In a report of May 2022 the European Court of Auditors (ECA) criticizes the European blacklist Early Detection and Exclusion System (EDES) that should protect EU funds.
From the executive summary:
The EU and the Member States are jointly responsible for protecting the EU’s financial interests with respect to EU funds. “Blacklisting” (or exclusion) is a key tool that international bodies and national authorities use to protect their public finances. The objective is to avoid entering into financial agreements with untrustworthy counterparties, such as those involved in fraud, corruption, professional misconduct, money laundering, or non-payment of taxes. In 2020, the EU paid out around €150 billion under financial agreements. Since 2016, the Commission has been responsible for operating the Early Detection and Exclusion System (EDES) for the quarter of EU spending (€39 billion) that it manages directly or indirectly through implementing partners in line with the EU’s financial rules. For the three quarters of EU spending involving national authorities (€111 billion), Member States have to follow exclusion-related obligations but they are not required to set up exclusion systems or databases per se.
The aim of this audit was to assess whether exclusion is being used effectively to protect EU funds from untrustworthy counterparties. We focused primarily on assessing whether the EDES has been operating effectively in direct and indirect management. In particular, we examined the effectiveness of EDES’ exclusion situations, exclusion procedures, blacklist of excluded counterparties, and arrangements for identifying counterparties in exclusion situations. As regards shared management, we selected four Member States to review their exclusion arrangements and to identify good practices. We carried out the audit with a view to contributing to the Commission’s proposals for revising the EU’s financial rules and its plans for enhancing the use of digital tools and data to protect the EU’s financial interests.
We concluded that exclusion is not being used effectively to protect EU funds from untrustworthy counterparties. Although the EDES has a broad range of exclusion situations and robust decision-making procedures, the Commission services have recorded few exclusions in the system due to shortcomings in the arrangements for identifying counterparties in exclusion situations. In shared management, where EDES does not apply, Member States’ differing approaches undermine the overall effectiveness of using exclusion to protect the EU budget.
ECA recommends the Commission to:
o extend further the range of exclusion;
o strengthen the implementation of the EDES;
o improve the monitoring of the EDES under indirect management;
o extend the EDES to shared management;
o make better use of data and digital tools for exclusion purposes.