Local view for "http://purl.org/linkedpolitics/eu/plenary/2007-11-29-Speech-4-008"
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"en.20071129.3.4-008"2
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"Mr President, Vice-President Kallas, ladies and gentlemen, I am delighted to be able to take part today in your debate on the annual reports of the Court of Auditors for the 2006 financial year. On 12 November I presented the annual reports to the Committee on Budgetary Control of the European Parliament, and the following day I presented them to the Economic and Financial Affairs Council.
One of the main innovations of recent times is the obligation imposed on Member States to present annual surveys of their audit and control findings. There are also the voluntary initiatives launched by some national audit bodies to issue national declarations and produce audit reports on the management of EU funds in their respective countries. The Court takes the view that the national declarations and the national auditing efforts could help to raise awareness in the Member States of the importance of internal control of EU funds. In its opinion No 6/2007, the Court stated that such national procedures were a means of focusing and demonstrating national accountability for the use of EU funds. Moreover, they can serve to identify rectifiable defects and examples of good practice as well as enhancing transparency and accountability in the realm of financial management.
The Court is also continuing to play an active part in fostering cooperation with the Supreme Audit Institutions in the Member States and is the lead body in a new working group dealing with common auditing standards and comparable auditing criteria designed for the EU context.
This brings me to the conclusions. In spite of considerable efforts on the part of the Commission to eliminate the weaknesses in the system of risk management for EU funds, the Court has once again delivered an unfavourable opinion on the legality and regularity of transactions in most areas of the budget. The greatest improvements were observed in relation to the common agricultural policy. The high error rate in the underlying transactions is due in part to the fact that complicated legal requirements and provisions and unclear eligibility criteria sometimes cause beneficiaries to overstate their costs when claiming reimbursement, but it is also partly due to persistent defects in the realm of internal control.
The basic prerequisite for effective management of budgetary funds is the existence of reliable internal control systems at every administrative level in all Member States and recipient countries. In my opinion, the people of Europe have a right to proper administration and control of EU funds throughout the Union.
Let me begin with a brief review of the key messages contained in the annual reports for 2006. My first point concerns the reliability of the final annual accounts for 2006. The consolidated financial statements for the 2006 financial year provide a true picture of the assets and liabilities and the financial position of the Communities and the results of their operations in that year with the exception of an overstating, in the statement of assets and liabilities, of accounts payable and of the amount of pre-financing. The Commission has made further progress in the implementation of accrual accounting, although some weaknesses are still observable.
The Court noted that the Commission has made considerable efforts to eliminate defects in the system of risk management for EU finances. Some changes are already yielding visible benefits in areas such as the agricultural budget.
I shall move on now to legality and regularity. The Court has once more delivered an unconditional favourable opinion on transactions underlying revenue and commitments as well as payments for administrative expenditure and expenditure under the pre-accession strategy, with the exception of expenditure under the Sapard programme. In addition, there was a minimal error rate for payments managed and controlled directly by Commission delegations in respect of external actions. The Court, however, has once again delivered an unfavourable opinion on the legality and regularity of the bulk of EU expenditure transactions. This applies primarily to expenditure under the common agricultural policy that is not subject to the integrated administration and control system – IACS for short – and to expenditure on structural measures and internal policies and to a considerable proportion of expenditure on external actions. In these areas payments to final beneficiaries are still affected by material error rates, albeit at varying levels.
The Court’s observations on the areas of the budget that are subject to shared management are as follows: in the realm of agriculture, to which a budget of EUR 49.8 billion was allocated in 2006, the Court noted a sharp decline in the estimated overall error rate, although the rate is still slightly above the materiality threshold. If properly applied, IACS, which covers some 70% of agricultural expenditure, can effectively reduce the risk of illegal and irregular expenditure payments. Financial corrections to agricultural payments, such as those deriving from the Commission’s annual clearance decisions in the framework of the balancing procedure, relate to large sums, which the Member States have to repay to the Community budget as corrections or financial penalties because of their failure to establish adequate control systems. These recoveries to the Community budget continue to be funded by national taxpayers and not by the beneficiaries who have obtained Community resources by irregular means.
Besides highlighting problem areas by citing illustrative cases, the Court also considers it has a duty to flag up developments which may be important for political decision-makers to know about. For example, the Court pointed out that, while the single-payment system facilitates application and payment procedures, it also has side-effects, such as entitlements being allocated to landlords who have never farmed. While this may be legally permissible, it has perceptibly shifted the focus of EU aid from farm proprietors to landowners. The new recipients of agricultural subsidies include railway companies, riding stables, stud farms, golf and leisure clubs and local authorities. Moreover, the legal provisions governing the single-payment system have given Member States wide scope in the allocation of entitlements, which has resulted in unequal treatment of beneficiaries.
With regard to structural measures, to which a total of EUR 32.4 billion was allocated in 2006, the situation prevailing in previous years has not changed. The Court observed a material rate of error, which it estimated to be at least 12% of the aggregate amount of reimbursements to beneficiaries. The most common errors involved applications for the reimbursement of ineligible expenditure and failure to carry out a tendering procedure. In addition, documentation substantiating overheads and personnel costs was often missing.
In the view of the Court, the Commission should set a good example in its handling of the expenditure it administers directly, that is to say expenditure on the Union’s internal policies and external actions. Although improvements are discernible, the internal policies administered by the Commission, on which nine billion euros was spent in 2006, were once again subject to a material rate of error. The main reason for this was the payment of reimbursements to beneficiaries who had submitted declarations overstating project costs. The causes of the errors in the underlying transactions include negligence, insufficient knowledge of rules that are often complex, and applicants’ wilful attempts to defraud the EU budget. In addition, for agricultural expenditure not covered by the IACS and expenditure on structural measures and on internal policies, checks on requests for payment, which are largely based on the information provided by beneficiaries, are in many cases inadequate in terms of frequency and coverage and are often short on quality too.
In past years the Commission has taken action to enhance the recovery system and to improve the protection of the Union’s financial interests. Because of the complexity of its procedures, however, the Commission is still not being reliably informed of the various amounts and recipients of unduly paid funds and of their financial impact on the EU budget. In fact, only six Member States responded to last November’s request from the Commission for a report on the recovery of irregular payments. In its single-audit model, the Court recommended the establishment of an efficient framework for all internal control systems relating to EU funds. All such systems should be based on common principles and standards; they should take account of inherent risks as well as striking the right balance between the cost of controls and the benefits they bring."@en1
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