BRUSSELS — The European Union is handing out billions of euros to nongovernmental organizations each year without properly monitoring how the money is spent — or whether it’s even going to genuine NGOs. That’s the main finding in a damning report from the European Court of Auditors which is likely to intensify a fierce political fight over how nonprofits use EU grant money. Using words like “opaque” and “hazy,” the report finds the EU’s entire process for funding NGOs lacks transparency and calls for reform in the way grants are provided, monitored and disclosed. “The picture of EU funding for NGOs remains hazy, as information on EU funding — including lobbying — is neither reliable nor transparent,” said Laima Andrikienė, the ECA member in charge of the report, who is also a former lawmaker with the center-right European People’s Party (EPP). The criticism will give ammunition to conservative lawmakers in the European Parliament who want to overhaul the way EU money is dolled out to NGOs, claiming it lacks transparency and is often used to lobby EU institutions — criticisms echoed in the report. Hanging over the report is the question of lobbying. Are NGOs using public money to influence EU policymaking? And if they are, is it being done in line with EU values? On these questions, the ECA found the European Commission lacked curiosity and transparency. The Commission “did not clearly disclose the information it held on NGO advocacy activities that were financed by EU grants,” the ECA said. Despite the overall critical tone, the report did find some improvements since the ECA’s last assessment in 2018. It also noted that since the period audited in the report, the Commission had issued guidance to NGOs that EU funding should not be used for lobbying. But overall the system was “too opaque,” the ECA’s Andrikienė said. “Improvements are absolutely necessary. We cannot continue this business as usual.” Importantly, the ECA found no evidence of NGOs using EU funds in a way that breached EU law or EU values — including via advocacy or lobbying work paid for with EU money — but warned the risk of this happening was higher because of the lack of transparency, the agency said during a press briefing on Monday. Last week the Commission admitted in a statement that in “some cases” work programs submitted by the NGOs “contained specific advocacy actions and undue lobbying activities.” BAD TIME TO BE AN NGO The report could hardly come at a worse time for the nonprofit sector. In Europe, attacks on NGOs from MEPs are multiplying, particularly over their use of EU funds to pay for lobbying activities. MEPs from the EPP allege the European Commission paid NGOs explicitly to lobby on its behalf to promote the European Green Deal in EU institutions, including other Commission departments — something the Commission seemed to admit last week. The European Union is handing out billions of euros to nongovernmental organizations each year without properly monitoring how the money is spent. | Martin Bertrand and Hans Lucas/Getty Images Early negotiations over the EU’s next long-term budget, meanwhile, suggest dedicated programs for environmental and climate action could be reduced if not cut altogether, as the EU’s priorities switch from green issues to defense, trade and competitiveness. And at the international level, funding sources are drying up after United States President Donald Trump decided to freeze the $27 billion-a-year USAID foreign development program. Green MEP Daniel Freund told POLITICO that he feared ECA’s report could be “misused by some political forces” and fuel further attacks on NGOs. “When you read the headline … it might create the impression that it is the fault of the NGOs … when this is a general problem of the beneficiaries of EU funding,” Freund said. NGOs meanwhile welcomed the report. “The bottom line is that there is no scandal. Only a clear need to strengthen transparency,” said Patrizia Heidegger, policy director at the European Environmental Bureau, one of Brussels’ largest environmental NGOs. WHAT THE REPORT SAID The ECA looked at EU funding awarded to 90 NGOs over 2021-2023 and worth €7.4 billion in total. It included funds received through the EU’s Horizon Europe research program, the European Social Fund Plus, the Asylum, Migration and Integration Fund, youth program Erasmus+, as well as the LIFE program that finances green projects. It found the Commission does verify that NGOs fulfill basic transparency requirements, but fails to “proactively check compliance with EU values.” This exposes the EU to reputational risk, Andrikienė said. The European auditors found “no reliable overview of EU funding granted to NGOs” and pointed to instances where organizations self-declared themselves to be NGOs when they were not. “We were quite shocked to find that one large research institute was categorized as an NGO while its governing body was composed solely of government representatives,” Andrikienė told reporters. The report found important aspects of an NGO’s status were not checked, such as government links and whether it was pursuing its members’ commercial interests. The Commission also failed to “clearly disclose” to the public information it had about NGOs’ “advocacy activities” that were funded through EU grants, the auditors said, calling for additional transparency on this because of the “sensitive nature” of this information. Funding sources are drying up after United States President Donald Trump decided to freeze the $27 billion-a-year USAID foreign development program. | Brendan Smialowski/Getty Images The ECA recommended the Commission provide clearer definitions of what counts as an NGO, demand more regular updates on how grant money is being spent, and strengthen checks that NGOs are acting in line with EU values. The Commission replied that it will take on the auditors’ advice and adopt measures “which minimize administrative burden and are proportionate.” Marianne Gros contributed to reporting.

