Court unsure about 93% of EU spending

By Tim King

Date: 18/11/04

THE European Court of Auditors in its annual report on the 2003 financial year states that, for the vast bulk of EU spending, it cannot conclude that the transactions underlying the accounts were legal and regular.

Although it is satisfied that, on the whole, the transactions for administrative spending were legal and regular, no such assurance can be given for 93% of the spending.

In a step back from last year's annual report, it states that pre-accession aid to the new member states was beset by errors and greater risks, which affected the legality and regularity of the spending.

As in previous years, the agricultural spending was "materially affected by errors". In the case of the EU's structural funds (mainly aid to poorer regions of the EU and poorer sections of the population), "persistent weaknesses" in the member states' systems for supervision and control meant that "payments were still subject to the same errors occurring with the same frequency as in previous years".

Together these two spending areas constitute 78% of EU spending.

Weaknesses in the management and control of the 6th Framework Programme for Research and in the European Refugee Fund led the court to conclude that, for the EU's internal policies, there were "significant errors of legality and regularity in terms of payments".

For the EU's spending on external action, mainly humanitarian and development aid, the court concluded that there were "a relatively large number of legality and regularity errors".

Michaele Schreyer, the European commissioner responsible for the budget, said she was "satisfied that in the fields of my portfolio" the court had given positive statements of assurance. In a statement, she said that the Commission was taking up the court's recommendation for strengthening recovery from the member states "which fail to properly control funds".

The Court of Auditors pointed out that the Commission as a whole had responsibility under the EC Treaty for implementing the entire budget, albeit in cooperation with member states.

On the reliability of the accounts, the court said that it could not be sure that the figure for sundry debtors of _3.6 billion at the end of 2003 was accurate. It again criticized the Commission for slowness in recovering money owed. The Commission said the problem of keeping track of the EU's assets, including advance payments, would be "solved" when the Commission brought in its accrual accounting system for the budgetary year 2005.

The court expressed some doubts about the "very ambitious" timetable for adaptations and validations for the new accounting system.

In particular it urged the EU executive to devote enough resources to drawing up the opening balance sheet as at 1 January 2005. The court commented: "The Prodi Commission made good progress in introducing new rules and procedures to improve financial controls, but the results are not yet satisfactory." David Bostock, the UK member of the court, added: "It is not yet clear that these reforms have had a profound impact on behaviour and management culture. The new Commission will need to ensure this happens."

Publication of the court's report sets in motion the process of discharging the 2003 budget which the European Parliament will vote on in April.

The annual report also contains an assessment of the European Development Fund, which falls outside the EU budget. The court concluded that on the whole the transactions underlying the accounts were legal and regular.

On the reliability of the accounts, the court made some qualifications to its assurance, particularly about failure to record amounts owed.

• The Court of Auditors was unable to publish its annual report in all the 20 official languages of the EU. The full report appears in only the 11 languages of the 'old' EU-15 and these versions will appear in the Official Journal in early December;
• only the first dozen pages of the report are so far available in the Union's nine new official languages. A spokeswoman for the court said that publication in the new languages would not be possible until mid-February;
• she emphasized that publication in all languages was important, both because the reports were presented to the European Parliament and because they were to be read by officials in national administrations;
• at present the court has only one Polish and one Hungarian translator.

The European Court of Auditors on 15 November 2004 presented its Annual Report for the financial year 2003. While the report states that, on the whole, the transactions for administrative spending were legal and regular, no such assurance could be given for 93% of the spending. The ECA had reserves regarding several internal policy fields, such as pre-accession funding and agriculture. The Court was also critical about the ambitious targets the European Commission set itself with the move to an accrual accounting system from 2005.

• Primary Source

http://eca.europa.eu/portal/pls/portal/docs/1/133991.PDF http://eca.europa.eu/portal/pls/portal/docs/1/133991.PDF

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