Local view for "http://purl.org/linkedpolitics/eu/plenary/2006-11-14-Speech-2-014"
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"Madam President, Mr Weber, ladies and gentlemen, I presented my initial position concerning the annual report to the Committee on Budgetary Control on 23 October. The committee is presently actively taking follow-up action and correcting the errors that have been identified. On the day after the Court of Auditors’ Report was published, the committee sent a letter to the Member States, in which it asked them to present comments and clarifications concerning errors identified in the countries concerned, and eliminate those errors.
Mr Weber, Madam President, now that these comments on our weaknesses, the need for simplification and the level of fraud have been presented, I presume the discharge authority would also like to assess the impact of the errors on the ‘price-quality relationship’.
The Court of Auditors’ report (page 138) reveals that the Court audited 95 projects funded from structural funds, and found significant errors in 60 of them. Does this mean that two thirds of structural funds has been lost or wasted? Does this mean that the objectives of these projects have not been achieved? It clearly does not. Some ground-breaking research may have been done without all the necessary paperwork, and conversely, one can find projects that were brilliantly executed in terms of the formal rules, and all the paperwork was done, but the objectives were not achieved.
Unfortunately the report gives no information on the true impact of the Community funding. Thus one wonders what conclusions Parliament and the ordinary citizen in Member States can draw based on the Court's overview of the errors in structural policies.
The Court often states that it is only a messenger, and that the Treaty obliges the Court to give a statement of assurance on the whole budget each year. It does this through its samples of transactions and other audits. It tests compliance with the rules. This work, the Court does professionally, within the limits of its human resources.
Who, though, then evaluates the impact of these errors on the achievement of policy objectives? On what basis should Parliament make such evaluations? After all, together with Council, you are the budgetary authority and have the final word on future budget allocations. The Court’s report should offer you a basis for evaluating the effectiveness of budgets approved in the past.
In this perspective, I think one should invite the Court to evaluate how significant an impact the errors have had. We know the Court has the expertise to do this. It does this kind of ’price-quality’ evaluation in special reports, which we highly appreciate. So why is such analysis absent from the annual report?
For the Commission, sound financial management means reaching policy objectives in an efficient way and at a reasonable cost. It necessarily takes a multi-annual view of each aid programme, and ensures that the expenditure on control over the programme is in balance with the costs and benefits.
The Commission is well aware that few university professors who apply for funding for research programmes are qualified accountants, and it knows that some will make mistakes in their applications for EU funding. Should the funding of research stop for this reason? Absolutely not. We reduce the scope for error, but live with what remains. In terms of choices, there is clearly something missing between a negative DAS and a positive discharge.
The Treaty – Article 248.2 of the Treaty on the European Communities – requires the Court to assess the soundness of financial management. Could it not also assess whether, in a given year, the Commission has indeed taken the steps necessary to ensure value for money? This would not simplify the Commission’s task, but it would give us all a clearer point of view!
You may think this sounds too radical. Perhaps it is, but the UK House of Lords goes even further in a very serious report published yesterday. The House says that ‘substantial improvements are needed to the methodology underpinning the Statement of Assurance’ and proposes, among other things: that the Court ‘should distinguish clearly between irregularity and fraud, publishing separate figures for the level of fraudulent transactions and administrative mistakes’; that ‘the Statement of Assurance should focus on giving a detailed summary of financial management in each of the spending categories and Member States’ listing those Member States demonstrating poor management of European funds’. The Commission will carefully study this interesting report.
Thus we will take the conclusions of the Committee on Budgetary Control into consideration fully and promptly. Like you, however, the committee has also contemplated the political significance of the report after its publication. It is clear that the above-mentioned report is not yet a general positive statement of assurance.
Allow me also to touch on the issue of recoveries, or ‘clawbacks’. In this year’s DAS statement, the Court appears to cast doubt on the relevance of clawbacks for the DAS, arguing that recoveries do not right wrongs, nor do they dissuade the final beneficiary from making errors.
This Commission thinks this does not fairly represent the actual situation. Every year, very significant amounts are clawed back by the Commission from Member States and by Member States from the final beneficiaries. This system contributes to the effective protection of the Union’s financial interests. It has a preventive effect, by giving Member States an incentive to improve their management and control systems, to prevent, detect and recover irregular payments to final beneficiaries.
