The European Court of Auditors’ new president vowed that “lessons have been learned” after a spending controversy ousted his predecessor, calling for the EU’s spending watchdog to meet the high standards of “ethical conduct.”
In an interview with POLITICO, Tony Murphy, who was chosen to head the Luxembourg-based institution last month, said the auditor “should be at the forefront of best practice, we should be above reproach and be seen as a role model.”
While the European Court of Auditors is normally responsible for auditing how EU money is spent, the agency has been battling its own ethical problems of late.
Murphy’s predecessor, Klaus-Heiner Lehne, a former German European Parliament member, stepped down last month after six years in the role. Lehne left following a scandal over allegations in the French outlet Libération that he was using a shared apartment in Luxembourg as a “shell address” to claim EU funds.
Murphy’s remarks come at a pivotal moment in his nascent tenure, as the institution is set to unveil its latest annual report on Thursday. The document will — once again — slam the European Commission for its spending record, saying there were “too many errors” in how the EU spent money. Such assessments normally land loudest when the people behind them are above reproach.
“It’s not just about being fully aligned with the rules,” Murphy said. “The ethical conduct has to be appropriate.”
While Murphy declined to specifically criticize Lehne, a member of the conservative European People’s Party, he was blunt in arguing the Court of Auditors must be “at the top of the league in terms of practicing what we preach.”
“If our reputation has been damaged, we need to work on that. If we have lost some trust, we have to regain that,” he added.
Murphy, an Irish official with more than 40 years of experience in the auditing world, was chosen to head the agency through a secret ballot last month. He rose to the job after working at the audit institution for a decade, including the last four as Ireland’s member of the court.
Murphy’s first annual report as head of the EU watchdog will show that spending errors in the EU budget rose to 3 percent last year, up from 2.7 percent in 2020. Some of the highest error rates occurred in how the EU spent so-called cohesion funds, meant to boost less wealthy countries, and its research funds.
It’s the third consecutive year the auditors have issued an adverse finding on the Commission’s spending record. And it’s the first time the agency has assessed the EU’s “Recovery and Resilience Fund” — the pandemic-era program that doled out billions to help battered economies.
While only one payment was made under the program last year — to Spain — the auditors found Madrid had not fully met one of the 52 “milestones” it agreed to in exchange for the cash. Murphy said the findings pointed to possible “accountability gaps” down the road.
“We have yet to see how the Commission will ensure the protection of the financial interest of the EU,” he said. “The spirit of the regulation was to give the money very quickly, without a lot of bureaucracy, but from another perspective, it raises some issues.”
The Commission, he added, must decide how falling short on a milestone “would affect the installment that is due. That has yet to be determined.”
The auditors will also warn that the war in Ukraine is posing risks to the EU budget. Ukraine, the report notes, already had outstanding loans worth €4.7 billion under multiple EU programs at the end of last year, before the war started.
Murphy said there’s a risk Ukraine may not be able to repay those loans, and noted there could be similar exposures in the future, given the large amount of money needed to reconstruct Ukraine.
Murphy also reiterated the court’s criticism of how Commission President Ursula von der Leyen handled contract negotiations with pharmaceutical giant Pfizer at the height of the COVID pandemic. Last month, the court accused von der Leyen of refusing to disclose details of her personal role in the talks.
“Under the treaty, we’re entitled to all the information we ask for and it is considered necessary to carry out our work,” Murphy said. “We did not get the complete information, which we would have liked to get.”
But he also pointed out that a steering committee was in place to monitor the contract.
“Ultimately,” he noted, “the member states approved this contract.”
Overall, the EU spent €228 billion last year, a number bumped up by the pandemic recovery fund. Around three-quarters of the total was managed and distributed by member states.
Murphy says “the way funds are disbursed” has an impact on the error rate. For instance, agricultural payments are made directly to farmers, lowering the chance of errors. Conversely, Horizon 2020, the EU’s flagship research program, and cohesion funds are more complex, with recipients normally reimbursed from the EU budget.
The report also questions the error rates each country is feeding back to the Commission, noting that the Commission’s own internal auditing derives from the work of national authorities.
“If the input is not reliable, then the output is not reliable either,” Murphy said.
