pleasure for us to do so. So they can ask us and we will think about that, of course.

AGERPRES: In the period in which Romania will hold the Presidency of the Council of the EU the next MFF should be drawn up. What do you think should be the main changes we should look for during the time that Romania will hold the Presidency?

Klaus-Heiner Lehne: I will focus on three aspects. First, I think the new MFF must be much more flexible than the old one. Flexibility is a key-issue. Why? In the past, if you look at the old MFF and the ones before, they were more or less fixed, in a double sense. The major areas of spending were fixed in a way that you had national envelopes so you could not move between the national budgets. Second, we had the problem that they were as well fixed in different chapters so you could spend the agriculture money only for agriculture and the money for fishery for the fisheries and the regional only for regional issues and so on. And the problem is that if you have a planning over seven years, this is never functioning 100 percent.

In a political process over seven years there are always things that happen that you have not foreseen: financial crisis, migration crisis, only two examples that I would like to mention. Then, normally, if something like the migration crisis happens, after that the European Commission, because there is a demand by the member-states for Europe to tackle the problem, to do something about this, is trying to find money. But they do not find the money in the EU budget, even if the money is not spent. They cannot find it because it's all fixed and you cannot take out money from some sector and use for it a new purpose. The result of this is that very often they find smaller amounts of money and the difference is then given by the member-states or created from somewhere and this produces a kind of "galaxy of budgets". And these surrounding budgets, surrounding the regular EU budget, they are intransparent, they are not audited, they are not controlled, whether by the European Parliament, nor really by the national parliaments, and that's simply not a good policy. And what we believe is that in the end, on the long-term, we should integrate all these satellite structures within the major EU budget and, of course, we should avoid that something like that becomes necessary by simply having more flexibility within the structure. That's the first point.

The second point is to make regulations easier to understand, more practicable. Very often the systems are much too bureaucratic and too complicated. This is due to the simple fact that everyone who's sitting there as a legislator in Parliament, as well as later in the Council wants to have as much determination and lack of flexibility for those people that do the final decision. On the other side, I think a little bit of more trust in relation to those people that do the final decisions would be quite helpful, because that gives, as well, additional flexibility as well as the opportunity to have rules that are easy to be understood. As a very simple background, very complicated rules produce more errors. Less complicated rules produce less errors. So from the point of view of an auditor, rules should be good, flexible, should include the opportunity to be interpreted, to become practical at a certain time and they should be easy to understand. So I believe that is the second most important issue.

The third one is to answer all those questions that have newly occurred. So, for example, it is quite clear that we have new tasks: Frontex, protection of the borders. And this has to be financed somehow. And of course this is only possible with the existing budget, maybe a little bit increased, but it will not be a big increase at the end. So, probably, within the big sectors, we have to take money and move it in the direction of the new tasks. But this means, as well, that the money left in the big sectors has to be spent much more focused to have the same effect. It must be much better targeted, it must produce added European value and this is, as well, crucial to the new structure of the MFF... those are the three points.

AGERPRES: I want to talk about the main areas in which the European Court of Auditor concentrates its audits?

Klaus-Heiner Lehne: I think we have changed a little bit the classical attitude. In the past, we mainly followed the money of the big spending areas. So agriculture and structural funds. They are still very important, but again, over the last seven years the EU has changed. We are doing a lot now in the area of planning policy. The EU is doing a lot in the environmental areas. The EU is doing more and more in the area of the rule of law. The EU is doing a lot of things in the area of migration. The EU is doing much more than in the past in supporting countries in the neighbourhoods, Mediterranean, as well as in the local neighbourhoods. So that is what we have done, and the financial crisis that we had. But the EU has new competences now, especially the supervision of banks and other issues. What we have done is we have changed the competence of our chambers. We are operating like a Court of justice. We have chambers that deal with specific issues. So, Chamber number four is mainly dealing with all the aspects of the financial service, internal market and things like that. This is not so much directly connected to money that is actually spent by the EU, but it is extremely important because if something goes wrong in this area, it becomes extremely expensive for the taxpayers, as we have experienced in the past. So that is an area where we are doing much more, so we are auditing the European Central Bank, we are auditing the SSM, so a lot of structures that have been created after the financial crisis.

