I welcome members back. I hope they are well rested after the Christmas break and I wish them all a happy new year. As members are aware, 2026 is a very significant year for Ireland as we prepare to undertake the Presidency of the Council of the European Union in July.

As members will also know, there is also a parliamentary dimension to the Presidency in which all of us will be participating. This is our first public meeting of the year. I am very pleased to say that today's meeting is hugely significant as we have in attendance the president of the European Court of Auditors, Mr. Tony Murphy. He is very welcome. Our purpose today is to discuss the work of the European Court of Auditors, ECA, and, in particular, its 2024 annual report. For those watching, the European Court of Auditors serves as the EU's independent external auditor, bearing a crucial responsibility of safeguarding the financial interests of EU citizens. It ensures the EU budget, and the very important funding it provides, is managed responsibly, transparently and in line with EU rules. Mr. Murphy and his colleagues are very welcome.

Before we begin, I will read a note on privilege and deal with some housekeeping matters. Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of that person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise, or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex in order to participate in public meetings. I will not permit a member to participate where they are not adhering to this constitutional requirement and, therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask any member partaking via Microsoft Teams that prior to making their contribution to the meeting they confirm they are on the grounds of the Leinster House campus.

I now invite Mr. Murphy to make his opening statement. He has five minutes, after which we will open the floor to questions from the members.

I thank the committee for this invitation. As this is our first appearance before this committee in this Dáil, I will start by providing a brief overview of the role of the European Court of Auditors and how we function. As the Chair has already stated, we are the independent external auditor of the EU. In a way, that would be comparable to the Comptroller and Auditor General's role in Ireland. We audit the EU budget and its policies, and as one of seven EU institutions we recently celebrated 50 years since our foundation under the Treaty of Brussels.

The court is comprised of 27 members, each nominated by their respective governments for a six-year renewable term. I was nominated in 2018, elected president in 2022, and was re-elected for another three-year term that began this past October. We employ approximately 950 staff members, around 20 of whom at the moment are Irish, with a diverse range of backgrounds from lawyers and engineers to economists and social experts. Only a small portion of our work relates directly to financial auditing or account work. In terms of our outputs, around 50% of our resources are dedicated to our annual report on the EU budget, which is the main topic of our conversation today, while the other 50% focuses on what we call special or performance reports, where we assess specific policy areas. We typically publish approximately 30 of these special reports annually and in each of these we sample several member states to assess how EU policy is being implemented on the ground.

As I already mentioned, we are primarily here to present our work on the EU budget for 2024 and to highlight some other significant publications that also align with the priorities of this committee's work programme. Starting with our annual report on the EU budget, we provide opinions on the EU accounts and on the legality and regularity of the underlying expenditure. Essentially, we are assessing whether it is spent in accordance with the rules. We also provide a separate opinion on the recovery and resilience facility expenditure. I will explain this later. If I look at the key takeaways from our 2024 annual report, as usual we give a clean opinion on the 2024 EU accounts. The error rate for EU budget spending has decreased but remains material. It is now at 3.6%, down from 5.6% in 2023. I highlight, however, that the estimated level of error does not measure fraud, inefficiency or waste; it represents the amount of money that was not used in compliance with EU and national rules. Given the pervasive nature of these identified errors, and that our error rate is above our materiality threshold of 2%, we have maintained an adverse opinion on expenditure for the sixth consecutive year.

Moving on to the recovery and resilience facility, as I have already stated, here we provide a separate audit opinion because this is a funding model which differs from the traditional budget as it uses a financing not linked to costs approach and has been sold as a performance-based model. Therefore, our opinion here cannot be directly compared to the one we provide for the multi-annual financial framework, MFF. To clarify, under the RRF, payments to member states are not based on actual costs of measures, and member states do not report the actual expenditures of final recipients. Compliance with EU and national rules is not a condition for the initial payment. Our assessment is limited to the payment conditions stipulated in the RRF regulation, which specifies that milestones and targets must be satisfactorily fulfilled. We have found instances of these where they were not satisfactorily fulfilled. These were issues related to double funding, eligibility periods and a reversal of a milestone. We have therefore issued a qualified opinion on the regularity of the 2024 RRF expenditure. Overall, we have serious concerns regarding the accountability and traceability of this type of delivery model, and in its current state it presents a significant risk to the EU's financial interests. We urge that lessons be learned from this model for the next MFF, as the current proposals appear to mirror this model to some extent. Such instruments should be employed only when funding is directly linked to measurable results. Unfortunately, the RRF focuses on measuring implementation rather than performance, emphasising outputs over actual outcomes. There should be clear traceability to actual costs. However, the RRF lacks this because the Commission does not monitor or trace these costs. We also consider that accountability must not be compromised. The RRF’s compliance framework is weak, posing substantial risks to the EU's financial interests. This concern is echoed by the European Public Prosecutor's Office 2024 annual report, which revealed 307 active funding fraud-investigations related to the RRF in EU member states, making it the third largest in volume across EU programs, with cases only likely to grow.

Our annual report also highlights budgetary risks. One aspect is that by 2027, EU borrowing could exceed €900 billion, nearly ten times the pre-NextGenerationEU level. Debt repayments have been deferred to future budgets, posing serious challenges to the sustainability of EU budgets and ensuring adequate resources for EU actions. In fact, the proposed €2 trillion budget for 2028 to 2034 currently under discussion includes provisions for debt repayment, which could cost up to €31 billion annually. As mentioned previously, this work is highly relevant to the ongoing negotiations for the next EU budget and for future budgets. In the coming months, we will issue between ten and 12 opinions on the 2028 to 2034 MFF proposals, two of which were published on Monday this week, relating to the proposals for a European competitiveness fund and Horizon Europe. These are distinct from our audit opinions as they form part of the legislative process. They primarily assess the financial governance of the proposals and are either requested by the European Parliament or Council, or both. Ireland is also likely to play a significant role in these MFF negotiations during its upcoming Presidency of the Council. We would be more than happy to keep the committee informed and updated on this body of work.

