Exploring the drivers of irregular spending in the EU cohesion policy

Abstract

The regularity and legality of EU spending, i.e., the conformity of the expenditures incurred with the applicable legislation, are important measures of its efficiency. They are also key pre-conditions for the effectiveness of EU funds. The present paper aims at understanding the main determinants of irregular spending (errors) in EU cohesion policy funding: this is a highly important, yet understudied topic, especially given that cohesion policy is the area of the EU budget with the highest level of irregularities. Using time series data and a fractional regression analysis model, the study provides evidence that the specific governance and structure of cohesion policy programmes can explain the intensity of irregular spending. Overall, the analysis finds that the more complex the programmes (e.g., in terms of number of priorities, multi-fund focus), the higher the risk of irregularities and the more difficult is for programme authorities to detect them. The paper also shows the relevant role of specific aspects of the implementation, such as the size and number of projects, in influencing the regularity of expenditures. The results suggest that greater simplification, thematic concentration and harmonisation of the funds’ rules could lead to fewer irregularities and improve the effectiveness of control systems in future programming periods.

Keywords

• Financial compliance
• cohesion policy
• fractional regression model
• European Union
• M42
• E61