‘THE CONT NEEDS TO CAUSE “DISCOMFORT” TO FULFIL ITS ROLE’
Interview with Monika Hohlmeier, MEP and Chair of the Budgetary Control Committee
Within the European Parliament, each and every Member of the European Parliament (MEP) is tasked with the role of legislator, but also with the role of overseeing the implementation of EU policies by the executive, namely the European Commission. However, this second task, public scrutiny, is vested even more specifically in the European Parliament’s Budget and Control Committee (CONT), a committee with a rather horizontal outlook. Monika Hohlmeier has long experience serving as an MEP for almost 15 years, first as member of the CONT and, since 2019, as its chair. As she explains below, she takes the CONT’s public scrutiny not only very seriously but also sees its impact, which extends well beyond the EU’s financial interests alone.
By Sara Abbruzzetti, Gaston Moonen and Tamara Pap, Directorate of the Presidency, ECA
Two sides of the coin
When we speak with Monika Hohlmeier, she just had a hearing for Italy’s candidate ECA Member. This is one of the tasks of her committee, part of the public scrutiny package. ‘For such a nomination, we explicitly look at the person’s whole CV, at how independent they are and whether their knowledge is sufficient, not only of audit but also in the area of legislation and management.’ She explains that she has had candidates who were, in the Committee’s opinion, not independent or experienced enough, or both. ‘We had the impression that governments were nominating a person who was convenient for them. But that is not the criterion we use. They should first and foremost do their job without being influenced, and in line with international auditing standards.
…how to be sufficiently sure that projects are really European and not just national?
Having been a CONT member for almost 15 years now, Ms Hohlmeier has seen some evolution in the CONT’s work. ‘In the past, compliance played the biggest role, but other aspects have increasingly gained attention. Performance is one of the major ones now, partly because of the Recovery and Resilience Facility — the RRF. With this ‘performance-based instrument’, discussions of how to measure performance have intensified, with questions about how to do this, what indicators to use and whether the milestones and targets chosen by the Commission are valid enough means of telling how well money has been spent. Another question is how to be sufficiently sure that projects are really European and not just national?’ As she points out, such EU funding should be avoided: ‘Because then there is no European added value.’
Another aspect that the CONT has paid more attention to is impact assessments. ‘Several times we have seen legislation with insufficient impact assessments to substantiate it, also lacking transparency regarding what has really been done.’ An example she gives relates to the Green Deal, adopted while the COVID-19 pandemic was also ongoing, which in her view did not help. A third aspect increasingly on the Committee’s radar is avoiding ‘having issues regulated three times from different sides, sometimes in different ways.’ Because, says Ms Hohlmeier, ‘contradictory legislation makes it complicated to hold people accountable. An issue also mentioned by the Court of Justice of the European Union.’ She underlines that for many of these aspects, the question of the validity of data is also most relevant, whether in relation to an impact assessment or an ex-post evaluation. ‘What is important is that the real figures are given in their correct context and are not inflated.‘
On top of all this, the CONT chair sighs, working in crisis mode, adopting legislation to address various crises, takes a certain toll. ‘Sometimes it isn’t easy to have a really democratic decision procedure because you’re under pressure. Normally we have more time to speak with different stakeholders — NGOs, citizens, companies — but this was not feasible during the pandemic and with the war going on in Ukraine, quick decision-making is needed now, too. The Ukraine Facility, the Western Balkan Facility — these were all done through the accelerated procedure.’ But this should not mean toning down financial management, audit and scrutiny: ‘From auditing such initiatives, lessons can be and need to be learned, also for our own sakes.’ She underlines the importance of also having verified data and audit results on actions carried out by others, such as UN organisations ranging from UNWRA to UNICEF. ‘It is essential to do humanitarian work and try to bring peace to a region. But if EU money is misused, then we won’t bring the peace or the help needed.’