This is just a snapshot of our annual report and some upcoming work. The supporting documents provided to the committee offer further details on our work, including that of specific relevance to Ireland and to the priorities of this committee. We also look forward to welcoming committee members to the European Court of Auditors in Luxembourg in the near future.

I am more than happy to take any questions that members may have on what I have already mentioned or other elements of the work of the European Court of Auditors set out in the package provided.

We now move to questions from the members of the committee. Members are reminded that they have a strict five-minute time limit for questions and answers combined. This is to facilitate at least one round of timed contributions. Deputy Ó Murchú will kick off.

Go raibh maith agat. Fáilte arís. The European Court of Auditors audits not only figures but also the legality of European policy. I am told that European defence spending is not allowed, whether that is on block-buying or on loans that relate to weapon purchases, under European treaties. How does that stand at the minute? It is an issue that has not necessarily been resolved. Questions have been asked on this in a number of committees and I am not sure that answers have been garnered.

The Deputy is right that pure defence expenditure is not allowed under the treaties - just to be clear on that point. So far, the amount of defence-related expenditure included in the budget is quite limited, I would say. It mainly relates to research. We have the ammunition and supply, which I believe is €500 million. We had the military mobility audit, which we issued last year. That is basically about dual-use infrastructural projects where money is being used that can facilitate both civilian and military purposes, for example, in transiting equipment or personnel through the different member states.

There has been a lot of talk about the €750 billion, the Security Action for Europe, SAFE, money, etc. The SAFE money is €150 billion and it is basically loans that are procured by the European Commission to hand on to member states. It is still the member states' money. It is purely a loan.

The other bigger element of this - there was talk of €650 billion to €750 billion - is basically allowing member states to incur defence-related expenditure that is above and beyond the normal limits. The 3% deficit limits in the fiscal rules are basically being loosened a little bit, providing that this expenditure is directly linked to defence. The Deputy is right that there is not a whole lot of funding in the pure EU budget. I do not really see that there will be in the future, to be honest.

On some level, there are workarounds available that are being used in real terms. In fairness, Mr. Murphy's answer is that it is not allowed for. If the EU was looking at something else, for example, having the European Commission purchasing or whatever, that would not be allowed, whereas facilitating is.

It is hard not to bring up the next point. On the RRF, Mr. Murphy stated: "Overall, we have serious concerns regarding the accountability and traceability of this type of delivery model, and in its current state it presents a significant risk to the EU's financial interests." Obviously, the European Court of Auditors is not particularly enamoured with the RRF. What is the court proposing to do to deal with this? I sometimes get answers around policy.

It is important that we recognise our mandate and the limitations of our mandate. We are auditors, so basically we are saying that-----

The court is pointing out that there is a problem.

We are pointing out the risks and challenges arising from the implementation of the RRF regulation as it stands. In May, we issued an RRF review on what we think are the potential shortcomings of the RRF. It is one page with key messages, so it very concise and easy to read. Basically, we feed into the debate. We have issued these reports. They have gone through the European Parliament. The European Parliament is not a big fan either of the RRF, I would have to say. It is a Commission flagship initiative and it is its holy grail. In a way, it suits the Commission because it wants to decentralise responsibility to the member states.

I get that. Nobody wants a wild bureaucracy.

Yes. The point about it is that this is replicated to some degree in the new national plans. The new national plans are basically a copy and paste of the RRF with some minor amendments around the edges. We will issue opinions. I mentioned the ten or 12 opinions. One of our opinions will be on these national plans where we will probably repeat some of the issues we have raised on the RRF. Again, this is to feed into the debate and the negotiation process for the next MFF. The national plans are obviously a significant component of that.

The court is hoping some of those issues will be addressed. Just to finish up-----

The Deputy can ask his question in the second round.

Mr. Murphy stated that EU borrowing could exceed €900 billion. That is a fair claim to make. It is quite worrying. I get that Mr. Murphy will say the court is just stating the problem and is not talking about policy in relation to rectifying that.

If he does not mind, I ask Mr. Murphy to hold the answer to that question until the second round.

I congratulate Mr. Murphy on his latest term as president. Mr. Murphy is an experienced hand at this stage. He has pointed out the limitations to what the Court of Auditors does. Its job is not to tell people how to apply the rules but to make sure the rules, as indicated, are actually adhered to. In that sense, I can see why Mr. Murphy is questioning the RRF payments because, as the report states, they are not based on the actual cost of measures and member states do not report the actual expenditure of final recipients. Obviously, there is a lot of give here. The RRF follows on from Next Generation EU and is supposed to deal with the current crises and give people a little bit of help. I have a question on this issue and one on cohesion funding, which Mr. Murphy may be able to address more tangibly. Where has Ireland fallen down in terms of money being spent or double-spent where it should not have been? Are there any other high-profile examples in other EU member states that would give us an idea of the type of stuff that should not be happening?

I will make a general comment on the budget, if Mr. Murphy wants to respond to it. Expenditure is going up and is supposed to reach €1 trillion by 2027. It is a lot less than the US figure and a fraction of the €13 trillion the EU member states collectively will owe in their individual budgets.

I ask Mr. Murphy to respond to my first two questions. It is examples that I am looking for.

The first question was on the RRF. It was a crisis response instrument back when Covid happened, which already seems a long time ago if we think back. Roughly half the money still has to be drawn down and the deadline is August of this year. The last time I looked there are either 3,500 or 4,500 milestones and targets that have to be met in order for this money to be drawn down. As the Deputy said, the auditors do not make the decisions. We are just pointing out some of the risks. We see a risk here because putting pressure on member states to spend money in a hurry is not a good idea. Normally, it results in more errors and greater potential for fraud or whatever. It is not an ideal scenario to be putting pressure on member states to spend money.

