Despite attempts by the European Commission to tackle fraud in its €650 billion Covid recovery fund, the current situation still has too many gaps and shows “systemic weakness”, the European Court of Auditors (ECA) said in its special report.
The European watchdog has highlighted serious issues with fraud detection in the Recovery and Resilience Facility. There are still major weaknesses in how fraud is reported and corrected, and gaps in the rules make the system vulnerable to abuse.
The Recovery and Resilience Facility (RRF), launched in 2021 to help European Union countries recover from the pandemic, has faced persistent issues since its inception.
The ECA’s investigation, published today, reveals that member states’ anti-fraud systems are inconsistent, often delayed and lack the necessary rigour to combat fraud effectively.
Because of this, the ECA found, the EC does not have a proper overall view on the total amount of fraud in the EU with the funds.
Although the EC introduced stricter requirements through bilateral financing agreements, these were not specific enough to ensure uniform standards across the bloc.
In some cases, audits were completed only after the first payments had already been made, raising questions about whether sufficient safeguards were in place.
One of the most glaring issues, according to the ECA, is the underuse of data mining tools, which are essential for identifying suspicious patterns.
The ECA found that many member states failed to fully utilise Arachne, the EU’s primary data mining tool for fraud detection, with some relying on outdated or inadequate national systems instead.
Whistleblowing channels, while established, have so far yielded few reports of suspected fraud and authorities have not analysed why this might be the case.
Another concerning issue is the lack of a standardised approach to reporting fraud.
Member states apply different criteria for determining what constitutes fraud affecting EU funds, leading to incomplete and inconsistent data.
The EC’s own monitoring system does not distinguish between suspected fraud and other irregularities, making it difficult to assess the true scale of the problem.
Another significant loophole is that, unlike in other EU funding programmes, member states are not required to return recovered fraudulent funds to the EU budget unless the EC deems their recovery efforts insufficient.
This creates a perverse incentive, as countries may prioritise keeping recovered funds rather than ensuring they are returned to EU coffers.
With the RRF set to wind down by the end of this year, the ECA warns that most fraud cases will only emerge after the programme’s formal closure, after which the EC will no longer receive systematic updates from member states.
The main mechanism for member states – the management declarations – will no longer be required after December 2026, when the last payment must be made by the Commission.
This raises the risk that fraudulent activity could go undetected or unpunished long after the money has been spent.
The auditors call on the EC to define clearer anti-fraud requirements for future programmes, strengthen its audits, and ensure that recovered funds are consistently returned to the EU budget.
