Fiscal governance audit finds flaws in budgetary oversight

fiscal governance audit
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An audit into fiscal governance by EU Member States has found that legal requirements for national budgetary frameworks should be stricter and better monitored.

The European Court of Auditors (ECA) investigated the implementation and enforcement of Member States’ national fiscal frameworks in order to assess the efficacy of EU-wide and national budgetary governance. The audit also examined the degree to which the European Commission conducted appropriate oversight of Member States’ budgetary frameworks.

Auditors found that in many cases the requirements placed by Member States on their national budgetary frameworks were significantly less stringent than international fiscal standards and best practice guidelines. Assessments conducted by the European Commission had either been delayed by outside factors or had taken place too early to provide a meaningful base of information; and the European Fiscal Board, an advisory body established to assess fiscal governance across the EU, has limited power to enforce compliance.

The audit includes a number of recommendations for the Commission to improve the EU’s fiscal governance practices:

  • Strengthening the role of the European Fiscal Board;
  • Boosting assurance on the implementation and oversight of national budgetary frameworks; and
  • Conducting a review of the EU’s requirements for national budgetary frameworks and improving adherence to the standards and best practices recommended by the International Monetary Fund and Organisation for Economic Co-operation and Development.

Mihails Kozlovs, the ECA Member responsible for the report, said: “After the financial crisis, the [European] Commission saw the need to complement the existing EU fiscal framework. In a monetary union, it is important to conduct fiscal policy in a co-ordinated manner [and] it is necessary to have a system of checks and balances at the national level to ensure compliance with the EU fiscal rules. The European Court of Auditors examined whether the Commission’s action to strengthen the Member States’ budgetary frameworks achieved the intended results. We found that the EU’s legislative action certainly contributed to stronger national fiscal policies; however, the EU legal framework governing the national budgetary frameworks is fragmented and leaves room for improvement.”


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