We – actually the Member States – should receive the credit for that, and it should affect the DAS declaration as well. I would like, Madam President, to continue on a more positive note. The Commission has established working relations with many national audit offices and found a positive attitude towards auditing EU funds in shared management. I am very encouraged by the announcement made by President Weber that the Court is intending to propose joint audits with these national audit offices, starting with the areas of Structural Funds and financial corrections performed in Member States.
Indeed, we could much more effectively convince Member States to take more responsibility for spending from EU budget, if the Court were willing to work with – and eventually use – the results of audits produced at the national level.
I would like to end with a comment on some of the good news in the Court’s report. Its President, Mr Weber, has pointed out that ‘the Commission successfully implemented the new accounting system with notable rapidity, and it now offers additional key information that is significantly more complete than that provided through the previous cash-based system’. We are proud of this achievement.
To sum up: the DAS is once again negative. The Commission regrets this. It will correct the errors made and take further actions to correct systemic weaknesses, as announced in the Action Plan for an Integrated Internal Control Framework. In acknowledging that there is still much work to be done, the Commission also notes that important progress is made every year and that the overall management of EU funds is sound. It is under control, but there is further scope for simplification of complex rules. Together with my colleagues, I look forward to the more detailed sectoral discussions in the discharge hearings ahead.
Finally, the Commission would like to re-emphasise that there is a missing link between the list of errors reported by the Court and the discharge procedure. The Commission would welcome an audit approach which also looks at effectiveness or ‘value for money’. We believe this would assist the discharge authority in carrying out its important task.
Thank you for your attention.
As Mr Weber, the President of the Court of Auditors, said, the Court submits a statement of assurance concerning the ‘legality and regularity’ of expenditures, obligations, pre-accession strategy expenditure, administrative expenditures and common agricultural policy expenditures that are part of the Integrated Administration and Control System. The Court of Auditors does not, however, present a positive statement of assurance concerning other areas, for instance research programmes and structural funds. The main reason for this is that the Court of Auditors has found too many errors in the sampling of transactions in these areas. As Mr Weber stated, the cause for these errors is ‘simple negligence or oversight, poor knowledge of the complex rules and presumably also fraud connected with the EU budget’.
I think that the criticism in the area of research programmes that was presented as a result of last year’s control is, unfortunately, justified. The reduction of the number of auditors in this sensitive area by nearly half, and our recovery procedures should be more rapid and more forceful. It is true that we failed to notice many errors that the Court of Audits later detected.
I believe that in both this and other areas, the poor knowledge of complex rules is the main cause of errors. Frankly, I think the Commission has done too little too slowly to simplify and clarify the rules and guidelines. We are addressing these questions in the Action Plan and in proposals for the new programming period. We welcome the continued attention and advice from the Court on how to improve the situation.
I would also like to look at the topic of fraud. How much fraud is there in the performance of the European Union budget? Any suspicions of fraud will be investigated thoroughly by OLAF, as witnessed by the two cases recently reported in the media in connection with the Chernobyl project and the Office for Infrastructure and Logistics in Brussels. Yet is the entire European Union budget ‘riddled with fraud’, as some journalists write year after year?
Let me quote from the report on the management and auditing of EU funds published yesterday by the UK’s House of Lords. The report finds that ‘much of the coverage in the press suggests that there is a significant culture of corruption in Europe’s institutions. Our investigation has uncovered no evidence to support this suggestion’.
Based on data from the Member States, the Commission possesses fraud estimates concerning two areas in which spending is greatest – agriculture and regional aid. These estimates show that 13-15% of notified irregularities are cases of suspected fraud, corresponding to 0.05% of the expenditures of agricultural funds and structural and cohesion funds. Last year the Commission wrote off EUR 90 million as irrecoverable financial losses, representing some 0.09% of the budget. Thus the rate of fraud is marginal. That does not, of course, mean that we should not seriously combat each specific case.
This also appears to be confirmed by the Court’s audit work in 2005. Of all the information, audits and about nine hundred sampled transactions the Court looked at in 2005, in only four cases did the Court have cause to suspect fraud or serious violation of the rules and regulations and inform the European anti-fraud office (OLAF). After analysis, however, OLAF was unable to confirm any of the fraud cases of which it had been informed. However, the Court traditionally has once again provided useful data that is useful to OLAF in its operational work."@en1
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