Deputy Gogarty mentioned Cohesion Funds, which are still very important to some member states. This is another area of contention at the moment. I would say there are two major issues of contention in this proposal for the budget. With these new priorities, whether we like them or not and whether they are defence or whatever else, we have one cake and one budget. If we want to add priorities, the existing policy areas suffer. A lot of the cohesion countries want to maintain cohesion funding as it is, and for very good reasons. The Cohesion Fund has been shown to have a very positive impact. Some of the member states, including Ireland, have benefited greatly in the past from cohesion funding. Cohesion funding for Ireland is now very small, with 90% of the EU funds we get now directly linked to agriculture. Ireland is now above the average for cohesion funding purposes.

Cohesion Funds are targeted at improving living conditions in member states where they are below average, so they do not feature so much any more for us. By its nature, cohesion funding is complicated because it tends to be used for big public procurements and big state aid infrastructural projects. We have seen here that our nationally funded infrastructural projects can sometimes be problematic. By its nature, cohesion funding is a difficult area. The fact that it is complex and that there may be more errors than in other areas does not make it a bad policy per se. At the moment, the number one customer for cohesion funding is Poland. There is no comparison between what Warsaw is like now and what it was like 20 years ago. That is basically because of EU Cohesion Funds.

The budget is very interesting. The figure is €2.3 trillion, which is fine. We do not question the number. The budget is a negotiated package between member states. That is ultimately how the envelopes that are agreed are decided on in terms of how much goes to agriculture and how much goes to cohesion funding. That is part of the whole negotiation process. This is half an answer to Deputy Ó Murchú's last question. What we are saying is that if you have a budget of €2.3 trillion, there are elements within it which are not fixed. For instance, there is something called "own resources", whereby the Commission is trying to generate income other than directly from the member states' contributions. The main contribution of the EU budget comes from a percentage of the GNI from each member state. Not many member states are in favour of increasing that contribution at the moment, so the Commission is looking at other ways of generating income. The proposal on the table is for a number of different "own resources", which would generate €65 billion per year. If we take €65 billion per year for seven years, that gives almost half a trillion, so a quarter of the €2.3 trillion budget is based on the assumption that these funds will actually materialise. When we go back to the NGEU, there was also an own resource proposal on the table, which was supposed to repay the NGEU loan, and it never materialised. There was one where it was a levy on the profits of multinationals in the GNI. Ireland was one of the member states that was not in favour of it and the own resourcing never saw the light of day. The result of that is we have a budget of €2.3 trillion, which is 1.26% of GNI. It looks a little bit impressive if you say it is 1.26% of GNI and in the previous seven-year period we had a budget of 1.13% of GNI. It looks like a reasonable increase, but 0.11% of that, which brings us back to 1.15%, is the €30 billion I mentioned in the introduction to repay the loans, for which there is no revenue stream to pay back. Instead of generating a revenue stream to pay back the loans, we now have to take it as the first piece out of the pie for 2028 to 2034.

What we are saying is that the size of the budget or the percentages when compared to America do not matter. It is about the sustainability of the budget and how it is paid for. We are looking at it from a budgetary management point of view. If you went into a bank and said you want to buy a house for X, it would ask what the collateral is and how you are going to pay for it. You might say you have this idea in your head for a new own resource but that might not happen. There has to be more of a sense of responsibility. This is basically money we are borrowing. It is not the Commission or the EU that is borrowing it; it is the member states which are exposing themselves to a proportion of this debt.

I have never seen so many Murphys in the committee room. We have four Murphys in the room and, for the record, Mr. Murphy is no relation, even though I have been to his headquarters on a number of occasions when I was a member of the European Committee of the Regions. I very much value his independent role in safeguarding what is ultimately taxpayers' money. It is so important that we have confidence and that there are checks and balances on how we spend taxpayers' money.

I welcome Mr. Murphy's willingness to engage with us today. I will ask a couple of quick questions and give him a couple of minutes to answer.

The recovery and resilience facility was at the heart of Next Generation EU. Did the European Court of Auditors issue an opinion prior to the design of the instrument? As a former member, for over 15 years, of the European Committee of the Regions, it comes as no surprise to hear there was a failure to involve local and regional authorities, where ultimately most of the money was spent. The European Court of Auditors is very critical of the RRF. I know the court had no role in its implementation, but did it issue an opinion on the design of that instrument?

I want to zone in on a matter of great concern to me, namely, the level and sustainability of EU debt. Over the last 15 years, we had the financial crash, Brexit, Covid, the cost-of-living crisis and so on. The level of debt is expected to be somewhere around €900 billion by 2027. How has it increased over the last 15 years? Could Mr. Murphy give his opinion on that level of debt? Does the European Court of Auditors have a role with regard to the level of debt member states are carrying?

I come back to EU borrowing and how it might influence or shape the next round of the multi-annual financial framework. From an Irish perspective, could Mr. Murphy outline positive or negative examples of Ireland's implementation of EU funds?

I thank the Deputy for the questions. I alluded to the fact that as part of the MFF process, we were required to give opinions to the Council, the Parliament or both. It was the same when the RFF regulation was being drafted. We were asked for an opinion when the initial proposal was on the table. We raised issues about the auditability. We had some concerns because we already knew that the idea of the cost was gone and that it was supposedly performance-based, which we do not fully agree with because we think it is more of a delivery instrument whereby if you do something, you get paid a certain amount of money. We had flagged some of the concerns already. That is as much as we can do. As the Deputy knows, having been a member of the Committee of the Regions, our opinions are part of the process. They are taken into account during the tripartite negotiations, to the extent that the institutions deem them necessary or feasible and that is it. We can only make a contribution. It depends on the final proposal. We can always say that this is in line with the concerns that we had and that they have materialised in reality. That is the case here. We always had a concern about the auditability of the money because, for us as auditors, we like to see an audit trail so that we can follow the money and see where exactly it is going. Part of the problem with the RFF was-----

Just on that point, in some member states was it more difficult to follow the money than in other member states?

