Local view for "http://purl.org/linkedpolitics/eu/plenary/2008-11-20-Speech-4-009"
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"en.20081120.3.4-009"2
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"Mr President, it is an honour for me to be able to take part in your debate on the Court of Auditors’ annual report on the 2007 financial year, which I have already presented to the Committee on Budgetary Control on 10 November.
Much of the budget, including in the areas under shared management, is disbursed to millions of beneficiaries across the Union, often under complex rules and regulations, based on the self-declarations of those who receive the funds. These inherently risky circumstances lead to errors by them and also by those paying the funds.
To control these risks, there are several levels of supervision and control: first, at the level of beneficiaries; second, to ensure that the arrangements to check claims are designed and operating effectively, and, finally, supervision by the Commission to ensure that all the systems are working as a whole.
As most errors occur at the level of the final beneficiaries, they can often only be detected reliably by detailed controls carried out on the spot. Such checking is costly, and so, usually, only a small proportion of individual claims are covered.
Again, the Court’s audit work on the 2007 financial year found that Member States are not always effective in identifying the shortcomings in the arrangements for checking individual claims. The Court also found some weaknesses in the Commission’s conformity clearance in agriculture.
In many areas of the budget, mechanisms exist for recovering incorrectly made payments from beneficiaries or, where Member States have incorrectly administered expenditure schemes, ‘disallowing’ some expenditure, i.e. refusing to finance it from the budget.
However, there is not yet reliable information on the impact of corrective actions, and the Court concluded that corrective actions cannot yet be considered effective in mitigating errors.
All of this said, it is fair to acknowledge that the Commission has made significant efforts since 2000 to address the weaknesses in supervision and control, mainly through developing and implementing an internal reform programme and, in 2006, launching an action plan to improve the supervisory and control systems across the Union.
Annual activity reports and declarations, a key part of the reform programme, including those relating to cohesion and agriculture, now present a picture that is more in line with the Court’s own assessments, but some reservations still appear to underestimate the problems.
Concerning its 2006 action plan, in spite of progress noted by the Commission, the Court finds that it is still too early for their impact on the legality and regularity of underlying transactions to be felt. For example, 2007 was only the first year for which Member States were required to produce an annual summary of available audits and declarations. These can, in time, as outlined in the Court’s Opinion 6/2007, stimulate improved management and control of European Union funds. But they do not yet provide a reliable assessment of the functioning and effectiveness of the systems.
This is the current situation. But, looking forward, we need to ask what more should be done, and which measures for the future should be considered. The Court suggests that any such measures need to take the following considerations into account.
Overall, the Court’s audit opinion on the accounts is now unqualified – positive, if you wish – but the opinion on underlying transactions is broadly similar to that of last year.
First, the benefits from efforts to reduce errors need to be weighed against the costs.
Second, all participants in the budget process need to recognise that some risk of error is unavoidable.
Third, the appropriate level of risk for the different individual areas of the budget needs to be agreed on at the political level by the budget/discharge authorities in the name of the citizens.
Fourth, schemes that cannot be satisfactorily implemented at an acceptable level of cost and with tolerable risk should be reconsidered.
Finally, due consideration needs to be given to simplification, not least in areas such as rural development and research, because well-designed rules and regulations that are clear to interpret and simple to apply decrease the risk of error and enable streamlined, cost-effect management and control arrangements.
The Court, therefore, encourages the Commission to conclude its analysis on the cost of controls, and on the levels of risk inherent in the different spending areas. The Court also recommends the Commission continue in its efforts to improve its monitoring and reporting, including working with Member States so that effective use of the annual summaries can be made in the annual activity reports, and allowing its follow-up of actions to improve recovery systems.
In addition to simplification and making use of the concept of tolerable risk, in its response to the Commission communication ‘Reforming the Budget, Changing Europe’, the Court suggests applying the principles of clarity of objectives, realism, transparency and accountability when designing arrangements for European Union spending. The Court also encourages the political authorities to explore the scope for recasting expenditure programmes in term of outputs and to critically consider the appropriate level of national, regional and local discretion in managing them.
To conclude, while acknowledging that progress is being made, the Court underlines that further improvements in the financial management of the European Union will depend on the success of ongoing and future measures to reduce risks to an acceptable level and develop cost-effective systems to manage them.
In times of financial turbulence and economic instability, the role of the Court is even more important and relevant. As the external auditor of the European Union, it is our obligation to act as the independent guardian of the financial interests of the citizens of the Union. In presenting this report, it is our objective to contribute towards transparency and promote accountability, both of which are considered essential to securing the trust of European Union citizens in its institutions that keep the Union functioning and give it the direction for the future.
On the accounts, the Court concludes that they give a fair presentation, in all material respects, of the financial position of the European Communities and cash flows at the year end. Owing to the improvements that have taken place, the qualifications expressed last year are no longer necessary.
As regards the legality and regularity of the underlying transactions, the Court gives unqualified opinions for revenue, commitments and payments for ‘economic and financial affairs’ and ‘administrative and other expenditure’.
As regards ‘administrative and other expenditure’, which accounts for EUR 8 billion in 2007, the Court acknowledges the decisions and actions taken by the institutions to further improve financial management based on the recommendations made by the Court, including those taken by the European Parliament. The Court will assess their impact in future years.
However, for ‘agriculture and natural resources’, ‘cohesion’, ‘research, energy and transport’, ‘external aid, development and enlargement’, and ‘education and citizenship’ the Court concludes that payments are still materially affected by errors, although to different degrees. Supervisory and control systems covering these areas are judged to be at best only partially effective, although in ‘research’ and, at the level of the Commission, for ‘external aid, development and enlargement’, the Court notes certain improvements in the supervisory and control systems.
For ‘cohesion’ which accounted for EUR 42 billion of budgetary expenditure, the Court estimates, based on the audit of a representative sample of transactions, that at least 11% of the costs claimed should not have been reimbursed. The most common reasons for errors were ineligible costs, over-declarations of money spent and serious failures to respect procurement rules.
For ‘agriculture and natural resources’, where EUR 51 billion was spent in 2007, the Court found that ‘rural development’ continues to account for a disproportionately large part of the overall error, while the error rate for EAGF expenditure is estimated to be slightly below the materiality threshold.
But why is this situation persisting, and why are the underlying transactions in a situation broadly similar to that of last year? Well, material levels of errors persist because there is a high level of inherent risk associated with many areas of European Union spending and weaknesses related to supervision and control."@en1
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"President of the European Court of Auditors"1
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