eurosai 58 Information on EU European Court of Auditors ANNUAL REPORT OF THE EUROPEAN COURT OF AUDITORS ON THE IMPLEMENTATION OF THE EU BUDGET FOR THE 2017 FINANCIAL YEAR On 4 October 2018, the European Court of Auditors (ECA) published its annual reports on the implementation of the EU budget and the European Development Funds for the 2017 financial year. The objective of the annual reports is to provide findings and conclusions that help the European Parliament, the Council and citizens to assess the quality of EU financial management, and to make useful recommendations for improvement. Central to the annual reports are the annual statements of assurance on the reliability of the EU accounts and the regularity of the transactions underlying them. In 2017, the EU spent €137.4 billion . The EU budget is agreed annually — within the context of 7-year financial frameworks — by the European Parliament and the Council. Ensuring that the budget is properly spent is primarily the responsibility of the Commission. However, about two thirds of the budget are spent under what is known as ‘shared management’, with individual Member States distributing funds and managing expenditure in accordance with EU and national law. Overall results The EU accounts for 2017 were prepared in accordance with international public sector accounting standards and present, in all material respects, a true and fair view of the EU’s financial results for the year and its assets and liabilities at the end of the year. Therefore, as has been the case every year since 2007, the ECA gave a clean opinion on their reliability. The estimated level of error in payments from the EU budget continues to improve. In 2017 it was 2.4 %, down from 3.1 % in 2016 and 3.8 % in 2015. Moreover, in 2017, a significant part of the audited expenditure — mainly entitlement payments — was not affected by a material level of error. Therefore, this year — for the second year in a row — the ECA issued a qualified opinion on payments . Entitlement payments are made to beneficiaries for meeting certain conditions, rather than to reimburse costs. They represent 53 % of the expenditure audited for 2017 and include direct aid to farmers, the largest share of spending under ‘Natural Resources: Direct support’, and ‘Administration’. Both these areas had an estimated level of error below the 2 % materiality threshold. Other activities funded through entitlement payments are student and research fellowships and agri-environment measures. Cost reimbursements are made to beneficiaries who have incurred costs that can be reimbursed from the EU budget. They include spending in the areas with the highest error rates: ‘Natural Resources: Rural development, market measures, the environment, climate action and fisheries’ and ‘Economic, social and territorial cohesion’. Other activities funded by reimbursing costs are research projects, training schemes and development aid projects. The individual components of the Commission’s information on regularity are not always in line with the ECA’s findings. The Commission’s estimate of the level of error broadly concurs with the ECA’s for ‘Natural resources’ and ‘Administration’, but it is lower for ‘Competitiveness for growth and jobs’ and ‘Economic, social and territorial cohesion’. Sufficient information was available to prevent, or to detect and correct, a significant proportion of errors . Had this information been used by national authorities to correct errors, the estimated level of error for overall spending on, for example, ‘Natural resources’ would have been below the 2 % materiality threshold in 2017. Using available resources from European Structural and Investment funds is still proving challenging for Member States, and the EU budget continues to face significant pressure owing to the value of payments to which the EU has committed for future years. Measures to increase the flexibility of the budget in 2017 were helpful, but may not be sufficient to help the EU address possible future challenges. A combination of high commitments and low payments increased outstanding budgetary commitments to a new high of €267.3 billion. Better managing the risk of a payment backlog should be a priority when planning the multiannual financial framework for the period starting in 2021.