Corporate Governance in EU Agencies: Balancing Management and Auditing Roles

Abstract

The fulfilment of strategic goals of public organizations is closely related to corporate governance, which assigns responsibilities, power, and controls. The object of this paper is to answer the research question: “Are standard EU audit controls applied to EU Agencies helpful in carrying out the assigned missions?” In the EU, the missions and tasks of Agencies are embedded in the funding acts. The operational performance of an Agency also depends on administrative procedures, such as financial management, compliant with the EU financial framework, and supervised by the European Court of Auditors. A reform agreed by the Council, the Commission, and the European Parliament provided a unified schema for the funding acts, including up-to-date topics such as conflict of interest, fraud prevention, and data protection. In previous work, evidence has been provided that the uniformity of funding acts may have a negative impact on the operational performance of an Agency. On the contrary, specific agency-related goals could be promoted through an ad-hoc normative layer to be added to the standard funding act. Once reaffirmed the need for a trade-off between standardization and customization to improve operational performance, this paper challenges the pros and cons of applying standard EU audit practices to Agencies that operate in an unstable and evolving environment. Standard EU auditing methods have indeed made it easier to control budgetary management, but at the same time, they have often reduced operational performance. The standard budgetary management report of the EU Court of Auditors, which attributes a poor score to implementations not compliant with abstract indicators without a context-related insight, may not only cause unfair budget cuts but also have a negative impact on the ability of an Agency to quickly react to changes in its operational context.