This is another thing about the RFF. Deputy Murphy knows from the Committee of the Regions that the regulatory framework in place is the same for everybody. It is equally applicable across all the member states. The difficulty with the RFF is that individual plans are negotiated between the member state and the Commission, so the plans are not homogeneous. It is not the same framework at all. It depends on the level of ambition in the plan. It was difficult to follow because a plan was assessed and given a monetary value overall. That was so many years ago and things have changed in many member states. When governments and priorities changed they wanted to change the plan. For us as auditors, it would have been nice if every target or milestone had a value and it added up to the value of the plan. If four or five milestones and targets are taken out and replaced with something else, without this type of information, how can we be sure that the value of the plan is the same?

There are a lot of issues of judgment in this as well. We also criticised how milestones and targets were worded. They can be very vague.

The level of ambition was not the same in different members states, so to a large degree it depended on the negotiating skills of the member states that were negotiating with the Commission. The starting point was always the European semester recommendations that the Commission was trying to get some progress on but, ultimately, it was a bilateral negotiation and, because of that, it is difficult to say. What I am saying is that there is not a standardised system. It is very standardised for cohesion, for instance. There is a structure where there is a managing authority and an audit authority, etc., whereas here, in fact, the same bodies are implementing in terms of investments at the end of the day. It is the same bodies that are investing. It is like cohesion-type expenditure. This is why we have problems. If we have problems in cohesion where this structure has been in place - as I said, there are reasons it is a very complex area - then for the RRF element, we can just say we will rely on the member state to self-declare that everything is okay, as auditors, there is a reputational risk there for the EU.

We will maybe talk later in the second round about EU debt-----

The debt; I am sorry.

-----and some practical examples from a negative perspective from Ireland's implementation. We can leave it until the next round.

I thank Mr. Murphy for coming in to talk to us today. I congratulate him on his second term.

On the error rate for the EU budget spending, can Mr. Murphy give us some examples of the reasons for spending not used in compliance with EU and national rules?

Second, are there particular member states involved in the 307 funding fraud investigations that are more likely to be there or repeatedly there? Who would be a good example versus a poor example? How would Ireland fare in relation to the 27 members?

Are there particular programmes, such as cohesion, climate or research, that Mr. Murphy identified as underperforming that member states should address in the next budget cycle?

Could the Deputy repeat the third question?

Are there particular programmes where Mr. Murphy has identified underperformance that member states should put focus on for the next budgetary cycle?

On the error rate, as I said, it is not a fraud, it is basically error.

Yes.

Basically, they seem to be the same types of things a lot of the time, it is just that the proportion of them can change in our sample. Ours is a random sample, so it just depends on the sample. However, we are talking about things like either ineligible costs being claimed, for instance, or a beneficiary who is not eligible or public procurement rules not being fully followed. We even have some cases where we just do not get the documentation so we cannot say that everything is okay. There are, therefore, a variety of reasons, but the vast bulk of it relates to ineligible costs or ineligible beneficiaries and projects.

The 300-odd cases I mentioned are specifically related to the RRF. It was just to make the point that from our perspective, we see the RRF as being a particular reputational risk for the EU. It is the European Public Prosecutor's Office, EPPO, that is investigating the vast bulk of those potential fraud cases. We are not fraud investigators by default. If we come across suspicious cases, we forward them to either EPPO or OLAF or both. It is not our primary role. What is interesting from the EPPO report is that most of the cases it has identified for the RRF are in Italy. On the face of it, that sounds bad for Italy but, actually, I would not fully agree with that because it is actually identifying cases. It has the Guardia di Finanza and all that sort of thing, so it is quite effective there. For me, it seems implausible that there would be such a number of cases in Italy and none -----

Anywhere else.

-----in many other member states. It just does not make any sense. If we look at it the headline figure that Italy has X number of cases, it sounds very bad but, actually, I think they are very good at detecting it. It is bad that they are happening, I am not saying that-----

No, I get you. It is a fair point.

-----but the fact is that they are identifying a large number of cases. Maybe they have a specific expertise, I do not know, but I am just saying it is a negative, but it is also a positive that they are identifying them whereas other member states with huge amounts of RRF funding are reporting zero.

In terms of underperformance, we do not audit member states as such. We are auditing the Commission. If we come up with findings generally, they are based on a sample of member states. We cannot visit every member state. We are trying to see how a policy has been implemented in five member states to get some sort of an overview about how a policy is implemented for good or bad. That could be equally applicable in the other 22 member states. That is why we circulate it in all the official languages so it is available to everybody, and our members will promote them in the member states even if the member state is not directly in the sample. However, one area where we have consistently had a problem is with the Commission's claims in terms of the green-related expenditure or climate-related spending. A few years ago, it had this idea that it would spend €1 in €5 on-----

The euro green deal.

-----climate-related expenditure. We estimated when we looked at the review that it had overestimated that by 30%. Then, in the RRF, there is also a percentage target for green-related expenditure and, again, I think in that case, in our first review of it we said it was overstated by €36 billion or something. There is a mismatch between the claim of what is climate-related expenditure and-----

What is actually-----

However, that is not at the level. Obviously, it is coming from a number of member states. It is built up from the member states, but we are auditing it at the Commission level.

I thank Mr. Murphy very much.

We will now move to the second round of questions. I propose that we start with the answer to Deputy Ó Murchú's question.

Can Deputy Scanlon confirm that he does not want to come in?

No, I am fine for the moment.