Performance and compliance are two sides of the coin that cannot exist without each other
She underlines that while the CONT’s interest in performance has increased, assurance regarding financial and compliance aspects is still just as necessary. ‘For me they are two sides of the same coin. Let’s say you have a wonderful infrastructure project like a bridge, but the tenders were manipulated. Performance may look great but if there was unfair competition, perhaps with oligarchs behind it or worse, then the compliance aspects are just as important, including for the eventual assessment of performance issues. Performance and compliance are two sides of the coin that cannot exist without each other.’
The discharge procedure — key leverage for accountability…
Most of what the CONT does revolves around the discharge process, which Ms Hohlmeier considers an essential power of the European Parliament. ‘Not all member states have a discharge process, and not all member states like it. But we have one and our committee cooperates a lot with specialised committees which identify issues that can be addressed in the discharge process.’ She observes that the procedure itself is sometimes complicated because of various technical points it includes. ‘But the main messages are there, such as the need for an IT system which is fully integrated and accessible also to the ECA, and not based on data delivered in multiple formats. Through digitalisation this should be a matter of seconds.’ She cites the Commission’s Arachne system as an example, saying its use should be extended to member states and thereby actually decrease bureaucracy. ‘Because data only need to be entered once, not three times — at regional, national, and EU level.’
She observes that, during the current legislature, the Parliament’s discharge report on the Commission has changed substantially. ‘It is more structured now, with more focus, with political priorities and most important messages, which are also placed more often at the beginning of the discharge report.’ Another area where she sees improvement is cooperation with the specialised committees. ‘We don’t want to be seen as checking these committees; we cannot be their superiors.’ But her committee reaches out to discuss on certain issues. ‘When we suggested requesting information about the 100 biggest beneficiaries in agriculture, the AGRI Committee was keen to have a joint meeting with us.’
…with the information from the ECA it became clear that milestones and targets should also be linked to projects…
The CONT chair explains that her committee pays a lot of attention to the arrangements for the RRF, even though it is outside the EU budget. ‘It is a totally different instrument, described as “performance-based”, even though you cannot monitor performance as we would like to see it monitored. This is the real problem with the RRF, and the ECA has shown this in several of its reports.’ She highlights how important these reports have been. ‘The ECA really put its finger on the problem. Say you have a large reform for which you receive €8 billion. Large amounts are paid, but the projects that need to be realised can come through years later, they don’t need to be planned in detail. This is an accountability gap the ECA revealed, and with the information from the ECA it became clear that milestones and targets should also be linked to projects, including to prevent EU money from disappearing into national budgets.’
From an accountability perspective, this aspect is very important for Ms Hohlmeier. ‘If EU funding is involved, the EU’s financial interests need to be protected. It cannot be in the EU’s interests to just give money to member states’ budgets and let them do what they want with it.’ She explains that the ECA criticised this approach and that, in the beginning, the European Commission stated that the final beneficiary would be the member state. ‘We made clear that the final beneficiary is not a member state and that the ECA should receive clear information on where the money flows to.’ She gives the example of a ministry for agriculture receiving over €500 million to be spent on biodiversity and climate projects. ‘Full stop, a ministry as final beneficiary. Very frustrating! We want to see money going to real beneficiaries, not intermediate institutions.’ In this respect, she pleads for the ECA to have full access to the RRF’s financial management system, FENIX. ‘Permanent access, not only for specific purposes as the Commission and member states were offering, because EU funding provided in 2022 might only be spent in 2025 or so.’
However, she thinks that good elements of the RRF structure can be combined with the experience gained in, for example, cohesion funding, where milestones and targets are clearly linked to projects, including specific reforms. She refers to a recent discussion relating to Slovakia. ‘There were milestones relating to the fight against corruption and fraud and the improvement of the justice system. Then we saw Slovakia reverse two milestones.’ The CONT chair explains that the Commission has gradually given member states less room for manoeuvre. ‘It is strengthening milestones during the implementation phase. At least now there is a methodology for valuing milestones, which would not have happened without the ECA and the CONT. Now we are asking for a methodology for when milestones are reversed — as in the case of Slovakia — after everything has been paid.’