The European Union and Switzerland have concluded negotiations on several sectoral agreements expected to deepen their relationship, they announced today. The broad package will grant Switzerland more access to the EU’s single market, while Bern will have to apply current and future EU law on free movement of people. “We are now giving joint answers to the global realities that we all have to face. We are living in an era of extremely rapid change with many shifts ongoing,” said Ursula von der Leyen, the president of the European Commission, speaking in Bern alongside Viola Amherd, the president of the Swiss Confederation. Existing agreements governing Switzerland’s access to the EU’s single market have been updated and several new elements have been added, such as on food safety, health and electricity. The deal will allow Switzerland to participate in several EU research programs, including Horizon Europe, and another part of the agreement will cover Bern’s participation in the EU’s Space Agency. As of Jan. 1, Brussels will set up transitional guidelines allowing Swiss applicants immediate access to the EU’s research programs, von der Leyen told reporters. The Alpine country will also have to pay €375 million annually into the EU budget. The two sides started negotiating a landmark partnership agreement in 2014, with a few hiccups along the way, including when Switzerland walked out of talks because of issues related to freedom of movement and state aid. Now that the talks are concluded, a lengthy process to the ratification kicks off. The Commission will legally check and translate the text into all EU languages, before it is sent to the Council and the Parliament. On the Swiss side, the deal will then still need to be approved by the Swiss parliament and by referendum, expected in 2028.

Brussels has launched a club of investors in a bid to lure more money to high-risk tech ventures. The investors could be tapped to coinvest alongside a fund the European Commission launched in 2021. The fund focuses on companies working on unproven, research-heavy technologies, which often struggle to attract the necessary funding to bring their products to the market. The “trusted investors” network was launched in Athens on Monday by outgoing European innovation chief Iliana Ivanova. Seventy-one investors joined the club, representing more than €90 billion in assets, according to a Commission official. Among the investors is the NATO Innovation Fund. The official added that among the investors are United Kingdom-based Atomico (backer of European fintech companies such as Stripe and Klarna) and Sweden’s EQT, as well as state-funded investors like French Bpifrance and Dutch Invest-NL. Last week, a Commission expert group painted a grim picture of the chances of scaling tech in Europe. “The EU is comparatively weaker than the U.S. and China with regard to the uptake, commercialization and scaling of new technologies,” the expert group, chaired by former Portuguese tech minister Manuel Heitor, wrote in an evaluation report of Horizon Europe, the bloc’s flagship R&D program. Europe’s technology gap is the Continent’s “single biggest long-term challenge,” veteran German diplomat Wolfgang Ischinger said in an interview with POLITICO. The Commission’s approach to plug the tech funding gap differs from earlier efforts. With its 2021 fund, the Commission takes on actual ownership stakes in tech companies through a proxy, a sharp breakaway from its regular practice of issuing grants or supporting private tech investors. Since the fund launched, it has invested nearly €1 billion in more than 250 European startups. Private investors added another €4 billion in coinvestments. The new club is meant to boost that number significantly. Commission President Ursula von der Leyen in her program for the next mandate vowed to “expand” the initiative further. It will be a priority for the designated startups commissioner, Bulgaria’s Ekaterina Zaharieva.