I think I half answered the question when I answered a different question. There is also another one that I did not get around to, so maybe we will just go over the debt again. As we said in our introductory note, the debt has increased over ten times since pre-NGEU. It is a new phenomenon, let us say. The big difference is that every time there is some sort of crisis, as we said, there is not an inclination to increase the budgetary contributions from member states, and the easy option is to just borrow. For borrowing where it is back-to-back borrowing, that is not so bad. For instance, I mentioned earlier that under the SAFE it is €150 billion, but that will be a loan to a member state and the member state is responsible to pay it back. Where the big change has happened is in relation to the NGEU because, there, we are borrowing to pay grants. There, it is roughly €350 billion by the time August is over or whenever they eventually pay all the money. It is basically borrowing to pay grants. That is a new pathway that is being followed. It is probably not sustainable. It is not being used for investment as such. It is actually just given to member states as a grant.

As I mentioned, it is already having an impact on the next budget because €30 billion has had to be put aside to repay the repayments for the NextGenerationEU loans. It kind of ties in with what we always used to say: the NextGenerationEU is very well named because they are the ones who are going to pay it all back. This is what we always said. In terms of debt, therefore, we can only flag that it is a risk in terms of sustainable debt. Ultimately, however, these are political decisions. The latest one was two weeks ago when we had the €90 billion loan to Ukraine. Again, the thing I think about all the borrowing is that member states should be more aware that this is an obligation on them. This is sort of all off balance sheet. It is not really accounted for anywhere. It is just this magical borrowing that is out there somewhere but, actually, every member state has an obligation under this debt. That is important.

I have a final question. Does Mr. Murphy have examples or maybe negative examples in terms of Ireland's cohesion fund?

To be fair, in the last couple of years, because Ireland's cohesion contribution is so small, let us say, we do not really come across Ireland in the sample very much any more at the level of transactions. It just does not feature as it is very small. In terms of agriculture, most of the agricultural payments are direct payments to farmers and they are entitlement-based, so it is based on the number of hectares of land. Generally speaking, therefore, we do not have any issues there either. We have satellite pictures now, which we can just check, and it is quite easy.

I would say it is very difficult to defraud in this area because of that. Sometimes there can be issues with rural development projects because the types of projects that are being done are similar to cohesion in a way. The rules can be very strict. As someone said earlier, we do not set the rules; we just see how they are implemented. We had one example in our report this year, which I think was a bit harsh, but obviously we could not say anything because we would be seen to be interfering. It was an Irish case about rewilding and there had to be an electric fence or something to keep the animals from venturing in. The fence was down and other things like that, so they said it was an error but in a way it was a bit harsh because the rewilding actually was there. The objective of the measure was reached but nonetheless I would say the problem with legality and regularity is that it is very strict. It is either legal and regular or not and common sense sometimes does not prevail, I would say. I think that was it.

Mr. Murphy spoke about some of the rural regeneration schemes and the issues. What exactly is he talking about?

I was saying that rural development expenditure can be higher risk in terms of errors compared to the direct expenditure under agriculture direct payments to farmers. It is more complicated and it is cost based, etc.

Right, I get it. We have the example Mr. Murphy gave earlier. How much is lost on the basis of harshness of rules?

It is very difficult for us to say because we do a sample. We look at 800 transactions, which is the minimum we have to do to be able to come up with statistically sound results. If we had enough people, we would do much more, let us say, so I do not know. Sometimes the rules are made even worse at the national level. I am not saying it is the case in Ireland. The Deputy is probably very familiar from the Committee of the Regions with this so-called gold plating, whereby member states go over and beyond what is required under the EU regulations. I think that in order to make sure there is no comeback and no chance of money being reclaimed, they go over and beyond. Sometimes that creates an administrative burden-----

It creates difficulties for them.

-----which is harsh and can vary between member states.

I know that while I have been here, any group that was ever engaged in anything, from PEACE right through, would have spoken at times about how difficult it was to deal with it. Yes, some are better than others. I suppose the issue there is no more than the issue in dealing with LEADER. Only certain groups have the capacity to do it, which creates a difficulty. It is probably something that needs to be looked at. Again, Mr. Murphy and his colleagues do not set the rules. They point out where there are issues in relation to errors.

We would hope that our work in identifying these matters might help people to think of the rules.

Yes, in that it is being put in front of somebody and on their agenda. Are the 3.6% and 5.6% error rates down to work done by Mr. Murphy and his colleagues, or things pointed out by them?

We hope that our work has an impact. I do not think we can take all the credit for it. It varies depending on the sample, which is random. It depends on the particular projects we select. We expected the error rate to come down this year because it was really the first year of post-pandemic processed payments under cohesion. People were back on site and physical inspections were going on again, so we expected that there would be an improvement.

There is greater time and capacity in relation to delivering on that. Okay. We obviously want that to happen as soon as possible. The bigger issue Mr. Murphy has thrown out is the fact of making people aware of the huge figure in relation to debt. It is important that they are aware of it. It is very easy to issue a press release and possibly make the news, but then everybody forgets. As Mr. Murphy says, it is off book. It is about making sure everyone realises that this is real and will have to be seen through in relation to payments.

Mr. Murphy is not going to give any opinion in relation to Horizon or anything other than-----

We gave an opinion on the new Horizon proposal on Monday. They are trying to simplify it. There are proposals on the table for it to be more lump-sum based in order that it would be administratively easier for the recipients to have an agreed budget up front and more performance-based in terms of what it can deliver.

I get that. My issues with Horizon were not necessarily in relation to the administrative burden and how exactly it operated. It was more to do with the involvement of the Israelis, given the circumstances we have been dealing with for a number of years. Anyway, that is what it is.

What is Mr. Murphy's biggest takeaway in relation to what needs to be done? He might speak from an Irish perspective on what has been said about there not being losses. Beyond that, what needs to happen from a central European point of view to improve this and make his life easier?

I would look at that from two perspectives, one of which relates to making our life easier as auditors. We are all EU citizens here, and I think we all believe in the project.

We want the money spent and spent well.

Yes, we want the money spent. It has to be done in a way where expectations are managed. People on the ground are not foolish. We cannot promise X, Y and Z and then not deliver consistently. There needs to be some sort of management of expectations of what we can do with a certain amount of money. We cannot change the Earth, moon and stars with this budget. As the Deputy said, in overall terms it is a small budget at 1.26% of GNI. I am not saying it is not a lot of money, but relatively speaking it is quite small, as the Deputy pointed out, compared to America or wherever.