She also thinks that long-term planning as envisaged through the RRF is not always possible in practice, in view of changing circumstances. ‘And the RRF is really a plan, not a framework like the multiannual financial framework (MFF). The RRF is often a rather top-down plan and you have to find good projects for it, which can lead to projects being funded which are not necessarily the best ones.’
…but enough accountability challenges remain
While Ms Hohlmeier is positive about the various changes in terms of accountability needs and outcomes, she also sees room for improvement — for her committee, for the ECA, and for the citizens themselves, including in relation to the RRF. ‘If, for example, you were to now ask Commissioner Gentiloni: “What are the most well-known projects implemented that proved to be effective, sustainable and increased our resilience?”, you would not get precise answers. We need a much clearer overview of implementation status and the money spent on projects.’ She does not believe the scoreboard that the Commission currently presents gives such information. ‘The figures the ECA revealed showed projects still in the planning phase. The real status of projects, like in cohesion, where invoices are sent to the Commission only once things have been done — you don’t have that in the RRF.’
During and following the pandemic, advances were paid almost unconditionally.
Crisis conditions have taken their toll also when it comes to protecting the EU’s financial interests. ‘During and following the pandemic, advances were paid almost unconditionally.’ She gives the example of EU funds provided to authorities in Hungary. ‘I believe over €900 million was given. Four years after the crisis, they gave that money to one of the biggest state-owned companies in China for the development of a battery. For me this is simply incredible.’ According to Ms Hohlmeier, this is one aspect that needs to be avoided in any future crisis situation: ‘No unconditional pre-financing.’ Another area for attention to improve accountability is full access to financial management systems for the ECA. ‘Such systems need to be up to date, with recent, almost real-time data. A third aspect relates to the Early Detection and Exclusion System (EDES) in relation to the EU Financial Regulation. ‘If there is misconduct, this EDES panel must be activated and the Commission must focus more on it.’ She also wants more clarity about what resilience is. ‘What does the word resilience mean for the Commission? The Commission needs to be clear on what kind of projects are not accepted under the heading of “resilience” in the EU. Just providing money to member states, almost unconditionally, does not increase resilience — only their dependence on EU funds.’
Besides the ECA’s publications, the CONT also receives information from the European Commission’s Anti-Fraud Office (OLAF) and the European Public Prosecutor’s Office (EPPO). For Ms Hohlmeier, the latter in particular has been a real game changer, including in relation to accountability. ‘Various member states are beginning to see that EPPO is really helpful. In the past, when there were manipulated tenders, prosecutors in some member states did not respond to requests from the Commission or from OLAF. But with EPPO, such requests are made through prosecutors who are influential in their own public prosecution systems. Misuse of EU funds needs to be brought to court, needs to be sanctioned.’ However, in relation to the RRF, she remarks that some member states — she mentions Malta, Croatia and Austria — have refused to refer cases to EPPO.
Ms Hohlmeier explains that cooperation with OLAF has also improved. Here her concerns relate to procedural errors. ‘When OLAF is searching for evidence, it really needs to ensure that all procedural requirements are met. Otherwise, you risk losing the whole case.’ She highlights the importance of OLAF in detecting fraud in the area of customs.
The IAS and the ECA should] focus on the important issues because we should not lose ourselves in nitty gritty cases.
Another organisation the CONT cooperates with is the Commission’s Internal Audit Service (IAS). ‘We strongly rely on the reports of the ECA, which provide insight on where problems exist or risks may arise. From the IAS it is interesting to hear where it sees problems with administrative capacities, and about programmes particularly prone to errors.’ Ms Hohlmeier hopes to see more from both the IAS and the ECA when it comes to the broader picture. They should, she says, ‘not only look into all the details, because then we end up unable see the forest for the trees.’ Rather, they should ‘focus on the important issues because we should not lose ourselves in nitty gritty cases. Most often, only when such issues are systemic do they need recommendations for improvement.’ She adds, on the subject of the IAS, that the CONT does not have access to its internal reports, only those open to the public. ‘I don’t think we should have such access. The most important thing is that the ECA has access to IAS reports. It is important to know that the Commission can prove that, if it found something, it has really acted upon it.’
