Cyprus increases absorption of EU funds

Over the past two years Cyprus has been a net beneficiary of EU funds, while increasing its rate of absorption of the same, MPs heard on Monday.

A joint session of the House finance, watchdog and foreign affairs committees were being briefed on the European Court of Auditors’ (ECA) annual report on the 2019 financial year.

In 2019 Cyprus contributed €209.3 million and received €264.4 million; and in 2020 the island contributed €203.4 million and received €263.9 million.

ECA member Lazaros Lazarou also said that at the end of 2018 Cyprus had absorbed 35 per cent of EU funds available to it; the uptake rose to 48 per cent at the end of 2019, and to 57 per cent at the end of 2020.

At the same time, the Republic has absorbed 59 per cent of regional development funds for which it was eligible.

Citing the ECA report for 2019, Lazarou said the auditors reported nine suspected fraud cases out of 747 examined transactions to Olaf, the European Anti-Fraud Office.

Of the nine cases reported to Olaf, the latter opened five investigations and dropped the other four.

Each year the ECA carries out a random sampling of transactions involving spending of EU money. For 2019, the ECA examined 747 transactions across the bloc; and of these, nine happened to pertain to Cyprus, for which nothing untoward was found.

Chiming in, auditor-general Odysseas Michaelides said his office has over the years sent three cases to Olaf. One of the cases was forwarded to the Directorate-General for Competition.

Lazarou also referred to another report prepared by the ECA after a tour of the region. It made a number of recommendations to member-states regarding the sharing of tax information, enhancing the tax regime and better monitoring of the implementation of EU legislation.

The official said the ECA plans to include issues related to Covid-19 in its auditing over the coming years.

For his part, Ierotheos Papadopoulos, head of the European Commission Representation in Cyprus said the island is not considered a high-risk country.

On high-risk expenditures, Papadopoulos said they have gone up compared to the previous three-year period, but attributed this to the higher uptake of EU funds in general.

“We have exceeded 50 per cent in absorption, which also heightens the risk,” he noted, but added that qualitatively 2019 was no different to prior years.

Cyprus has implemented 206 of the ECA’s 270 recommendations, which is why “we have one of the most reliable and transparent systems in the world.”

According to the ECA’s annual report, in 2019 the EU spent €159.1 billion in total.

Whereas the ECA gave the EU’s accounting a clean bill of health, it did find widespread problems as regards expenditure. Although the overall level of irregularities in EU spending remained relatively stable – 2.7 per cent in 2019 compared to 2.6 per cent in 2018 – the error rate in the ‘high-risk expenditure’ category was high (4.9 per cent).

High-risk expenditure concerns reimbursement-based payments, often subject to complex rules and eligibility criteria. These include for example research projects, investment in regional and rural development, and development aid projects. Compared with 2018, high-risk expenditure increased and represented the majority of audited spending (53 per cent).