The European Court of Auditors (ECA) has warned that errors in spending from the EU budget have increased against a backdrop of greater demands on EU finances from the Covid pandemic and the war in Ukraine.
While the annual report of the auditors conclude that the EU's accounts for 2021 give "a true and fair view", payments from the EU budget to member states are "still affected by too many errors".
An error is where money should not have been paid out because it was not in accordance with the relevant EU rules, or where it is not used in accordance with specific national rules.
The annual report also said that instances of fraud had increased from six cases in 2020 to 15 in 2021.
These cases have been reported to the European Anti-Fraud Office (OLAF), which has opened five investigations.
Presenting the report, Ireland's member on the Court of Auditors Tony Murphy, who was recently elected president, said: "With the war of aggression in Ukraine, the energy shortage, the coronavirus pandemic and climate change, the EU is being forced to deal at one and the same time with the consequences of an unprecedented series of crises.
"Such an environment creates increased risks and challenges for the EU's finances and makes it all the more important that the European Commission manage them soundly and effectively."
The report finds that the total exposure of the EU budget to potential future obligations more than doubled in 2021, from €131.9 billion to €277.9 billion.
This was mostly due to the issuing of €91bn in bonds to finance the EU's Covid recovery fund and a €50.2bn increase in financial assistance to member states to protect jobs hit by the pandemic.
Auditors warn over risks from Ukraine war
Auditors also warned of the risks that the war in Ukraine posed to the EU budget.
At the end of 2021, Ukraine had outstanding loans with a nominal value of €4.7bn under multiple EU programmes. The European Investment Bank has also granted Ukraine loans, covered by EU guarantees, to the value of €2.1bn.
The annual report found that the overall level of errors in spending increased in 2021 to 3% compared to 2.7% in 2020.
Among errors highlighted was an Irish emergency accommodation scheme for asylum seekers which the report said lacked appropriate processes, incomplete contracts and poor monitoring of the facilities.
The "emergency assistance project", which was funded through the EU's Asylum, Migration and Integration Fund (AMIF), involved the provision of emergency accommodation, including meals.
Auditors found that because the State had insufficient capacity to house asylum seekers there was a Government call for interest to rent rooms at hotels and guesthouses.
Auditors checked a sample of ten invoices included in the claim the State made to the European Commission and audited the procurement procedure that led to contracts being signed between the Government and hotels and guesthouses.
Officials found numerous shortcomings, including a failure by the Irish authorities "to provide certain key procurement documents and information" and those offering accommodation being treated unequally.
The report states that "one bid was rejected because the hotel in question had too few available rooms, but bids from other hotels with the same or even less capacity were accepted.
"As a consequence, we have no evidence that these contracts were awarded on the basis of the applicable public procurement legislation. We thus considered 100% of the declared expenditure ineligible for EU funding."
The report does not highlight the sums involved, although it is understood to be in the thousands of euro.
However, in a response the European Commission said that while "the absence of documents had not allowed the ECA to verify the correct implementation of the procedure", further information provided by the Irish Government indicated that the project was correctly implemented.
The Commission said the procedure put in place by the Irish authorities guaranteed that those eligible for emergency accommodation were able to avail of support.
"The provision of the services, accommodation and meals is not questioned, and the Commission is satisfied with the operational results of this emergency assistance project," the Commission said.
However, following the issue raised by the Court of Auditors the Commission would send a mission to Ireland to "ensure appropriate procedures to address the deficiencies identified" and to see if funds need to be recovered from the state.
'natural resources and the environment' which includes direct payments to farmers
The annual report found that in 2021 Ireland contributed €3bn to the EU budget and received just under €2.7bn, meaning the State was a net contributor to the EU of €300m.
The majority of Ireland's contribution was based on a percentage of the state's Gross National Income (GNI), which amounted to €2.4bn.
The other main sources include €390m in customs revenue collected on behalf of the EU, when goods are imported into Ireland from the rest of the world, and VAT-based contributions of €285m.
The majority of the money received from the EU budget, €1.55bn was paid under "natural resources and the environment" which includes direct payments to farmers of just under €1.2bn and €350m relating to the European Agricultural Fund for Rural Development.
Ireland is expected to receive some €915m in grants under the RRF for the period 2021-2026, with the first instalment of €395.5m due to be paid in 2023.
According to the report, the state will also receive €1.165bn in grants from the Brexit Adjustment reserve fund between 2021 and 2025, to mitigate the impact of Brexit on the "economic, social, [and] territorial consequences" of Brexit.
Ireland has received €361.6m in December 2021 and €276.7m in May of 2022.
