Financial Instruments: costs must be kept reasonable, say EU Auditors

Financial instruments, which provide EU support to recipients through loans, guarantees and equity investments, are sometimes expensive in terms of management costs and fees, according to a new report from the European Court of Auditors. The instruments operate across all Member States and are used increasingly by the EU as they may be a better way of using public money than grants.

financial instrumentsThe auditors examined whether financial instruments in the areas of regional, social, transport and energy policy were an efficient way to implement the EU budget during the period 2007-2013. They identified a number of significant issues that limited their efficiency:

  • management costs and fees were high in relation to the support provided and significantly higher than for private-sector funds;
  • a significant number were oversized and by end-2014 they continued to face significant problems in disbursing their capital (although steps have since been taken which may alleviate this problem);
  • financial instruments in both shared and central management were unsuccessful in attracting private capital;
  • only a limited number succeeded in providing re-usable financial support.

Mrs Iliana Ivanova, the Member of the European Court of Auditors responsible for the report, said, “Under certain conditions, financial instruments represent a better way to spend public money. But it is essential that their associated fees and costs are kept at a reasonable level going forward to 2020.” Improvements were made for the 2014-2020 programme period, but certain issues remain, say the auditors.

Their main recommendations (with target time-frames) are that the Commission should:

  • ensure that Member States report comprehensive information on management costs and fees already incurred (by end-2017) and also change the regulations during 2016 to strengthen the element of incentives in fees for fund managers over the period to 2020;
  • distinguish clearly between the extra funding raised by public and private contributions and clearly define how the amounts mobilised by the EU and national public contributions are calculated, possibly following OECD guidelines (at mid-term review);
  • ensure that Member States provide complete and reliable data on private contributions to capital endowments (by end-2107);
  • take appropriate measures to ensure that Member States re-use funds for the intended purposes during the required eight-year period after the end of the 2014-2020 eligibility period (by end-2016).

The full report is on

Source:  The European Court of Auditors