Fusion for Energy (F4E), the organisation responsible for the EU’s €5.61 billion contribution to the International Thermonuclear Experimental Reactor (ITER) project in 2021-27, has been heavily criticised by auditors for failing to manage increased risks arising from changes to ITER’s scope and milestones made in 2024. These included postponing the end of the assembly phase from 2025 to 2035 and the end of the whole project from 2042 to 2059.
While auditors have long sounded the alarm about rising costs at F4E, they now say that the organisation has failed to track these new legal, technical and financial risks, which could jeopardise the EU’s funding contribution.
“F4E’s risk identification process mainly focuses on risks to the project’s operational implementation,” the European Court of Auditors (ECA) says in its latest report. “It does not address horizontal risks – such as the need to restructure the JU [Joint Undertaking] and reallocate human resources to adjust to the 2024 baselines, the disproportionate use of external service providers, topics of resource planning and management, and non-compliance with the EU Staff Regulations or the JU’s ethical framework – in a similar manner.”
Added to inflation and supply chain pressures, the new baselines for ITER are estimated to cost an additional €4.2 billion in the contributions from the EU, which covers some 45% of the construction costs through its nuclear programme Euratom, and other partners funding F4E’s operational budget.
“There is a financial risk that the significantly higher F4E contributions may not be sustainably financed by Euratom in the future,” the ECA says. In other words, the Euratom budget will not go up enough to cover the growing cost of the ITER project.
In a written reply to the audit, F4E acknowledges these additional risks, which it is currently trying to “adequately show” in its risk register. It also points out that the revised plan for ITER presents opportunities.
“In particular, the use of tungsten in the first wall instead of beryllium, and the redesign of hot cell facilities simplify safety demonstration and long-term operability, while reducing certain important cost drivers,” it says.
Accounting weaknesses
The criticism of F4E appears in the ECA’s annual assessment of EU Joint Undertakings, public partnerships set up by the European Commission to achieve strategic research and innovation goals. Financed by EU programmes, they cover areas ranging from global health to clean hydrogen to the circular bioeconomy.
Eleven JUs were set up in 2021, with €10 billion in Horizon Europe funding to be matched by private contributions in cash or in kind, for example through the use of data and laboratories.
The ECA approved their 2024 accounts, but reiterated concerns about accounting and funding shortcomings.
“As in previous years, our audit revealed errors that showed weaknesses in the JUs’ management and control systems in respect of the legality and regularity of operational expenditure,” the ECA says in its report. “These errors mainly related to incorrect declarations of staff costs in grant transactions by the JUs’ beneficiaries.”
Based on a random selection of grant payment and clearing transactions made by JUs under Horizon 2020, Horizon Europe and Digital Europe, the ECA cited errors in the calculation of hourly or daily rates, the reporting of the staff costs of SMEs, and the declaration of subcontracting costs, in part due to the complexity of cost declarations for beneficiaries.
The auditors previously recommended that the JUs implement a risk-based framework to reinforce controls of the risky beneficiaries and projects. At the end of 2024, only four JUs had finalised such a framework for Horizon Europe grant payments.
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The ECA also found shortcomings in budget planning for administrative spending, which mostly consists of salaries and routine payments. Two of the Joint Undertakings, the Clean Hydrogen Partnership and the Global Health European and Developing Countries Clinical Trials 3 Partnership (EDCTP3), blamed delays in recruitment procedures, refurbishment contracts and invoice submissions.
The auditors however pointed out that low implementation rates had already been reported in the past and resulted in the accumulation of unused administrative payment funds, “which may indicate structural issues.”
Lagging private contributions
The ECA also observed, once again, that contributions from private partners were falling short for several JUs.
Under the current long-term budget, through to 2027, the total financial resources for the JUs excluding F4E amount to around €38.5 billion, of which some €17.2 billion comes from the EU. The plan was to have other members contribute up to 123% of EU money, namely €21.3 million.
Although this is much lower than the 158% target set under the 2014-20 budget, the JUs have on average achieved only 26% of this objective so far.
Most notably, the European High Performance Computing JU had reached just 0.3% of its €900 million target for 2021-27 at the end of last year. This “threatens the achievement of its overall programme objective to have a strong cooperation with private partners,” the ECA says.
In the case of the Single European Sky Air Traffic Management Research 3 JU, which aims to modernise air traffic management, the contribution from the European Organisation for the Safety of Air Navigation, its international founding member, stood at 16% of a €500-million under Horizon Europe. The same goes for the Global Health EDCTP3 JU, which has obtained 4% of a promised €400 million, for lack of sufficient contributing partners.
According to the ECA, this can be partly explained by the slow start of the 2021-27 programmes.