Luxembourg-based watchdog warns that the European Fund’s architecture complicates oversight and blurs accountability lines

The European Union’s largest budgetary instrument is facing mounting scrutiny after auditors warned that its complex design is undermining transparency and complicating effective supervision across the bloc, raising fresh questions about how Brussels manages unprecedented volumes of joint spending at a politically delicate moment for fiscal integration.

The warning comes from the European Court of Auditors, the Luxembourg-based watchdog responsible for scrutinizing EU finances, which has concluded that the current architecture of the Commission’s flagship investment fund makes it difficult to compare results between member states and to ensure that money is consistently linked to measurable outcomes.

In a report released this week, auditors argue that the fund’s hybrid structure — combining performance-based disbursements with elements of traditional cost reimbursement — has generated uneven reporting standards and diverging control practices, ultimately limiting the Commission’s ability to present a clear, consolidated picture of how funds translate into tangible reforms and investments.

The instrument was conceived as an ambitious response to overlapping crises and structural weaknesses within the Union, pooling vast resources to support recovery, green transition projects, digital modernization and economic resilience, and it marked a historic expansion of common borrowing and centralized financial coordination within the EU framework.

Yet that political boldness has been matched by administrative complexity, as the system relies heavily on national authorities to certify the completion of agreed milestones and targets before payments are released, a model designed to encourage reform ownership but one that auditors say leaves room for varying interpretations and inconsistent verification methods.

According to the Court, milestone definitions are not always sufficiently precise, and documentation standards differ from one capital to another, making it challenging to assess whether reported achievements correspond uniformly to the objectives originally approved by the Commission and endorsed by member states.

While the report does not point to systemic fraud or widespread misuse of funds, it stresses that prevention and detection mechanisms depend largely on domestic control systems whose robustness varies significantly, creating potential blind spots that could undermine confidence in the integrity of EU-level oversight.

Auditors also highlight difficulties in data interoperability, noting that information systems used by national administrations are not always fully aligned with those of the Commission, which complicates real-time monitoring and hampers efforts to generate standardized performance indicators across the Union.

The Commission has defended the fund’s design as a necessary innovation tailored to extraordinary circumstances, arguing that performance-based financing reduces bureaucratic delays and incentivizes structural reforms that might otherwise stall under more rigid, input-focused funding models.

In a written response accompanying the audit findings, Commission officials reaffirmed their commitment to sound financial management and pledged to refine guidance where necessary, while emphasizing that the flexibility embedded in the current structure was instrumental in accelerating investments at a critical juncture for the European economy.

Nevertheless, the Court insists that the balance between flexibility and accountability has not yet been fully achieved, warning that blurred governance lines risk eroding the clarity of responsibility between Brussels and national capitals, particularly when public scrutiny intensifies over how joint borrowing is managed.

The shared management principle, long embedded in EU cohesion policy, assigns primary responsibility for implementation to member states, but the unprecedented scale and political visibility of this fund have heightened expectations for centralized scrutiny and clearer lines of accountability at EU level.

Experts in European public finance say the auditors’ concerns reflect deeper structural tensions within the Union’s evolving fiscal architecture, as policymakers experiment with new forms of solidarity while operating within oversight frameworks originally designed for smaller, more fragmented spending programs.

Several governments, particularly in fiscally conservative member states, have signaled that stronger audit clarity and simplified governance structures will be essential if the EU is to consider further common borrowing or the creation of additional large-scale instruments to finance defense, industrial policy or long-term competitiveness strategies.

In the European Parliament, members of the budgetary control committee have echoed calls for clearer milestone definitions, harmonized reporting templates and enhanced digital tools capable of tracking implementation progress across borders in a more transparent and user-friendly manner.

Some lawmakers have floated the idea of a centralized digital dashboard accessible to both institutions and citizens, allowing near real-time visibility into disbursements and reform progress, a proposal that reflects broader demands for openness as the Union’s financial role expands.

Auditors acknowledge that the fund has accelerated investment in renewable energy infrastructure, broadband expansion, public administration reform and labor market modernization, and they recognize that the speed of deployment has been notable compared with previous EU programs.

However, they caution that long-term credibility depends not only on rapid spending but on demonstrable results supported by clear evidence trails, consistent evaluation criteria and transparent reporting mechanisms that allow stakeholders to understand how each euro contributes to agreed strategic objectives.

The debate arrives as discussions intensify over the next multiannual financial framework and the possible institutionalization of joint debt instruments, making the credibility of existing oversight arrangements a central factor in shaping political negotiations among member states.

For now, the watchdog’s message is unequivocal: ambition in European fiscal policy must be matched by equally robust and coherent control systems, and design simplicity, clearer accountability chains and improved data integration will be critical if the Union is to sustain public trust while navigating the next phase of budgetary innovation.