EU auditors warn of waste in €5 billion Brexit fund

A rush to quickly spend a €5 billion European Union fund aimed to counteract the economic impact of Brexit may sacrifice quality for speed, and Ireland could end up having to pay some money back, the European Court of Auditors has warned.

Ireland is in line to receive at least €1 billion of the Brexit Adjustment Reserve (BAR), by far the largest amount going to any country in the bloc due to the economy’s exposure to the impact of Britain’s exit from the EU.

In a bid to get money out to member states quickly some 80 percent of the BAR will be provided to governments up front without the details of the projects it will pay for needing to be provided, compared to the usual level of just 13 per cent of EU budget funds.

Governments will only later have to justify how they spent the money, by submitting claims in 2023, something that the auditors warned carries risks. Capitals could spend the money on sub-optimal projects that do not offer the best value for money, the auditors pointed out.

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In addition, governments could mistakenly fund projects that are later deemed ineligible when claims are submitted to the European Commission, which would mean that the money would ultimately have to be paid back into the pot.

Measures

The eligibility period for implementing measures is July, 2020 to December 2022, and it is unclear why this period has been chosen or whether it is best designed for its purpose of counteracting the effect of Brexit, the auditors warned.

Ireland is set to receive just over €1 billion of an initial tranche of €4.2 billion in funding available for the whole bloc, with almost all of it arriving in pre-financing in 2021.

The Netherlands is to receive €714 million in pre-financing, Germany €429 million, France €396 million and Belgium €305 million, reflecting the impact of Britain's departure and the disruption to trade and the fishing industry.

Ireland's member of the Court of Auditors Tony Murphy, who wrote the opinion, described the BAR as an "important funding initiative", but warned that "the flexibility provided by the BAR should not create uncertainty for member states".

The large proportion of pre-financing is aimed to allow the funds to take effect as soon as possible and lessen the Brexit impact.

“While this would allow for a swift reaction to the exceptional situation, the eligibility and appropriateness of these measures would not be assessed by the Commission before the end of 2023,” a statement from the Court of Auditors read.

“The auditors warn that the proposed structure and timing would increase the risk of sub-optimal and ineligible measures being chosen.”