When it comes to the CONT’s own accountability and transparency in relation to its work, the CONT chair refers to is the information publicly available on the committee’s website. ‘What is important for me in the CONT’s activities is that we don’t duplicate things, and avoid having reports on the same issue year after year.’ Being rather introspective, Ms Hohlmeier identifies one thing at which she considers herself less successful. ‘I like that we are doing various discharge reports, but do we really follow them up? So in terms of our own reports, this is an area where we could do more. Another Interview with Monika Hohlmeier, MEP and Chair of the Budgetary Control Committee During and following the pandemic, advances were paid almost unconditionally. “ [The IAS and the ECA should] focus on the important issues because we should not lose ourselves in nitty gritty cases. “ 98 area she feels her committee needs to follow closely is public procurement, particularly in relation to the Green Deal.
Financial interests go well beyond finance
Overall, Ms Hohlmeier is convinced that the CONT’s work has really made a difference when it comes to transparency. ‘What is happening with EU money? Member states, particularly regarding the RRF, don’t like to say what the money is used for.’ She points out that, without the CONT, member states would be able to get away with this more easily. ‘Without the CONT, the ECA would not have been involved in the RRF Regulation. We will try to continue on this path, really changing regulations from in terms of accountability and transparency and allowing for the public to see and get proof of what happens with EU funds. For this, the CONT is the voice.’ She adds that she hopes to be able to contribute to the next legislature herself, after the elections in June 2024.
…allowing for the public to see and get proof of what happens with EU funds. For this, the CONT is the voice. (…) This discharge power of the European Parliament makes really a difference to democratic oversight.
She underlines that the CONT has a stronger voice than parliament committees in some member states. ‘Some parliaments are not used to this kind of public scrutiny. This discharge power of the European Parliament makes really a difference to democratic oversight.’ She considers it crucial that a parliament should have the right to demand accountability of institutions and programmes and put its finger on problems, identifying lack of oversight and lack of audit. ‘The RRF Regulation is the best example of where we did this. We need to remain critical. The CONT needs to cause “discomfort” to fulfil its role. Discomfort for the Commission and for member states.’
This does not mean she wants to change everything. ‘But you can always strive to improve things.’ She explains that, after the pandemic, her committee really achieved a common understanding on transparency, taking a firm position vis a vis the Commission. ‘We “achieved” the conditionality mechanism, which really made a difference. We must continue on this path to show that we are the institutions to make the European Parliament and all the institutions more credible.’
It’s about the way you treat EU money, making sure it is not misused. We won’t accept an oligarchic system.
Through this conditionality mechanism, Ms Hohlmeier believes that the Parliament showed EU citizens that governments must adhere to concrete European values, such as the independence of justice. ‘It’s about the way you treat EU money, making sure it is not misused. We won’t accept an oligarchic system.’ She observes that, for many people, these European values are not self-evident. ’70 to 80 % of states in this world are autocratic, or not democratic, so we are really under pressure from outside.’
…financial interests go well beyond finance. In protecting them, we need to protect our values!
She recalls working on the conditionality mechanism, some years ago now. ‘We were saying “no EU funding” for those who were not respecting our legislation, our fundamental values as enshrined in the Treaties. Without the CONT, the conditionality mechanism would not have been introduced. You can really make a difference by having this kind of democratic oversight, voiced in parliamentarian democratic protest.’ She explains that even if the programme a member state submits for funding is fine in itself, if that country is violating various values — if its judges are not independent, its prosecution system does not work, etc — then other guarantees are needed that the EU’s financial interest are being protected. ‘In the end, financial interests go well beyond finance. In protecting them, we need to protect our values!’
