EU Court of Auditors found conflicts of interest in Hungary

The European Court of Auditors has found weaknesses in the detection, resolution and reporting of conflicts of interest in EU funds in Hungary. A report published on Monday by the EU's budget protection authority examined how conflicts of interest are handled in four member states, including Hungary, in the most important areas of EU spending: agriculture and cohesion policy. The EU's Court of Auditors examined not only the actions of the national authorities but also those of the European Commission.

"We have found that efforts have been made to address the problems, but there are still a number of shortcomings. Reporting on individual cases needs to be improved to provide a clear picture of the amounts involved in conflicts of interest."

- Pietro Russo, member of the Court of Auditors in charge of the audit said, according to a statement from the organization.

EU rules require all participants in the management of common funds (whether at EU or national level) to avoid any conflict of interest, whether it be political, national, economic or any other personal interest. Should such a situation arise, the competent authority should ensure that the person concerned ceases all related activities.

Member States most often use self-declaration as a way of preventing and managing conflicts of interest. However, such declarations may prove unreliable and the cross-checking of information can sometimes be hampered by insufficient administrative capacity, data protection legislation and general difficulties in achieving full transparency.

The auditors found that in the countries they examined (Germany, Hungary, Malta and Romania), government officials involved in decisions on EU programs and the allocation of related funds are not obliged to make declarations, despite the EU's requirement to do so since 2018. Declarations are widely implemented and monitored at EU level, especially in sensitive situations. However, the 'revolving door' phenomenon, where a public official subsequently takes a role in the private sector related to his or her field, is an inherent risk and auditors would like to see more active enforcement in preventing such cases.

The panel believes that national authorities are placing greater emphasis on the detection of conflicts of interest in public procurement, but some warning signs are not always followed up. For instance, there is often inadequate competition, for example due to non-competitive contracts or bidders with links to other stakeholders. The auditors also note that there are no measures in place yet for protecting whistleblowers, and many Member States are late in transposing legislation for the protection of those who would report breaches of EU law.

On Hungary, the report notes that in 2019, the European Commission found serious deficiencies in the control of public procurement procedures and applied a flat-rate correction of 10% to all contracts concerned, and in April 2022, it launched the first ever rule of law procedure to protect the EU budget.

Of the four countries examined, Hungary is the only one without legislation for reducing the risk of the revolving door phenomenon. In 2017, the Anti-Money Laundering Directive introduced beneficial ownership registers, but the registers in Hungary and Romania are not public, while Germany and Malta charge a fee for access. In 2020, Hungary's 39 percent share of single-bid public procurements was just below Romania's 41 percent. The high rates are a warning sign of a conflict of interest.

However, shortcomings are far from being confined to Hungary. For instance, the auditors have found that of the four reviewed member states, only Germany does not require ministers to submit regular income and asset declarations.