Friday, November 14, 2008

Court of Auditors have hiccups as EU budget shadows lengthen

Time is running out for the European Commission’s vice-president Siim Kallas, responsible for administration, audit and fight against fraud, as the Commissioner had sworn to get the EU accounts a clean bill of health by the time the Commission’s mandate ended in 2009.

Presenting the report to the Budgetary Control Committee of the European Parliament, the European Court of Auditors said on Monday (Nov 10) that although the accounts themselves have been approved without qualification, the same cannot be said of the "transactions underlying the accounts." The Court said that for the 14th year in a row it was not able to issue a "statement of assurance" that the EU money had been spent well and according to the rules in all policy areas.

The damaging report provided an indication of things to come as the budget moved through the labyrinth of the EU decision making process. The auditors concluded the accounts were a “fair presentation” of the Commission’s financial position but added there were unacceptable spending errors in all but two of the seven policy areas covered under the 114 billion Euro EU budget.

Commissioner Kallas said in a statement: “The Commission welcomes the auditors' constructive analysis and will continue efforts to improve its financial management to address the weaknesses identified. I do hope the report will also mobilise member states to do their job better so that errors on the ground are prevented and corrected.”


On the other hand, financial experts and political pundits went down the memory lane to express sympathy for the former chief accountant Marta Andreasen, sacked by Kallas’ predecessor British Commissioner Neil Kinnock for going public with the Commission’s lax accounting in 2002.

Last week the Commission statement called the report, “a clean bill of health,” adding, “the Court also found that the majority of EU payments it checked were regular, though errors were still too frequent in some areas, particularly in spending on EU regions and to boost employment (cohesion policy), where grants are managed by national authorities.”


EU Commissioner for Regional Policy Danita Hubner said her department which covers structural and cohesion funds, had reclaimed 843 million Euro in irregular payments this year, with 1.5 billion Euro more in the pipeline for recovery.

Commenting on the audit report, Hubner said, “Errors do not mean fraud. When the Court and the Commission's auditors talk about errors, they mean non-compliance with conditions for receiving EU funds. Where there are problems, in 99 percent of cases they are the result of errors which can be fixed and not a result of fraud,” adding, “and in all cases, the Commission always takes action to recover funds which have been misused.”

Citing that the report had found “the highest rates of error in structural funds, which are managed by the member states,” Commissioner Kallas said, “the Commission shall not hesitate to take a tough stance and suspend payments until all member states implement adequate corrective measures. And where errors have financial impact, we shall recover the money.”

Some examples are not only simple but glaring in nature as found in the Puglia region of southern Italy, certified organic olives were found to be growing in a waste dumpy while the owners of a charitable horse-riding school received 400,000 Euro in EU funds from the Lombardy region of Italy by providing inflated numbers.


Court of Auditors President VĂ­tor Manuel Da Silva Caldeira told European Parliament’s Budget Control Committee that the Court is not a judicial authority and can only notify others, i.e. the EU fraud-fighting office OLAF, when it finds clear indications of possible fraud. This year, the Court had done so nine times. He also stressed that 80 percent of the EU budget is managed at the final beneficiary level by the member states.
Asked for suggestions to improve the situation, Caldeira advocated more on-the-spot checks, although it should be considered, he added, whether the cost of making such checks would outweigh the benefits. The budgetary authority - Parliament and the Council - should take a political decision on what would be a level of "appropriate tolerable risk.” Caldeira also called for a simplification of the regulatory framework.


Conservative budgetary control spokesman in Brussels, James Elles MEP, said the ongoing inability for national governments to take urgent and rigorous action to achieve a clean opinion from the Court of Auditors is unacceptable, and the European Commission should now 'name and shame' those countries failing to live up to their commitments.
Chris Davies MEP, a Liberal Democrat member of the European Parliament’s Budget Control Committee, commented: "This report is very disappointing for the European Union, but we shouldn't forget that national governments are responsible for 80% of EU spending ... The public will again assume that fraud is widespread and the Brussels bureaucracy incompetent but in fact the EU administration is now subjected to greater scrutiny than that of any government in Europe." 


Although the European Union last year paid out six billion Euro wrongfully, in the highest ever overclaims being reviewed by the European Court of Auditors, there were also some positive points to cheer for like expenditure on administration and for economic and financial affairs (enterprise, internal market, etc.) got a clean bill of health, as did the revenue side of the EU budget. There were improvements in internal policies and external actions, though not enough to affect the overall judgement.

However, the Court of Auditors was unable to state whether the EU accounts were clean for ''most spending areas.'' ''The court still finds that payments made to financial beneficiaries, such as farmers and project promoters running EU-funded projects, have a too high level of error,'' they said.

The Budgetary Control Committee of the European Parliament will now proceed to have a series of hearings of Commissioners while the final vote on the 2007 discharge is scheduled to take place at the April 2009 plenary session of the Parliament.