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Spilled water, wasted funds? – A special look at a special EU Court of Auditors report

Water is one of the most important resources for social and economic development. Water supply for domestic consumption is essential for human health and wellbeing.

This is a very general though strong statement, one that few would argue against. You may have expected such a sentence in the UN Resolution on the International Decade for Action “Water for Life 2005-2015”. And indeed, the second sentence of this resolution is quite similar and reads as follows:

“Emphasizing that water is critical for sustainable development, including environmental integrity and the eradication of poverty and hunger, and is indispensable for human health and well-being

However, the first sentence is not a quote from one of the many diplomatic declarations the United Nations produces year after year. This is the first sentence of the Executive Summary of a very concrete report of the EU’s Court of Auditors, an institution that oversees the spending of EU funds and a body that few would have expected to come up with such a statement.

The report in question is Special Report N° 9 of 2010 published on 13 December 2010 and is titled

Is EU structural measures spending on the supply of water for domestic consumption used to best effect?

It covers 29 water-related projects in four EU countries – Spain, Greece, Portugal and Italy – funded by EU money during the years 2000 to 2006. According to the report, these four countries receive most of the EU funds related to water supply systems.

The report not only shows the relevance water has in EU policy making and budgeting, it also underlines political and administrative shortcomings in the planning and execution of water-related projects within the European Union.

In the press release on the report, two important conclusions stick out:

  1. The Court found that better analyses could have made it possible to build smaller capacity infrastructure and consider alternative solutions.
  2. The analyses of possible solutions were generally limited to supply-side measures (building infrastructures to exploit new water sources), and paid little attention to other solutions, such as reducing water losses, or using more accessible resources.

In other words, EU money has been used in some cases to build facilities that were way too large due to miscalculations of consumption. Some of these facilities have also been built although it might have been better to consider options to reduce losses in the existing systems instead of tapping new sources.

These conclusions are substantive when you look at the considerable amount of money invested by the EU in projects that concern water supply. Just looking at the most expensive undertakings in the four countries covered by this report, we find the following projects and the contributions the EU has made for these projects (cf. page 45):

  • Greece: “Water supply of Thessaloniki from Aliakmon river” – 60.88 million euro
  • Italy: “5° module of a desalinator in Gela” – 14,79 million euro
  • Portugal: “2nd phase of the municipal water supply system to the Área Sul do Grande Porto [map]” – 42.40 million euro
  • Spain: “Supply to Zaragoza and Ebro corridor” – 67.88 million euro

The sum of EU funds spent just for the most expensive projects in the four countries reaches around 180 million euro, all 29 projects together are worth almost 500 million euro EU money over 7 years. The Court estimated that the total amount of financial support by the EU dedicated to domestic water supply was up to 4.05 billion Euro from 2000-06 (~90% of these funds going to the four countries).

And the EU continues to spend money on water-related projects: A search for “water” in the EU structural funds database recently compiled and published by Financial Times and the Bureau for Investigative Journalism finds 225 projects worth over 320 million Euro. And there is more (yet more difficult to search) in the database on EU funds handled by the EU Commission, e.g. in the context of funds spent on EU enlargement.

Having seen these figures, it is the more relevant to look back into Court of Auditors’ report and its findings. For the 18 out of the 29 projects that were approved by national management authorities (and not by the EU Commission), the auditors found that

“[c]onditions about water losses and savings, as well as measures to protect the quality of raw water, were never imposed“.

We should read this finding of the Auditors in combination with a recently published scientific study by Lucia De Stefano on stakeholder involvement in 23 European countries and regions in the context of the EU’s Water Framework Directive.

This study found that

the definition and approval of specific projects such as construction of water infrastructure were the less transparent decision-making processes in water management (p. 1337).

It concludes that NGOs in general seem to have a problem in participating in decision-making when it comes to issues covered by the Water Framework Directive.

Given that this directive is considered the “key legal instrument for water” in the EU context by the EU Court of Auditors it is noteworthy that from the four countries covered in the Court of Auditors report, Spain, Greece and Italy rank “very poor” when it comes to “Active Involvement” of stakeholders according to the study (Portugal is ranked “moderate”).

Read together with the Auditors’ report, one could conclude, for example, that better participation of NGOs might have prevented the lack of conditions for the execution of the 18 projects approved by national authorities. Scientifically spoken, this conclusion may however be an ecological fallacy because I do not have data on NGO participation in the 18 cases mentioned above so I can’t infer a direct causal relationship – but this might still be a hypotheses worth considering.

At the end of their report, some of the recommendations the Auditors thus make to EU member states are to

  • improve their ex-ante analyses and forecasts of future water needs by taking into account recent and accurate data (in particular by taking into consideration the downward trends in per capita consumption)
  • pay greater attention to alternatives to the supply side solutions, for example by taking into account the potential for reducing water losses
  • improve the quality of the ex ante analyses of the projects and take their results into account when determining the size of new infrastructures
  • systematically analyse the pros and cons of building infrastructure in stages, with the aim of making better use of the capacity built , and develop it according to the evolution of needs.

And although I haven’t covered these aspects of the Auditors’ report, it is also noteworthy that the Commission is asked, among other things, to:

  • “pay more attention to the quality of the financial analysis accompanying the grant applications and request the information it needs to set the grant at the appropriate level

Now, after the report has been made public, both the EU institutions and the EU member states have to deal with it.

The Commission reply is already annexed to the report (page 48 and following) and within the EU Council – the body representing the EU member states – the so-called Working Party on Structural Measures, a group of national officials dealing with EU structural funds, has been asked to draw the necessary conclusions from the report.

What will they come up with? – These conclusions they are going to draw should be quite relevant, given that according to a Commission official on Twitter, the proposal for the new rules on EU structural funds is expected for mid-2011…

Remarks: I started to write this post because I thought about participating in the next round of the “Th!nk About It!” blogging competition on the topic of “Water”.

I ended up linking this topic both with my own research on interest group involvement in EU policy-making and with my advocacy work for the Transparency International EU Office in Brussels in which I deal with, among other things, transparency of EU funds spending (see e.g. this blog post on Structural Funds or this one on network visualisation of EU funds). I should mention that Transparency International also deals with “Corruption in the water sector“, making this topic even more interesting.

I have decided to publish the post now instead of waiting for the competition – maybe it can serve as an encouragement to participate for others.

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