Reprioritisation can obviously change.

Absolutely, but that is what I am saying. We cannot keep adding new priorities one after the other and maintain the status quo for the existing policies if there is not an income flow to match it.

Yes, we already see it in relation to CAP.

In relation to the own-resource question, obviously we are talking about the digital tax and whatever. Has there been much other conversation around anything else? How close to anything being put up as a proposal are we?

There is a proposal on the table from the Commission. From what I understand, there is a lot of blowback against different elements of the proposal in different member states. I think this own-resource proposal will be very difficult to agree on. It is difficult to start on the basis of a budget where a quarter of the budget is dependent on this own-resource materialising. If, from the start, there is a sort of feeling that it is not going to fly, then it is-----

Have there not been multiple ideas about how the own-resource would be garnered?

Yes, there is a proposal on the table from Commission. One is on electrical components and technological waste. There is also a sort of a tax on companies with a turnover above a certain amount, so they are there.

They are multiple. Right, okay.

It adds up to €65 billion per year.

With all of them made, all right.

They are already there. As I say, at least from the informal feedback we have had, it will be difficult for it to proceed in its current format to the end. I do not think it is a good starting point to finalise a budget if such a large element is uncertain. It is about managing expectations and certainty in relation to funding.

Deputy Gogarty, do you want to come back in?

Yes, if that is okay with Deputy Murphy.

Yes, we are following the same order. I want to maintain that solidarity with my colleagues.

Go raibh maith agat.

Well said, Deputy Murphy.

I want to try to lighten things up a little bit. Obviously, we have our own bike shed out at the back entrance.

Not EU funded, I hope.

Not fit for purpose: if you put a bike under it, it is going to get wet. My background is in journalism, so I am just putting on the old tabloid hat for a second. Does Mr. Murphy have any examples he can give us of where bodies were grossly incompetent in the way they spent money or built something that did not actually happen? In his work, has Mr. Murphy caught out something really fraudulent?

This year there have been fewer high-profile cases. The year before we had a big one in Sicily where there was a lemon farmer but no lemon trees.

Sicily.

There were no lemon trees. The Financial Times and so on all thought this was a big case. It does happen from time to time.

The ECA considers only a sample, obviously.

Yes. We look at a very small sample. I do not believe we would come across the bike shed, for instance. We are looking at 800 transactions, with so many to cover each of agriculture, cohesion, neighbourhood and the world, and research, for instance. We have a chapter on each policy area.

We are talking about the ECA’s work in an EU-wide context. Not in relation to Ireland but using Irish terminology, what level would be cute-hoorism and what level would be absolute fraud in general terms?

I do not believe it is about the level; it is about the intention.

Yes, because there would be errors found.

Let me get a little more serious again. Russian bot farms and troll farms would ask the following questions, but they are valid. They relate to Ukraine. I absolutely support the EU’s solidarity with Ukraine. It is hugely necessary in many fields but malevolent operators and also those who ask valid fiscal questions will ask how the money spent in Ukraine is monitored, given that it is outside the EU. Does the ECA have any jurisdiction in this regard? How can the ECA ensure the money is being spent properly?

We have jurisdiction if there are EU funds. However, so far it is all loans. Again, it is still Ukraine’s money. Whether it will be repaid is another issue, but at the moment it is a loan.

Are there criteria for the loans?

Yes, but we can check only the criteria for the drawdown of a loan. That would be as far as we could go at the moment. Under the Ukraine facility, there was also a grant element. That involves a different scenario. When the grants start kicking in, we will follow them.

Is that a case of having to send somebody to Ukraine itself?

Yes, but at the moment we could not do so from a security perspective. There are ways and means around it. We had an audit report recently about the management of development funds, for instance. This is where the Commission is monitoring remotely the use of funds in dangerous areas, for want of a better term, or less developed areas that are too dangerous to allow officials to check on the ground. There are ways and means around things but we have not had to face the issue yet because it has all been loans so far.

Mr. Murphy is obviously talking about money lent as opposed to moneys in respect of which he has a direct input.

Yes.

So far, and given early indications and Mr. Murphy’s best estimate on feedback, would he say the money is generally being spent where it is supposed to be?

I would not like to say. We are very much an evidence-based organisation. We are not going to go into conjecture. When we have a basis for saying something, we will say it. What I can say is that we issued a report in 2021 about grant corruption in Ukraine. It was before the war, obviously. It is not a very good read from Ukraine’s perspective. It was very corrupt at the time. We would have to reassess. Part of the conditionality for the drawdown of loans is the putting in place of various structures like anti-fraud offices or anti-corruption agencies. Presumably, the Commission will have a basis for releasing the funds and we will be able to see the evidence it has been provided with showing that the bodies have been set up or whatever.

I thank Mr. Murphy for that.

My final question relates to the drawdown of funds before the funding period dries up. Multi-annual funding makes a lot of sense but some of the schemes are coming to a close within two years. Is there a danger of people rushing to try to spend money? Where money is not earmarked for spending by a certain point, does Mr. Murphy recommend that it be brought back into the budget early, for example? Is there a way of doing that?

There is a way but what the Deputy described would never happen because member states will always make sure they use the money somehow. It goes back to what I was talking about in respect of the money in the RRF having to be drawn down by August. We would always find an increase in the error rate linked to the end of a financial programming period, exactly because of the pressure on member states to spend.

Has the ECA issued warnings to member states?