Another issue, of course, is all this area of migration, the neighbourhood policy, the rule of law, they are all connected to this. The Third Chamber that mainly in the past has dealt with foreign policy, with the development fund, is now as well dealing with these matters. And this is as well becoming more and more important because one of the experiences we had is that migration can be very expensive and we may face a lot of consequences. So this kind of policy, what we are spending there I think must be checked as well. There will be other things which we have to deal. So, for example, the EU for the first time, is starting to spend real money in the area of defence. It will probably happen that we'll have some activities of the EU in the public procurement for defence matters. Or that we have some kind of coordination on foreign security. This is something which is a new task for us, which as well will be done in Chamber No 3. Because it's connected, of course, security policy to the aspect of foreign policy.

Cyber security will become an issue more and more. And we must be able, for example, to deal with this and to do audit in this issue. So there are a lot of points where we really have to find the right targets that are relevant for the future. And then, of course, we have to prepare the institution to do so. You can only do an audit on cyber security if you have people who understand that. You can only do an audit on supervision of banks if you have someone who did this. You can only do an audit on defence if you have someone, for example, who had audited this before. For example, there is a very, very strong experience in the national audit offices. They did audits on defence since more than one hundred years. But we not, so we try to share. In some of the areas, of course, we can support them. And we expect as well exchange of staff or something like that, so as we get experience from their side.

AGERPRES: Now I want to ask you about the biggest problem you identified at the European Union level regarding the use of European funds.

Klaus-Heiner Lehne: The biggest problem... that's difficult to day, but just complexity, of course. So to have less complexity would make it much easier. For example, in the structural funds, we have a much higher error rate than we normally find, for example, in agriculture, because in agriculture the way of spending is easier, they are more lump sums there. In other areas, where we have projects, and they have to be calculated, of course, the risk to be an error is much higher, so this question of complicated rules plays a certain role. Then, of course, the question of parallel planning. It is sometimes quite correct, but the EU does in huge projects. They say they are important and they should be financed. But if you take a look at the Brenner tunnel, in Austria, with the EU money a lot of things are happening, but if you go to the south, in Italy, or to the north, to Bavaria, you see that the connecting roads or the connecting tracks for the trains they are not there, they are not available. And you see this kind of trans-European planning is not really functioning. Here I believe that a coordination between the member states, as well as the coordinating role of the Commission must be much stronger than it is. So I think that those are two aspects which I believe that are quite important.

In agriculture, we very often see a contradiction between the classic way of financing big agricultural enterprises and the environmental interests on the other side. We see that there are funds for supporting the environmental development, but they are in contradiction to the way how we finance traditional agricultural policies. So still a lot to do, still a lot to do.

AGERPRES: How can we improve the way the European funds are used?

Klaus-Heiner Lehne: They should be better targeted. The planning of the parallel aspects should be massively improved. And, of course, the money should be spent at an earlier stage. So one of the key problems that we addressed in the last annual report is the simple problem of the so-called RALs (remedial action list), that is the money is foreseen in the budget, but not spent in the budget, because the projects have not developed in that direction. This shouldn't become more and more. Actually, it is double than the amount of the regular budget. That shows that the absorption quality of the member states is still much low. This has something to do with a lot of facts. Some of the aspects concern co-financing, others concern lack of planning, planning difficulties and things like that . That is an area where I believe the EU should improve, because to have the money in the budget is one aspect, but to transpose it into concrete actions is another aspect, and, probably, at the end it is more important than the first one.

AGERPRES: How can we make sure that Romania is using the right way European funds?

Klaus-Heiner Lehne: I had an interesting discussion this morning with the president of the national audit institution here and he described one of the reasons are the problems that exist in planning. This is, by the way, something that is the same in many, many other member states. So planning very often is not functioning because individual interests that act against the collective interest, and probably you have to find the right balance. So if there is a really overwhelming common interest, the common interest gets a priority and then you can develop planning and you can fasten planning. So that at a certain time you have the projects in a stage where you can really start with building and really starting the construction. AGERPRES (RO - author: Constantin Balaban, editor: Nicoleta Gherasi; EN - author: Rodica State, Razvan-Adrian Pandea, Adina Panaitescu, editor: Rodica State)