LONDON — Rejoining the Horizon Europe program was meant to pump billions of pounds into British research post-Brexit. It hasn’t quite turned out that way. As Britain prepares for a painful autumn budget, finance ministers are looking to pass on a sizable chunk of the costs for membership of the EU research program to the science and tech department. The Treasury agreed to cover the fees when the U.K. rejoined Horizon in 2023 under the Conservative government, but the latest move could see an effective cut to the country’s domestic research spending of up to £1 billion as the squeezed department instead foots the bill. Two people familiar with discussions, granted anonymity to speak candidly, said there were real concerns within the research and development community that this would effectively prevent UK Research and Innovation funding new projects next year. “The Horizon money was given by the Treasury to get the deal done and to prevent pressure on existing research budgets,” said Andrew Griffith, a Treasury and science minister in the last Conservative government. “The issue now sounds like the Treasury is looking to offload the Horizon money at the spending review against a flat-cash settlement. That would be a huge issue for the research sector and be an example of the Labour Treasury emasculating the department.” The plans, first reported by Research Professional News, sparked a letter on Friday from leading U.K. universities and research groups to the chancellor, warning of “deep cuts” to R&D budgets if the changes went ahead. “It is vital that our long-term ability to grow the economy isn’t undermined by the false economy of short-term cuts,” they wrote. “It would mean deep cuts across other parts of R&D investment, with significant negative consequences for the UK’s world-leading R&D sector, putting the brakes on growth and undermining confidence.” A second letter was also sent by the National Centre for Universities and Business, signed by the leaders of some of the biggest U.K. companies including Diageo, Anglo American and Johnson Matthey. A government spokesperson said: “We do not comment on speculation outside of fiscal events.” IT WASN’T MEANT TO BE THIS WAY When the U.K. rejoined Horizon last December, after an acrimonious exit during the Brexit negotiations, researchers celebrated. Vivienne Stern, chief executive of Universities UK, described it as a “momentous day,” giving British researchers access to bid from a €95 billion funding pot. Former Science Minister George Freeman, who was involved in securing the deal in 2023, said there was never any suggestion from the Treasury that the costs would come from the Department for Science, Innovation and Technology (DSIT) budget. “The new government has rightly made a commitment to back U.K. R&D.,” he said. “But if true, the rumours of a Treasury clawback of Horizon money and below inflation settlement in the budget will totally undermine the credibility of this mission.” A former DSIT official, who was also involved in negotiating Britain’s access to Horizon, said: “The conclusion we came to was the costs couldn’t come out of the domestic R&D budget as then we wouldn’t have money to do anything else. The Treasury was 100 percent involved. We were negotiating on the policy of the deal but on the numbers, that was the Treasury.” HANDLE WITH CARE Science Minister Patrick Vallance was repeatedly asked about cuts to the R&D budget by a House of Lords committee this week. With a one-year spending review and budget imminent on Oct. 30 he only said DSIT would “get the best outcome we can.” But he also warned against cutting government R&D budgets, particularly for “curiosity-driven” research, warning they must be protected “carefully.” “As a country that has been highly dependent on the knowledge-based economy and which is very good at science and technology, we must, as the economy allows, protect and grow­­ the basic curiosity-driven science that we do in this country,” he added. “I make that statement, because that work is ultimately the goose that lays the golden egg.” On targeting R&D to drive economic growth he said: “We need to show politicians how you can use that to get growth. I have been in global companies and seen what they do. They often cut the R&D budget in times of stress, but those that do tend to go in one direction only — and not a good one.”

The European Union should boost its next research and innovation budget to €220 billion — more than double the current figure — to stay competitive globally, a group of experts warned in a report seen by POLITICO ahead of its release. The report, ordered by the European Commission’s research department, rates Europe’s research and innovation spending against geopolitical rivals, including the United States and China. More investment in the Horizon Europe program “is not a subsidy or expense; it’s an investment in our future,” the experts said, asking for a twofold increase of the current €95 billion allocation for the next program from 2028 to 2034. Such a steep hike may prove difficult to secure as there is growing pressure for the EU’s €1.7 trillion seven-year cash pot to fund new priorities such as defense and building pan-European champions. The report, chaired by former Portuguese Technology Minister Manuel Heitor, cites several areas where Europe’s market share is declining or significantly below its main competitors, such as the EU’s share of scientific publications, patent applications, or public and private R&I investments. “Compared to the U.S., the EU fails to scale new innovative companies to become global giants,” the report said. “Additionally, and partly as a result, the EU has developed undesirable dependencies in certain critical technologies,” it said. The experts lament that policymakers failed to pick up on a call to increase spending in 2017, resulting in “adverse consequences for European competitiveness.” They also said that the current budget “has been raided to fund new priorities.” The EU’s push to develop chipmaking in Europe, the Chips Act, was one program that sought to divert some cash from Horizon. European Commission President Ursula von der Leyen in her political guidelines has promised to “put research and innovation at the heart of our economy.”