Yes. The Commission has an N+2 rule. It was an N+3 rule. It was giving member states two or three years, even after the relevant period. The period 2014 to 2020 has only just ended, in a way. It is not that long ago that it ended. In this regard, the RRF money was very attractive to member states because there was no cofinancing required. The drawdown for the period 2021 to 2027 is extremely low in respect of cohesion and everything else because there is a concentration on using other sources. In a way, this is why the problem is created for cohesion. The Deputy will know from his time on the European Committee of the Regions that cohesion funding is always the piggy bank. If there is a crisis, that is where people go first. It was stated in the recent mid-term review that cohesion money was not being used, with an explanation why. Basically, it was said it could be moved to deal with new priorities, such as defence-related, dual-purpose infrastructure projects.

Gabhaim buíochas le Mr. Murphy.

I wish to bring the discussion back down to Irish citizens living in every town and village across Ireland. While they see membership of the European Union overwhelmingly in a positive light, I doubt that they really comprehend EU budgetary matters. However, they would be somewhat reassured to know the European Court of Auditors has an oversight role. Could the ECA do more? Perhaps that question is unfair. The European Court of Auditors has only a certain amount of resources and there are only so many audits it can actually do. Is there an ongoing battle between it and the Commission for additional resources? I realise this is not within Mr. Murphy’s remit but, for the sake of the taxpayers watching today, could he state whether there a sanction where fraudulent misappropriation, for example, is uncovered? Is there a sanction over many years?

Could Mr. Murphy remind me how long he is in his role for?

I am the Irish member. It is seven years, I believe.

Does sanctioning follow on from a discovery on the ECA’s side?

If we find an error, for instance, it is reported to the Commission. The Commission has the option to recover the money but it is basically its decision. It might decide there was an inadvertent error rather than fraud, so it does not necessarily have to insist on the money being given back. However, it does sometimes. For sure, it would recover money.

What about the resources within the organisation?

With most public institutions, there is always a battle over resources. When the NGEU came on stream, we got an additional 27 or 28 posts to audit it. The amount is €750 billion, so it involves a quite onerous task. We have had to add to what was provided from our existing resources. A staff of 27 was not enough to conduct the audit. We will see whether we can keep the additional posts. The increase in our numbers was temporary. It is always a battle. The process is that we make a budgetary proposal. When we make one, the European Parliament sometimes agrees with us and sometimes it does not. We might come to a compromise somehow. The Commission then has an input, and finally it is the Council that decides. There is always a battle and this is why we have to do more with less. Like most institutions, we have to go down the technology route even more. If we could do more audits, that would be fine, but the Deputy is right that we have a duty to promote what we are already doing. It is already a start to make more people aware that we exist and have relevant work. It is a question of somebody being seen to hold the executive to account for its stewardship of the funds. That is our role.

Does the ECA have oversight of the institutions themselves?

Yes. We have an administrative heading or chapter in which we examine administrative expenditure. We examine some transactions across the different areas.

In the limited time I have left, may I refer to the debt level? Does the ECA have a role in issuing opinions on levels of debt or the next crisis? Given the current geopolitical situation, the next crisis might not be too far away. In this regard, does the ECA have a role in issuing opinions on a requirement to borrow a certain amount?

It does not have a role in issuing opinions on whether those concerned should take on the debt.

That is their political decision. We have a chapter in our annual report, entitled "Budgetary and Financial Management". There, we report and highlight risks relating to debt exposure or the famous reste à liquider where the commitment is outstanding. It is over €500 billion there. There is a lot of-----

In terms of those risks, is it 20 of the 27 member states that are in the eurozone and seven are operating outside the eurozone?

I think it is 21 now.

Is it 21 now?

Bulgaria has joined.

Are member states that in the eurozone at a bigger risk with those debt levels in terms of exchange?

I suppose.

It is quite complex.

It is. I presume the debt obligation would be the same as the percentage of the gross national income, GNI, that is paid in. It would be denominated in euro because that is what they are borrowing in. It would then be translated into whatever the non-euro currency would be.

I thank Mr. Murphy for his presentation. There were some frightening figures when I read his report. One of them is that the report highlights budgetary risks, and one key aspect is that by 2027 EU borrowing could exceed €900 million. That is nearly ten times the pre-NGEU level. That is a frightening statistic. Will Mr. Murphy expand on that?

We see that the cost of the programme for 2028 to 2034 is €2.3 trillion. The cost of servicing that is going to be €31 billion annually. That is certainly going to cause some problems in relation to the repayment of the funds. Mr. Murphy mentioned about continuing to pay out grants and having to borrow that money all the time. At some stage, the day of reckoning is going to come, and somebody is going to have to pay. Where does Mr. Murphy see that going into the future?

The easiest way of getting additional money through the different crises has to been to borrow. It has increased from €90 billion to €900 billion by 2027. The Deputy is right. It is €31 billion per year based on the current level of debts that need to be serviced. That is just the NGEU debt, which starts to be repaid in 2028. That is capital and interest. If we take the €2.3 trillion, that is roughly €300 billion per year, so approximately 10% of the budget is already earmarked to repay the debt. We cannot say that they should not borrow any more. That is their political decision. All we can keep pointing to is the risk from a budgetary management point of view. That is what we have done consistently over the last few years. We raised the warning about the NGEU for a number of years. We were told to not worry about it. Now, we see that the reality is that, as the Deputy said, somebody has to pay. Now, the €30 billion is coming out of the 2028 onwards budget. It is a reality now that the money has to start being repaid. We do not know what the next crisis will be and how it will be funded.

If we look at enlargement, there is a huge appetite for enlargement. In terms of Ukraine alone, the enlargement bill would be something like €180 billion. That is based on the Commission's figures. If another ten western Balkan states come in, they are all going to be member states that are under the average. They are all going to be looking for cohesion money. There are going to be more net recipients than payers. That is for sure.

The question has to be asked, can we afford it?

People tend to look at this in terms of a mathematical thing, in that we pay in €3 billion and get back €2 billion, so we more or less have a net €1 billion contribution, but we have to go beyond the figures. It is also about the benefits of being in this club. There is the open market. We have benefited greatly in terms of cohesion. We also have an awful lot of foreign direct investment, which is directly linked to the fact that we are in the EU. We have to take it-----

In the round.

