Giving development aid is an inherently risky business for the European Union. Most of the money is spent abroad, often in places of poverty and insecurity with a fragile grip on the rule of law. Recovering money that has been spent abroad that breaches EU rules is much more difficult than, for example, recovering money misspent on the EU’s farmers, or her poorer regions.

Perhaps then it should be no great surprise that, in its report on the implementation of the EU’s budget for 2008 published last week (10 November), the European Court of Auditors found that spending on development aid was affected by errors. For the European Development Fund, which lies outside the EU budget but is the Union’s main instrument of aid to Africa, the Caribbean and the Pacific, the auditors found that payments were affected by a material level of error. The auditors found persistent weaknesses in the system of checks by the European Commission’s delegations abroad.

Structural problems

The problems highlighted by the auditors cannot all be explained by the inherent riskiness of development aid. There are internal, structural problems with the way the EU spends money on development.

The auditors judged the Commission’s supervisory and control systems to be only “partially effective” in the area of development and other external aid, including projects in neighbouring countries.

The Commission’s procedures for spending aid are complex – and therefore prone to error and irregularity. The auditors urged the Commission to greater simplification – a message that was not limited to the field of spending in foreign policy, but was also attached to regional and farm aid inside the EU.

Some of those structural problems are of long standing. The way that the Commission delivers development aid has already been the subject of extensive upheaval and reform. In an attempt to improve the speed and effectiveness of aid delivery, in 2001 the administration of Romano Prodi set up the EuropeAid Co-operation Office as a Commission department in its own right, to deliver aid according to the strategy and programmes drawn up by the departments of development and external relations. The Commission devolved both work and staff from the departmental headquarters in Brussels to its delegations abroad.

“Better, faster, more” has been the mantra of EuropeAid, suggesting that faster aid need not necessarily mean a relaxation of financial control – although Koos Richelle, the director-general for EuropeAid, has warned of “dangerously high” vacancy rates in delegations and the “loss of institutional memory” at headquarters because of the high proportion of staff on short-term contracts.

The case for simplification

The figures on aid delivery suggest that improvements have been made, certainly on the quantity and speed of aid delivered (aid effectiveness is harder to measure). But, as the auditors’ findings suggest, the procedures for getting a programme implemented can be cumbersome and complicated, as proposals ricochet between the various Commission departments, the member states, and the European Parliament.

The case for simplification is not hard to make – although not all are equally enthusiastic. MEPs, for instance, are customarily suspicious of reforms that might reduce their say over how EU money is spent.

But first the field of EU development is to be hit by another bout of institutional upheaval: the introduction of the European External Action Service (EEAS), which is to serve the high representative for foreign and security policy, who, as a member of the Commission, is supposed to embody a unity of purpose shared by the Commission and the Council of Ministers.

One of the details of the EEAS that has yet to be filled in is what the division of labour between the EEAS and the Commission will be in the field of development aid.

The Commission’s delegations abroad are about to become EU delegations, whose heads will be members of the EEAS. But how will those EEAS staff who are not Commission officials be held accountable for Commission funds?

A change in the Commission’s financial regulations will be required and, as one official remarked, it is likely to provoke an “intense discussion” with the Parliament, which is keen to protect its oversight of Commission spending.

Richelle believes that “it is possible to create the rules to serve a political goal” and that the financial accountability can be worked out, but non-governmental organisations are suspicious of how the political priorities of the member states, through the EEAS, might affect the implementation of EU aid.

“Europe likes to present itself as the world’s largest donor but it is, in fact, 28 decision-centres,” an official said, referring to the 27 member states and the Commission.

So is the EEAS about to become a 29th? It is too early to say, but the upheaval does not seem likely to simplify the existing structures and that, in turn, means that the auditors are unlikely, in the near future, to find an improvement in supervision and financial control.