Mr. Tony Murphy:

I think the error rate causes a bit of confusion because we always have to clarify that it is not fraud. That is the first thing. I explained that the increase from 3% to 4.2% was mainly due to cohesion. As I said, there were three factors which contributed to that, including the Covid-19 pandemic and this particular crisis response investment initiative. I do not know what the trend will be. Next year will be the second year of Covid, if you like. There will still be many payments and we will not yet be back to some sort of normality. We will still be operating under these difficult conditions for control bodies. It is possible the level will stay quite high.

We are also, as I said, at the very end of the programming period and because of the absorption rates in many member states, there will be errors. Italy and Spain are two cases in point. They benefit a lot from the RRF. They are big beneficiaries of it. They are attracted to it because it is 100% financing, which is fine. The problem then is that for the normal MFF expenditure the headline figures look quite good. That figure is approximately 75% to 80% for both Italy and Spain. However, if we take out the agricultural funds, which are more direct and systematic payments, and concentrate instead on the other European structural and investment funds, such as the European Social Fund, ESF, the European Regional Development Fund, ERDF, and others, the actual absorption rates in September, with three months left in the programming period, were at 57% and 67%. Massive amounts of money are still to be spent. That is what I am saying. We worry about an increase in errors but funds are almost competing at the moment. Funds are available and there is only a limited amount of projects that can be processed and managed properly by an administration. It is about trying to fit the projects into the most beneficial funding source.

It goes back to what Deputy Howlin said. It is okay that the Commission adds all these new facilities and programmes, but that has an impact not only on the budget but also on the administrations in the member states because they are being asked to do more. In many member states, as the committee will know, the administrating headings are the ones that are not for any increases. We are asking administrations to do more with the same, or fewer, resources. That is a type of pressure and it is normal that where administrations are constantly under that type of pressure, mistakes will happen.

It is important to put this into context. We are looking at this from a legalistic point of view. Some of the projects, even those in which we see an error, would be useful projects. On the other hand, there are projects that are in line with all the rules and tick all the boxes but are useless. We have to take it all in context. It is a legalistic approach but we are required to do this under the Maastricht treaty. We have to look at the legality and regularity of the underlying transactions. That is to put the error rate into context.

We recently issued a report in respect of the budget galaxy. It shows how complicated the financial landscape in the EU is. Apart from the EU budget, there are many satellite bodies, including the European Peace Facility, which we do not audit. We were raising the issue that many of these bodies are handling substantial amounts of taxpayers' money but are not subject to the same scrutiny and supervision as the normal EU budget. They are sometimes used as a way around scrutiny. They can be set up for a specific instrument that is not subject to the same level of scrutiny. For many bodies, we would prefer to have a mandate but we do not.

On expenditure for Ukraine, we have not been able to send any auditors to Ukraine, as the committee will understand. Not many are willing to go on the ground in Ukraine at the moment. The other issue is that all funding to Ukraine is in the form of loans. It is debatable whether they will ever be repaid but in accounting terms, they are considered loans. We have only limited scope in that regard. We can audit the loan but not the expenditure because it is member states' money and Ukraine will allegedly repay it.