Yes. It is not as simple as just saying that it costs us X.

As members have no further questions-----

May I add something? To be clear, one of the main new own sources is a tobacco levy. Another one is EU waste. The carbon border adjustment mechanism, CBAM, is another. The one that I was talking about that profits on the turnover is corporate resource for Europe, CORE. These are the main components. It adds up to €65.6 billion per year in current prices.

On the digital currency, is that seen as eliminating profits that are going to the US and wherever else? Is that seen as a revenue-raising measure?

No, it is not in this. Digital tax is not there.

I am referring to the digital currency.

It is EU waste, which is different.

If members do not mind, I will-----

I have a quick question to ask.

Go ahead.

I will say "very quickly" but then make a lie of that. With the recently published and upcoming reports, what sort of deep diving does the European Court of Auditors do? I am interested in EU support to Moldova and Georgia, given the particular issues in Georgia in the last while. What exactly is the report on military mobility?

I mentioned military mobility earlier. It was a funding mechanism whereby, for dual-use projects, there was a particular scheme where member states could apply for dual-use projects.

That is dual use and dual purpose. Is that on some level the get out of jail free card in relation to money for weaponry?

It is not weaponry. As I said-----

They are dual use. These are materials that will be used in defence systems or whatever you want to call them.

When we did the military mobility audit, the kind of things we were looking at were bridges that could not hold the weight on the routes. They were mapping routes where they needed corridors. They now have this Schengen military corridor, which is going from Belgium all the way across the Netherlands to Germany and Poland. It is a dedicated corridor that they can move through.

Yes, whatever they need to move.

It is whatever they need to move.

That is probably not cattle. When Mr. Murphy was looking at EU enlargement and dealing with that specific issue, such as Georgia, is some of that work done or is the intention to write that in 2027?

If it is for 2027, it is probably only starting now. Again, it is looking at the level of EU support that has already been given to both states in terms of their accession path. There is a conditionality mechanism envisaged in the regulations. It is to see if that was effective. It is looking at the funding that has been given to those accession countries and how it is used. It will be an assessment of the compliance audit.

That is obviously important in relation to the journey they are looking to take. Georgia's journey is not exactly straightforward.

On the wider scenario, we are dealing with how the percentage of error in relation to funding is far greater than fraud. Is that fair to say?

We do not look at the fraud. We have reported 3.6% based on our sample. In our sample, we had something like 19 potential fraud cases that we submitted to OLAF and seven to EPPO. Some member states are not in EPPO. That is why there is a difference. If we are looking at the fraud figures, we have to look at EPPO - the public prosecutors - but they are in a different ball game. Their big figures are not in relation to the type of expenditure we are looking at.

It is about VAT fraud and customs fraud and the so-called VAT gap and the customs gap, whereas we are looking at projects where people are getting money to do a certain thing. They are looking at evasion of VAT or customs duties.

Some of these projects involve large enough amounts of money. I can see how people could come a cropper where there are strict criteria. I imagine that the audit process is fairly rigorous. I would like to think that the opportunities for fraud are limited and that examples like the one in Sicily that Mr. Murphy gave to Deputy Gogarty are detected and those responsible caught.

We would hope so. Again, we are auditors. The primary responsibility for anti-fraud activity lies with member states. They have to set up proper anti-fraud systems and offices. There is also a role for the Commission in overseeing that. We are the next layer. We are looking at how these anti-fraud mechanisms function. If we were coming across a member state with which we were consistently having problems or suspicions, that would call into question whether the anti-fraud strategy was working.

I probably should know to this, but to what extent are member states getting financial assistance from the European Union towards meeting their international protection obligations? Maybe they are not getting any. If they are, has the European Court of Auditors looked at international protection at member state level?

We have an audit coming up in relation to refugees in Europe generally. That relates to all types of refugees, and there is cohesion funding going into it. There is an element of funding attached to that, for sure.

There are no-----

We are only starting to look at it now.

Does Mr. Murphy have any information for 2024 or 2025?

No.

As there are no other Deputies offering, I have a couple of quick questions. Regarding the recommendations, I note that when it came to the microchips Act, they were quite quick in taking on board the court's recommendations. I believe there is a public consultation going on at the moment. Mr. Murphy has also noted that when it comes to legislative changes or repeals, they are quite slow. On average, how many of the court's recommendations do they effectively take on? How long does it take for them to actually deliver those recommendations or changes, as requested? Does Mr. Murphy believe that the court's remit should be broadened or its powers strengthened?

In relation to recommendations, to be fair, most of them are taken up. We go back, a couple of years afterwards, to see if they have actually been implemented. It is one thing to accept a recommendation at the time that an audit is done but it is another thing to actually implement it. The Chair mentioned microchips. Sometimes our planning is good enough that we deliver at the right time. In terms of the microchips Act, for instance, we had findings which were relevant and could be taken on board straight away. It does not always happen because normally we come in after the event, generally speaking. It depends on the individual type of recommendation, when we issue it, and if it is timely. Some of the recommendations that we might think would be easy to implement may, in reality, not be. It is a mixture of all of that.

In terms of the remit, we had an audit report a couple of years ago called the budget galaxy. What the Commission has started to do goes back to Deputy Ó Murchú's initial question about defence. If we look at the European Defence Fund or the European Peace Facility, there is real defence expenditure there but it is not in the EU budget. It is outside of it. There are ways and means. They set up separate bodies with which, maybe, not all but only a certain number of member states. Even if all member states are not involved, we think that once EU public money is going into something, we should have a mandate in respect of it. There are many areas where we think democratic scrutiny and accountability would be improved by us having the mandate but these are sometimes political decisions which are outside of our control.

Very good. We will leave it there. I thank Mr. Murphy and his colleagues for coming in. I found that very interesting, particularly regarding the budget and the responsibility we have, as an EU member state, to keep a watchful eye on the budget and on borrowing.